Governments across the United States are grappling with funding challenges for road infrastructure and maintenance. Revenue from motor fuel taxes, vehicle fees, and tolls—intended to serve as a user fee system—often falls short of covering roadway expenses. Inflation, along with the rise of electric vehicles and increased fuel efficiency, has reduced gas tax revenues per mile driven.
Currently, only Delaware, Montana, and New Jersey fully cover their highway spending through these revenues. The other states rely on additional funding from general tax revenues. Alaska and North Dakota are notably dependent on non-transportation-related revenue sources for their highway funds.
In fiscal year 2022, California saw an increase in its proportion of roadway spending funded by road users to 89.2%, while Hawaii rose to 97.2%. Conversely, Indiana's share decreased to 76.2%, and Kentucky's dropped to 54.7%.
The decline in gas tax effectiveness is due partly to rates not being indexed to inflation and improvements in vehicle fuel efficiency that have reduced revenue per mile driven. Electric vehicles further complicate matters as they do not contribute to gas taxes yet still use public roads.
To address these issues, the federal government is considering fees on electric vehicles. Some states have already implemented special registration fees or taxes on charging electric vehicles. However, experts suggest a long-term solution might involve shifting towards a vehicle miles traveled (VMT) tax.
State governments and the federal Department of Transportation are exploring this VMT tax as a more direct method of aligning road use costs with funding needs. While such a shift may be challenging without federal leadership, state policymakers are encouraged to prepare for this transition.
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