SUMMER DRIVING season is here — time for us to repeat ourselves on the cost of a gallon of gasoline. Specifically, it should be higher. Congress last raised the federal gas tax in 1993, which means that the 18.4-cent-per-gallon levy has fallen more than 40 percent in real terms. That is a rough indication of how much incentive for consumers to drive less, and to drive more fuel-efficient vehicles, thus reducing carbon emissions, Congress has passively forfeited. The shrinking gas tax is a major reason the Federal Highway Trust Fund has enough money to meet its obligations only through fiscal 2020.
If all of that provides another reason to lament policy paralysis on Capitol Hill, then July 1 was an occasion to celebrate a surge of policy activity in the states. On that date, gas taxes went up in 13 states, including not only blue states such as California and Illinois — where the tax rose for the first time in 29 years — but also red ones such as Indiana, Nebraska, South Carolina and Tennessee. (Connecticut’s increase affected only diesel fuel.) In several cases, the tax increases represent scheduled hikes previously enacted as part of multiyear phase-ins. More states are also choosing to index their gas taxes to inflation or other economic benchmarks, enabling regular increases to preserve the tax’s real value without a political fight each time. Such a provision accounts for the 1.4-cent rise in Maryland’s tax that kicked in July 1; it’s based on a formula implemented in 2013. Also, Virginia’s tax went up 7.6 cents on the first of the month — but only for sales along the Interstate 81 corridor.
All told, 31 of the 50 states have raised or reformed their motor fuel taxes during the past decade, according to the Institute on Taxation and Economic Policy. What’s more, 22 states now have variable-rate policies in place to make sure that inflation does not erode this crucial revenue stream. In so doing, they are establishing sustainable funding for the transportation infrastructure they need, for which they cannot rely on Washington alone.
They are also disproving much conventional wisdom about the politics of taxation in general and fuel taxation in particular. When the public understands the connection between increasing taxes and the purpose for which the revenue will be spent, legislators can persuade voters to accept paying a bit more. That is apparently the case with fuel taxes, which are roughly equivalent to a fee for maintaining the roads we all use, especially when they are levied and spent close to home, at the state level. Even deep-red Alabama will increase its gas tax by 10 cents per gallon over the next two years, then adjust it to keep pace with highway construction costs thereafter.
Obviously, a different political dynamic pertains to federal gas taxes, which are collected more remotely from where they are spent and used for mass transit, as well as roads. Yet the states’ experience demonstrates that the American people are open to more rational fuel taxation and that Congress’s old excuses for avoiding it may no longer apply.