Pain at the pump: are gas taxes in the future of transportation funding?

• Author: Rall, Jaime
• Position: TRANSPORTATION FUNDING

Widening gaps between transportation revenues and needs make it painfully clear that traditional ways of paying for transportation projects are falling short. Years of underinvestment, aging systems, a growing demand and the effects of the recession have all added to the infrastructure crisis.

The most significant factor, however, is the nation's decades-long reliance on gas taxes, which is now under serious scrutiny. State lawmakers are leading the way, debating how to make gas taxes work--or what they can replace them with--to maintain and improve our world-class transportation system well into the future.

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Coming to Depend on Gas Taxes

Oregon was the first state to enact a gas tax, in 1919. Colorado, New Mexico and North Dakota followed the same year, and by 1929, all 48 states had enacted gas taxes.

The federal government followed the states' lead by passing a gas tax in 1932 at the rate of a penny per gallon. Intended as a short-term budget fix, the tax instead has remained in effect, funding transportation systems since President Eisenhower signed the Federal-Aid Highway Act of 1956 to build the new Interstate System.

Today, state per-gallon tax rates on gasoline range from 8 cents in Alaska to about 51 cents in New York, with the national average around 30 cents per gallon, according to the American Petroleum Institute. On top of state taxes, drivers also pay a federal gas tax of 18.4 cents per gallon.

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Gas taxes are the single largest source of revenue for highway projects in about half the states. They provide close to 40 percent of state revenues for highways, and more than 90 percent of gross revenues for the federal Highway Trust Fund, which supports highway and transit projects nationwide.

A Faltering Revenue Source

For nearly a century, gas taxes have helped build America's transportation system. But today, gas tax revenues are dropping, and there is simply not enough money to pay for desperately needed infrastructure projects.

Americans are reducing their gas consumption by driving less, and when they do drive, they are hopping into fuel-efficient and alternative-fuel vehicles more frequently. "The traditional per-gallon gas tax is not a long-term sustainable funding source," says Virginia Speaker of the House William Howell (R). "With higher efficiency standards and alternative-fuel vehicles, government cannot continue to rely on the gas tax as a revenue source."

Senator Bruce Starr of Oregon (R) concurs. "There is no question that the fuel tax as a funding source will not work in the future. We have more and more vehicles that are getting higher miles per gallon and we have Congress mandating higher corporate average fuel efficiency standards across the fleet," says Starr. "Even without alternative-fuel vehicles, the fuel tax won't keep pace and the system just won't work."

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It's not just that cars...