By Brianne Glover
Relying on gas tax is outdated as travel, vehicles become more diversified.
Amid all the news of record-breaking inflation, it’s hard to think of anything that doesn’t cost more than it did a year ago — much less 30 years ago. To find one example, though, just think of your vehicle’s fuel.
The price we pay for a gallon of gas or diesel recently rose to more than triple what we were paying three decades ago. The tax we pay for that gallon, however, didn’t rise at all. In fact, the state motor fuels tax, the major revenue source for our roads and bridges, is the same today as it was in 1991 — 20 cents a gallon.
When we buy pretty much anything else — household supplies, kitchen appliances, a new car — we pay a tax based on a percentage of the cost of the thing we’re buying. But that’s not how it works when you swipe your credit card at the pump, because in Texas, state fuel taxes are not tied to fuel prices. You pay that 20-cent tax whether the per-gallon price is $1.89 or $4.89.
The tax isn’t tied to the price of oil, either; that 20-cent levy stays the same no matter how much a barrel of crude may cost.
At first glance, that may sound great. After all, who wants to pay higher taxes, right? The fact that we’re paying no more in fuel tax now than we were when the first George Bush was president is a good thing, right?
If you’re trying to figure out how to pay for building and maintaining the state’s roads and bridges, maybe the answer is no. The tax, such as it is, has throughout most of our highway history, been a primary source of transportation funding.
Consider, however, these factors: Inflation has eroded the value of that source to a point where it pays for less than half of what it paid for in 1991. And the prices for things that go into our highways — concrete, steel, etc. — have gone up even more than many other common expenses.
A growing number of cars sold every year are hybrids, which pay less in gas taxes because, well, they use less gas. Fuel efficiency improvements are expected to continue, meaning still less tax revenue for every mile driven.
The number of electric vehicles on the road is growing, too, and those cars and trucks pay no gas taxes at all.
In short, the state fuel tax by itself is an increasingly unsustainable funding source. I say “by itself” because we’re fortunate to have another source that’s actually growing. Texas voters in 2014 approved a transfer of tax funds from oil production in the state to help pay for roads and bridges. Unlike the state gas tax, that funding source is, in fact, tied to the price of oil. When oil prices rise, the revenue to the state increases, too. This year alone, we expect that transfer to yield about $3 billion for transportation, compared with the $2.6 billion we expect from the gas tax.
Thanks to Texas voters and that 2014 constitutional amendment, and actions by the Texas Legislature that provided for it, the state has had more highway money to work with in recent years. At the same time, though, demands on the road and bridge system have only intensified. The state’s population has grown by more than half since 1991, leading to a 70% growth in roadway travel, and correspondingly more wear and tear on that system. Much of that growth is in-migration, bringing folks (and their cars) from other parts of the country. We can expect the Texas population to swell to 45 million in less than 20 years, further straining a transportation network that’s already carrying far more traffic than originally expected.
Given these daunting challenges, what’s our best path forward? Through our research at the Texas A&M Transportation Institute, we identified what other states are doing. Many of those jurisdictions are using an increasingly varied mix of ideas, from a sales tax on fuel to local-option taxes to fees on alternative fuel vehicles. We include these and other variables on a website we created called the Transportation Revenue Estimator and Needs Determination System (TRENDS). Whether you’re a highway planner or an everyday commuter, you can use the TRENDS website to come up with your own ideas of how to pay for our state’s growing transportation funding needs.
The travel options and types of vehicles we use to move about have become more diverse in recent years. Perhaps it’s time to also diversify how we pay for that mobility.
Brianne Glover is a research scientist at the Texas A&M Transportation Institute. She wrote this for The Dallas Morning News.
This article was originally published in the The Dallas Morning News, July 29, 2022.
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