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Rethinking the gas tax: Suddenly it’s the theme of 2013

Is the per-gallon gas tax going the way of the full-service filling station?

To look at the flurry of proposals coming out lately, you might think so. Since the start of the year, major new proposals from industry leaders, governors and state legislatures have sparked a new debate over the ways we collect revenue collection for transportation — at the federal, state and local levels.

Earlier this month, the outgoing head of the American Association of State Highway and Transportation Officials, John Horsley, proposed replacing the per-gallon federal tax with a sales tax on fuel. Although he didn’t specify a level, an AASHTO press release indicated it should be set “at a level that restores solvency” to the transportation trust fund, meaning it would have to take in at least $15 billion more a year just to keep spending at current levels. While some no doubt will deride it as a stealth tax increase, Horsley said, “The cost of the reform to taxpayers would be less than $1 per week, per vehicle.”

At the same time, 2013 already has seen several ambitious proposals for funding transportation outside of the excise tax on gas.  Massachusetts Gov. Deval Patrick in his state of the state address proposed raising his state’s income tax rate from 5.25 to 6.25 percent and lowering the sales tax from 6.25 percent to 4.5 percent, while earmarking sales tax revenue for infrastructure, with a significant share dedicated to public transportation.  Patrick said those moves would raise $1.02 billion in new revenue per year on average for the next ten years – none of it from a per-gallon gas tax.

Last week came a report from Pennsylvania that Republican Gov. Tom Corbett is preparing to a release plan to add nearly $2 billion to the state’s transportation funding pot. Though the details are speculative pending a public unveiling next week, he has pledged that the money won’t come from an increase at the gas pump.

These proposals come on the heels of the month’s most controversial, headline-grabbing pitch from Virginia Gov. Bob McDonnell to scrap his state’s gas tax altogether.  Instead, he would raise the state’s sales tax from 5 to 5.8 percent – ironically on everything but gasoline – while increasing vehicle-registration fees and adds an annual $100 charge for drivers of alternative-fuel cars. Those changes would raise an extra $3.1 billion over five years, he said.

At bottom, the recent move away from gas taxes as the go-to source of transportation funds is a nod to new realities: Their earning power is shrinking every year, and car-dependent voters will not stomach increases commensurate with their desire for a robust transportation network.

At the same time, both the highway lobby and environmentalists are seeing their long-held arguments undermined by experience. Environmentalists have contended that gas taxes should rise to slow consumption and speed the transition away from oil. The political reality is that gas taxes can’t be imposed in the U.S. in a way that changes behavior. Behavior now is changing, but for other reasons.

The highway lobby has spent years and millions making the case that gas taxes are “user fees” and are rightly devoted to roads. But with experts like DOT Secretary Ray LaHood predicting that nearly every vehicle will be a hybrid or electric a decade from now, most motorists will be paying little or no such “user fee” absent a major change.

That, of course, says nothing about meeting the needs of the vast majority of Americans who will be living in metro regions too crowded for one-person-per-car travel. State gas taxes certainly can’t meet those needs: 22 states have a constitutional prohibition against spending gas tax revenue on anything but roads, and eight states have similar statutory restrictions.

The reality today, though, is that gas taxes only cover half of the bill for building and maintaining our road network, and that ratio is dropping every year. At the local level, of course, nearly all road and transit costs are paid by sales, property or other non-fuel taxes.

While moving away from the gas taxes, all of the recent proposals — coming from Republicans in VA and PA or Democrats in MA, MN and MD – would amount to asking citizens to pay more for transportation infrastructure. That is something that polls show voters increasingly are willing to do when they understand what the money will be used for.

As we have said since the rollout of our “Blueprint” in 2009, we believe all options to increase funding for reinvesting in America’s infrastructure should be on the table.  Back then, T4 proposed a variety of options including a 20 cent increase in the gas tax, converting the federal gas tax to a sales tax, or imposing a per-barrel fee on imported oil.

The gasoline tax has its merits, but given the lack of political will to raise it significantly, and the wide range of needs, it’s time to begin thinking of  infrastructure as a basic government function that can, and should be, funded the full range of available revenue sources. Our global competitors, after all, have recognized this for quite some time, and are moving ahead of us in building a 21st century infrastructure.


  1. Pingback: If Pols Won’t Raise the Gas Tax, How Else Will They Fund Transportation? | Streetsblog.net

  2. Pingback: If Pols Won’t Raise the Gas Tax, How Else Will They Fund Transportation? | Bici a Milano

  3. IrvinDawid

    11 years ago

    Hmm, David – you end by pointing to “Our global competitors,” recognizing that national infrastructure must be paid for – but fail to note that in Europe and Japan they pay exceedingly high gas taxes. You suggest that doing away with the gas tax would also kill the entire falsehood that gas taxes pay for roads – which would be good because they stopped doing that since 2008 when the first subsidies to the Highway Trust Fund occurred, but one can’t help but think that this strategy is “throwing the baby out with the bath water”.

    The gas tax DOES pay for most of the revenue going to the HTF.
    State excise taxes do account for a large amount of transportation revenue.

    Shifting to sales taxes or income taxes to fund transportation have their own problems.
    Maybe if we look at all the alternatives, we will see the merits of each – and see that a gas tax – or other user fee – makes the most sense.

  4. Alden Wilner

    11 years ago

    Why isn’t the word “turnpike” in that article even once?

  5. oceanstater

    11 years ago

    For the most part other user fees are even more unpopular than the the gas tax which our legislature riased a few years ago as the only practical way to bail out our statewide transit authority. The gas tax, unlike new tolls or vehicle miles fees, are cheap to collect and at least are partially paid by out of staters. But Rhode Island has to worry about cross-border sales, so it would help us if MA finally raised their gas tax. Otherwise, its a race to the bottom, as that state’s transportation systems are also hurting.