This blog is the fourth part in our series examining what rising gas prices reveal about the U.S. transportation system. As global disruptions push fuel prices higher, this series also explores how Americans are affected (part 1), how people adapt (part 2), and what a more resilient transportation future looks like (part 3).
By Chris McCahill
In an earlier installment of this blog series, we explored the mounting transportation costs that Americans face, which are now exacerbated by rising gas prices. Efforts to provide relief through gas tax holidays—first in certain states, then nationally—show just how fragile our system is. These temporary measures offer minimal relief while undermining the very foundation of our transportation funding.
Given the rapid increase in gas prices following U.S. military operations in Iran, federal lawmakers have proposed a temporary freeze on gas taxes. This 18.4-cent charge on each gallon of gas makes up just 5% of the total price. The price of crude oil, which accounts for more than half the cost of each gallon, has surged by at least 55% in the past few months.
To add more context: The average family pays less than $150 per year in federal gas taxes, and around twice that amount in state taxes. Together, those are about 1% to 3% of the total estimated cost of car ownership, which is more than $12,000 per year, according to AAA.
However, those small fees we pay at the pump bring more than $40 billion per year into our Highway Trust Fund, which gets redistributed mostly to state DOTs for building and repairing roads and highways. Without them, that money runs dry. The proposed tax holiday compounds a problem that’s been building for decades. Gas taxes have not covered our transportation costs for almost 20 years, forcing nine transfers of general tax revenues into the Highway Trust Fund totaling $275 billion.
That leaves some difficult choices.
Federal lawmakers are drafting a transportation reauthorization bill that some analysts warn will deepen the funding hole while failing to address our most urgent needs. The Congressional Budget Office says the Highway Trust Fund will accumulate another $295 billion in deficits over the next ten years under the current proposal. Transportation for America notes that it also strips popular programs from the Biden-era Infrastructure Investment and Jobs Act (IIJA) while failing to prioritize road repairs, safety, and transit.
One controversial proposal would charge electric vehicle owners $130 per year and hybrid owners $35, on top of steep local fees in many states. The fees are a stopgap response to the gas tax revenue lost as more drivers switch to electric and fuel-efficient vehicles. However, the fee would mean owners of lightly used EVs would pay more per-mile than owners of heavily used gas vehicles. These fees discourage a necessary shift to cleaner vehicles to prevent harmful carbon emissions.
A more durable solution is a road user fee based on mileage and vehicle weight. Active programs already exist in Hawaii, Oregon, Utah, and Virginia, with pilots in many other states. The model was also a key focus of discussion at our recent Community of Practice meeting in Sacramento. Given how receptive drivers are to pricing signals—a topic we discussed in an earlier post—these direct user fees, paired with variations on New York’s highly successful congestion pricing program, could help effectively manage traffic congestion.
Ultimately, without public support for increased transportation funding, state and local agencies may need to reassess their spending priorities. This could mean focusing on more on the upkeep of existing infrastructure and supporting a range of transportation options, instead of larger highway projects that eat up resources and add to the list of assets agencies must maintain—an approach stressed in Transportation for America’s new Repair Priorities report. Virginia’s SMART SCALE program is a prime example of how performance-driven project selection can surface smaller projects that offer more bang for the buck. The tools and models exist, and what’s needed now is the political will to implement them.
Photo credit: David Brown via Pexels. License.