The Problem with the Gas Tax in Three Charts

A recent U.S. House Ways and Means Committee hearing focused on the long-term sustainability of the nation’s transportation program. Most of the attention went to the federal gasoline tax, its role in supporting the overall program, and the fact that it hasn’t been raised—even to keep pace with inflation—in two decades.

Yet, Committee Chair Paul Ryan declared that Congress is “not going to raise the gas tax” even though after years of steady growth, federal gas tax receipts are declining. The chart shows that revenues peaked in 2007 at $25.7 billion and have slowly dropped ever since. (The IRS data shows a strange drop in 2004, possibly a reporting error for that year.)

Figure 1

The inflation-adjusted data show a different picture of the growth of the gas tax and its corresponding receipts. After controlling for inflation, revenues peaked at $28.8 billion in 1994.

Figure 2

This matters because the gas tax generally makes up about 60 percent of the revenue in the federal highway trust fund. However, fiscal year 2013 (the latest year for which data is available) also included an infusion of about $6 billion from the general fund to augment the revenue in the trust fund. Therefore, in that year the gas tax only made up a little more than half of the total.

Figure 3

However Congress chooses to address the problem of the long term sustainability of the transportation program—and little was learned about how they plan to do that at the hearing—it is clear today that the program is highly reliant on the gas tax. It should be raised—as six states have done with their own gas taxes this year—at least to keep pace with inflation.

But it seems clear that part of the reason for the reluctance to raise the tax is that the problem is only framed around an immediate funding crisis. It is impossible to start with a funding solution or what the optimal level of investment should be when there is no real agreement about what the federal role should be, what problems we are trying to solve, or what questions we are trying to answer.

Looking at it another way: No major increase in transportation revenues has ever occurred without major transportation policy reform. This should be another one of those times.