To Gas Tax Or Not To Gas Tax. That Is The Question


In the coming age of electric vehicles, what will be the fate of the gas tax? Taxes are never popular. The infamous Senator Huey Long once explained tax policy this way. “Don’t tax you. Don’t tax me. Let’s tax that fellow behind the tree.”

Should the gas tax be indexed

Automobiles are wonderful devices, but they aren’t much good without the infrastructure that makes driving into town or across the country possible.  Roads, bridges, and tunnels are expensive. Not only do they cost a lot to build, they cost a lot to maintain. Since 1932, the federal government has imposed a tax on every gallon of gasoline sold. In theory, the money collected goes into a trust fund. It is to be used solely to fund infrastructure improvements and maintenance.

Except politicians are spineless wimps. They would rather siphon off money from the general treasury than be forced to vote for an increase in the gas tax. That leaves no way to account for the increase in costs to build and maintain our roads that happens over time. Today, gas taxes aren’t high enough to pay for even half the cost of our transportation infrastructure. Electric cars and CAFE regulations make the problem worse. If people buy less gas, less revenue is collected, which leaves less money for roads.

California and Oregon are experimenting with computer applications that will track how many miles a driver covers. The theory is people who drive more should pay more. That makes sense, but there are some issues. Many of us are not thrilled with our government knowing where we go and when we go there. Our every e-mail, phone call, and mouse click is already recorded an analyzed by dozens of federal security agencies tasked with protecting us from the latest threat du jour.

In Oregon, more than 1,000 drivers have volunteered to be part of a “pay as you go” program. They are billed monthly for the miles they drive. In exchange, they are exempt from paying the state’s gas tax. The California program is theoretical only. Participants only get virtual bills from the state. In addition to the technical issue of whether states can or should track the movements of millions of vehicles, the “pay as you go” system has the same built in problem as the current gas tax — it is not automatically indexed to the inevitable increase in the cost of maintaining the transportation infrastructure.

That is the solution proposed by a group calling itself Tax Justice. It favors the indexing approach, saying that even if tracking miles driven is possible, it won’t help resolve the shortfall in revenue that exists today. Only reforming the gas tax system so it automatically adjusts for increasing costs will do, the group says.

In fact, that’s precisely what several states are doing. Florida, Georgia, Maryland, Rhode Island, and Utah index their gas tax rates. California does a variation that makes little sense. It ties the amount of its gas tax to the price of fuel. When gas prices decline, as they have over the past 18 months, there is less money coming in to fix the roads. Whoever thought up that idea should get an award for stupidity.

Paying per mile is actually no different than paying for parking. Both are a charge based on usage. As electric cars become more common, states and the federal government are going to need to rethink how we pay for our roads. “Pay as you go” plans will probably become more popular. But they need to be indexed to actual costs of road construction and maintenance if they are to be effective. Leaving it up to politicians to set the rates will doom them to failure.

About the Author

I have been a car nut since the days when Rob Walker and Henry N. Manney, III graced the pages of Road & Track. Today, I use my trusty Miata for TSD rallies and occasional track days at Lime Rock and Watkins Glen. If it moves on wheels, I'm interested in it. Please follow me on Google + and Twitter.
  • Radical Ignorant

    So basically gov is subsidising car industry. (Does planes, trains get similar help?) And the problem is that this subsidy is increasing as cars efficiency is rising because it’s tied to car inefficiency.
    IMHO it would be good to increase gas tax. We as society should penalise inefficiency which is polluting our common resources.
    Long term… that is hard question. Paying by mile will penalise suburbs, but then loving in apartments is more efficient and with electric cars cietes will be quieter and cleaner… but is it American way to leave close to others?
    It’s super complicated topic and involves lot beyond simple car use.

    • Steve Hanley

      Good points. Thanks for sharing.

    • Jim Smith

      using the word ‘penalize’ is a misuse of the term. Those who cause the most wear on roads should pay the most. The gas tax does not work. period. the problem we are trying to solve is how to pay for roads. It logically follows, the users of the roads should be the ones to pay for it.

  • Marcel

    Trucks ans busses are responsible for most of the infrastructure degradation. Trucks are 10’000 more damaging to roads and bridges. Freight can and should be transferred to rail. Plus freight trucks pollute so much, they’re very dangerous to other road users, someone’s got to do something about it.

    • Radical Ignorant

      True – basically truckers would put 99% of road infrastructure cost if it was based on wear and tear. But it’s not only. It’s also opportunity. It’s worth to pay $? yearly to have roads and to have possibility to drive where you want even if actually you are not using them. Then again – forcing truckers to pay 99% you are forcing this tax on society (freight goes up = prices of things for final customer goes up). So you have the same result as now = everybody in kind of similar way is paying for infrastructure -> easier to be paid from taxes already being in place, no need for additional bureaucracy.
      Gas tax makes sense as incentive for people to use less polluting cars, or to move this cost of maintaining roads from everybody to those who are using cars heavily, so at least not super poorest.

      • Jim Smith

        the gas tax does not work. It collects less and less revenue as cars get more efficient. EV drivers do not pay anything. Trucks would not cover 99% of taxes, but they would pay the largest share. This is due to trucks, being heavy and driving the most miles, cause the most damage to the infrastructure. it is only fair they pay the cost for that rather than externalize it. Sure, prices will go up, but that simply reflects the business model they operate in. Perhaps it makes rail more cost effective? That price pressure would also force the market to move to lighter more efficient trucks. The market will sort it out.

        • Marcel

          Very well said, my thoughts exactly.

  • Jim Smith

    first thing is the federal gas tax should be eliminated. The Federal government should not be involved in something that is clearly a state issue. Next, the gas tax in its current state will never work. So lets get rid of it, and have a state vehicle tax. When you register a vehicle, you are signed in to the tax. In the cost equation, we cover vehicle weight and miles driven. The heavier a vehicle, the more wear on the roads. Most states already have yearly inspection and emissions testing. The mileage is already recorded at the inspection. Based on weight and miles driven, the tax is computed.

    States could also put up toll booths on their major highways to capture revenue from travelers and long haul truckers. Again, based on weight and miles driven. The combination of these two things provides a fair and simple means of paying for the public infrastructure being used, and it has state level accountability for poor infrastructure funding rather than some faceless bureaucrats in DC.

  • AaronD12

    Simple: STOP SUBSIDIZING BIG OIL. Then you can get rid of the Federal gas tax completely. The loss of subsidies will cause the price of gas to rise, of course, but the money used to subsidize big oil can be put to use improving our roads and infrastructure.