U.S. states fund most of their road and infrastructure budgets with revenues from gasoline taxes. The historical rationale behind this is intuitive. The more people use public roads, the more gasoline they consume, making the gas tax a well-designed user fee.

The gas tax is often levied as a specific tax per gallon. While the commodity price of oil can fluctuate dramatically, the volume basis for the tax and citizens’ general dependence on gas for transportation have made the gas tax a stable source for funding roads. Gas taxes also serve as a disincentive to drive, decreasing both traffic congestion and pollution on the margin.

As the market share of electric vehicles (EVs) on the road grows, however, the gas tax’s ability to fund road projects and decrease traffic congestion erodes. Both federal and state real tax revenue per vehicle mile traveled has been on a steady decline for decades, creating a fiscal gap for road expenditures even as the demand for road infrastructure improvements has grown.

👉 Read the full post at Tax Foundation