Title: How Much Gas Tax Money States Divert Away From Roads - Reason Foundation
Headings: How Much Gas Tax Money States Divert Away From Roads
Policy Brief
How Much Gas Tax Money States Divert Away From Roads
Examining the percentage of state gas tax revenue that is allocated for expenses unrelated to roads, including money shifted to law enforcement, education, tourism, environmental programs and more.
State Gas Tax Diversion Rates
Background
Figure 1: State Gas Tax Rates 2000-2019
Gas Tax Diversions by State
Figure 2: State Gas Tax Diversion Rates
Figure 3: Average Diversion Rate of Each U.S. Region
Methodology
Colorado
Connecticut
Florida
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
New Jersey (FY18)
New York
North Carolina
North Dakota
Oklahoma
Pennsylvania
Rhode Island
South Carolina
South Dakota
Texas
Utah
Vermont
Virginia
Washington
Wisconsin
Analysis
Recommendations

Content: The federal gas tax rate was raised by half-a-cent per gallon during World War II and by another half-cent during the Korean War to generate new revenue for national defense. With the Federal Aid Highway Act of 1956, commonly referred to as the Interstate Highways Act, Congress raised the federal gas tax rate from two cents to three cents and dedicated all of the revenue to the newly created Highway Trust Fund (HTF). The HTF was designed to fund the construction of the new Interstate Highway System utilizing the users-pay/users-benefit principle of taxation. The users-pay/users-benefit principle simply means that those paying a user tax receive the benefits, connecting a government expenditure with both market demands and a reliable, fair source of revenue. In the case of the gas tax, drivers are proportionally paying for their road and highway use, assuming the revenue is allocated for roads and highways. Overall, government revenue that conforms to the users-pay/users-benefit principle is fair, proportional, predictable and self-limiting, while serving as a signal for investment. Over the past 100 years, state gas tax rates have increased to accommodate the need to build (and rebuild) highways and to account for inflation. In July of 2019 alone, for example, drivers in 14 states saw gas tax rate increases. A few states, such as Rhode Island and Georgia, mandate periodic indexing of the gas tax rate to account for inflation. New Jersey, on the other hand, ties its gas tax rate to revenue goals.