Out of the many transportation problems America currently faces, funding infrastructure remains at the top of the pile.
Currently, we pay at the pump both a national and state gas tax and in many local counties and cities around the country, we also pay special sales taxes and wheel taxes for infrastructure.
It never seems to be enough.
Infrastructure maintenance and construction increases with the rate of inflation, but the funding mechanisms seem to be constantly falling short. For example, Congress has not raised the federal gas tax since 1993.
The Pew Trusts reported recently that without a change in tax formulas, we would fail to meet the nation’s infrastructure needs. The Congressional Budget Office concluded in 2021 that without indexing the 18.4-cent per gallon federal gas tax to inflation, the Highway Trust Fund would be $140 billion short in ten years. Only 22 states index or have legislated variable-rate gas taxes.
According to the National Association of State Budget Officers’ 2021 State Expenditure Report, fuel taxes only comprised nearly 40 percent of state transportation funding sources. Here are some state projections of decline:
- Kansas: current gas taxes make up 19 percent of transportation funding in 2021, but for 2045 projections, that could be down to 11 percent if not adjusted for inflation.
- New York: revenue will peak in the 2023 fiscal year and then start to fall.
- Washington State: DOT predicted that the state’s current 49.4 cent gas tax would need to increase by 1.7 cents per gallon every year through 2040 to keep the current level of revenue.
- West Virginia: projected gas tax revenue would fall between 11 to 20 percent by 2030.
Fuel tax revenues have also dropped for two other reasons: better fuel-efficiency vehicles mean drivers don’t need to pump as often, and electric and hybrid vehicle sales have grown.
Alternatives to the Gas Tax
The federal DOT and many state departments are now calling for road user charges. Many fear a road user charge would be placed on top of what drivers already pay at the pump.
The NMA has investigated road user charges, vehicle-miles-traveled tax, or mileage-based user fees for at least a decade. Here are just some of the more recent newsletters and posts:
- Should We Lean into a Federal Vehicle Miles Traveled Tax?
- Are We Slinking Ever Closer to a Universal Road User Charge? Part 1—the National Landscape
- Are We Slinking Ever Closer to a Universal Road User Charge? Part 2—Congress
- Are We Slinking Ever Closer to a Universal Road User Charge? Part 3—Regional and Local Efforts
- The Road User Charge by Any Other Name
California and Oregon have been testing RUC for years, and this year eight states (HI, MA, MN, TN, UT, VT, VA, and WA), considered bills to set up their pilot programs to tax electric vehicle drivers.
An RUC works in two ways:
- An installed device measures the vehicle miles driven (and in some areas, such as downtowns, could even track the time frame to determine a congestion pricing charge).
- Owners report miles driven through year-over-year odometer readings during the yearly vehicle registration.
Under its revised law this year, for example, Utah legislators set the mileage tax at a penny per mile beginning next year. In 2026, it goes up to 1.25 cents per mile, and in 2032, it rises to 1.5 cents per mile. It’s all voluntary for now.
Implementing a road user charge is much more complicated than you think—especially if the extra fee is funding something other than roads. The question always remains: Why should drivers always be hit with extra fees and taxes for other types of governmental needs, which are not roads and bridges?
The San Diego Association of Governments, or SANDAG, wanted to include an RUC to help pay for its ambitious $160 billion plan through 2050 to expand transit across the region while at the same time, limiting car travel.
San Diego Mayor Todd Gloria spearheaded the move to strike the controversial RUC from the funding portion of the plan. His reason:
“I cannot support the concept of charging people to drive when we don’t have viable transit or other alternatives to offer those who are already struggling with high rents, high utility bills, and everything else.”
The SANDAG plan envisions an extensive network of underground fast trains in the county. Voters first will need to approve three half-cent sales tax increases by 2028. Without the road user charge, funding alternatives include fees tacked onto new vehicle registration in the county or increased parking fees.
Landline recently reported that a Louisiana statehouse meeting concerning funding for road infrastructure focused on a possible road user charge. Legislative Performance Audit Manager Gina Brown reported to the electric vehicle legislative task force that the state could lose close to $564 million in gas taxes over the next decade.
According to the Louisiana Department of Transportation and Development motor fuel taxes generate most of the state’s transportation funding. Other funding sources include vehicle registration fees and self-generated revenues.
A new state law taking effect in early 2023 will impose an annual road user fee for EV and hybrid vehicle owners. It will cost $110 for EVs and $60 for hybrids. Brown told the task force that this new fee would raise $240 million. She added that this estimate is based on the assumption that EV and hybrid owners will self-report on their state income taxes. She was not confident that many would report or pay the voluntary fee.
Another recommendation made to the legislative committee would be to do away with the gas tax and collect a higher road use fee. Currently, the state of Louisiana collects a 20-cent-per-gallon gas tax—unchanged since 1990 and the eighth lowest in the country. In the hearing, lawmakers learned that if the fuel tax had been adjusted to inflation all along, the current rate would be 49 cents. In Louisiana, vehicle miles traveled per year total close to 14,075 per driver, ranking 17th in the US.
Funding transportation will be one of the most significant issues in statehouses this coming legislative session. Many of our elected leaders are reluctant to raise taxes or raise fees, but what happens if we don’t adjust funding for the times we live in currently?