The Problem
Gasoline taxes are an unreliable funding source for state transportation projects, road construction, and maintenance due to declining gasoline prices and more fuel-efficient vehicles. In 2015, Daniel Vock, writing for Governing, analyzed state gas tax data reported to the U.S. Census Bureau and found two-thirds of state fuel taxes failed to keep up with inflation.
Moreover, gasoline taxes are regressive and produce widespread economic consequences. Increasing fuel taxes leads to higher prices on goods and services throughout the economy. These additional costs are inevitably passed on to consumers, with an especially negative impact on lower- and middle-income families.
Policy Message
Point 1: Relying on gas taxes to fund transportation projects will hurt states in the long run because gas tax hikes raise prices on goods and services throughout the economy.
Point 2: Gas taxes have a detrimental effect on lower- and middle-income families than they do on the wealthy.
Point 3: The real problem with transportation funding is not lack of revenue, but poor spending.
Point 4: States should remove unnecessary cost drivers such as prevailing wage laws and project labor agreements.
Point 5: Indexing gas taxes removes accountability for policymakers and will likely accelerate tax increases.
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