Fuel taxes and the 2018 midterm elections

What’s the problem?

Fuel taxes have become an increasingly large topic of debate as many states around the nation have looked to them as an additional stream of revenue to rebuild state infrastructure.

Fuel taxes, also known as gas taxes, are a form of an “excise tax,” or a tax attached to a product or service with the intention of discouraging the usage of it. Other examples include taxes on indoor tanning beds, alcohol and tobacco.

In 2018 alone there were seven states which raised fuel taxes. In fact, 27 states have raised fuel taxes since 2013 in an effort to increase tax revenue.

Currently there are three states with gas taxes higher than 40 cents. A notable state is California which boasts a combined federal and state gas tax of more than 73 cents.

In 2017, the governor of California signed a piece of legislature to increase the state’s fuel tax by 12 cents. After Californians grew angry at the tax increase, legislation was drafted, creating Proposition 6 which repeals the 2017 increase. This, among other vehicle and diesel tax increases, was expected to bring in $5.4 billion per year for road repair projects.

Although the additional tax brings in revenue for each state, it does not bring in as much as it used to, according to Bloomberg Opinion columnist Justin Fox. The federal gas taxes have remained near-constant for more than three decades at around 18.4 cents per gallon. The federal tax is instituted by the cent, not a percentage making its revenue decline as inflation rises.

With many states in need of an infrastructure overhaul, such as Rhode Island and New Hampshire, this decline in adjusted tax revenue limits the state’s ability to fix the roads.

In addition to the federal gas tax revenue decreasing in effectiveness, consumers have been buying more electric and fuel efficient cars. This in turn leads to purchasing less gas and to a decreased revenue.

In Florida, the impact of the increasingly efficient vehicles brings more than $3.3 billion in missed fuel taxes through fiscal year 2024/2025 according to the Florida Transportation Commission.

The impact caused by more fuel efficient vehicles entering the market is more than $3.3 billion in unrealized state fuel tax collections through FY 24/25. The average age of road infrastructure in the United States is 28.4 years old, according to the New York Times. Relative to the economy in the 1950s, the country is spending half as much on infrastructure than in the mid-century.

A February 2018 report by President Trump’s Council of Economic Advisers, it states basing the funding of road infrastructure through gas taxes “is becoming increasingly unsustainable.” As this continues, more states are looking for alternative ways to fund infrastructure repair.

Until then, prepare for potholes.

All graphs in this piece were found using Grafiti’s chart search engine.