Institute Takes Closer Look At States’ Gas Tax

As state and federal transportation officials scramble to secure funding sources to repair aging infrastructure, two timely fact sheets released by the Institute on Taxation and Economic Policy on April 1 highlight what states have done with their gas tax system over the years.

The institute, a Washington-based think tank, noted that 24 states have not increased their gas tax rate in at least a decade. The institute also identified Alaska, Oklahoma, Iowa, Mississippi, South Carolina, and Tennessee as not having increased their gas tax rate since the 1980s. All the while, the cost of infrastructure maintenance and construction increases steadily.

In a separate fact sheet, the institute highlighted the states that allow for modest increases in their tax rates each year through a “variable-rate” system. A majority of the country’s population – 55 percent – lives in a state where the gas tax rate is indexed to grow over time after Maryland, Massachusetts, Pennsylvania, Virginia and the District of Columbia abandoned their “fixed-rate” gas tax structures last year, according to the institute.

Carl Davis, a senior analyst at the institute, argued that transitioning toward a “variable-rate” system at the federal level and in more states would put funding for infrastructure investments on a sustainable path. The federal gas tax was last increased in 1993.

“A lot of problems with our infrastructure can be traced back to outdated gas tax rates that haven’t kept pace with the cost of construction and maintenance,” Davis added. “Clearly, there’s more work to be done when almost half the states haven’t revisited the gas tax in over a decade.”

State transportation officials have been examining ways to raise funds to address their infrastructure needs. Over the years, revenues from the gas tax have declined partly due to people driving less and improvements in fuel efficiency.