Low-Energy Fridays: Everyone Hates the Gas Tax, but We’re Probably Stuck with It
The Biden administration has big plans to shift drivers into electric vehicles (EVs), with rules requiring at least two-thirds of new vehicles to be electric by 2032. But there are several problems—one of them being that EVs use no gasoline. Since federal highway projects are meant to be funded through the federal gas tax, how will we fund road maintenance if everyone switches to EVs?
While EVs highlight a problem with using a gas tax to fund roads, they aren’t the only contributing factor. Fuel efficiency has been going up for decades, meaning that it takes less gasoline for a car to cause the same amount of wear and tear on the road. And the federal gas tax hasn’t been raised in 30 years, not even to account for inflation.
Why are politicians so reluctant to touch the gas tax? Nobody likes taxes (and to be clear, I’m not advocating for a tax increase), but politicians have been willing to raise taxes in other contexts. What’s more, the gas tax is the type of tax that economists and policy wonks tend to look upon most favorably—partly because it approximates a user fee for the roads. That way, people who drive more (and ostensibly add more wear and tear to the roads) pay more of the tax, all else being equal. There is an economic logic in this, since gas tax revenues go toward building and maintaining roads. Taxing gasoline can also help account for the pollution produced by vehicles, for example.
Polling suggests that voters aren’t uniquely repelled by the idea of higher gas taxes. While only 20 percent of respondents would support a gas tax increase in the abstract, support rises to 67 percent when they’re told revenues will be used for road maintenance. Similarly, 50 percent would support an increase if revenues would be used to fight global warming. By contrast, when asked which tax they like least, respondents commonly cite local property taxes. Yet voters do sometimes approve higher property taxes to fund things like schools or road projects.
However, the way people answer questions about a hypothetical situation isn’t necessarily how they’d react to a real-life rise in gas taxes. Recently, a Washington state law meant to combat climate change led to a 50-cent-per-gallon increase in gas prices—and many unhappy residents. People might get angrier about property taxes than the gas tax, but they’re only reminded of property taxes once a year when their bill comes in the mail. They’re reminded of higher gas prices every time they fill up.
Given the downsides of the gas tax, it would be great to replace it with something else. Unfortunately, each known alternative has its own problems. The simplest would be to use tolls to fund federal highway projects. If the gas tax is an indirect user fee for the roads, a toll is a direct one. The problem is that it’s too direct—which makes it an even less popular choice.
Another option would be a yearly tax based on the number of miles driven in a year. The aptly named Vehicle Miles Traveled tax makes sense on a theoretical level, but details still need to be worked out to protect privacy and avoid fraud.
Finally, some states have attempted to patch holes in the gas tax by applying a yearly flat fee to electric vehicles. Since EVs use the roads but do not pay gas taxes, some sort of fee would be appropriate and could even form the basis for a more general gas tax replacement in the future. In some cases, however, these fees have been set at a punitive level far above what the average driver would pay in a given year.
All this means that, while the gas tax may be unpopular and increasingly unsustainable, we are also likely stuck with it—at least for now.