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State Gas Tax Policies Costing Governments Millions In Lost Revenue, Report Indicates

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WASHINGTON -- A new report by the Institute on Taxation and Economic policy, a non-profit and non-partisan research organization based in Washington, D.C., found that state governments are collectively losing out on over $10 billion in transportation revenue each year due to state lawmakers' reluctance to update gas taxes in their states.

The report also found that every year the national economy loses an estimated $130 billion due to higher vehicle repair costs and and travel time delays.

Despite these apparent costs, the negative associations of the word "tax" makes politicians less likely to enact appropriate legislation.

"Unfortunately, many politicians won't consider touching the gas tax," said Carl Davis, senior analyst at ITEP and author of the study. "They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax. But they can't bring themselves to modernize the biggest source of transportation revenue that's actually under their control. It makes no sense."

The revenue source continues to be neglected even as states are facing their lowest revenues since The Great Depression and state and local governments are cutting jobs and services.

At the same time, a recent report by Citizens for Tax Justice found that 68 large, multinational corporations have avoided paying state income taxes over the past ten years.

This neglect extends up to the federal level, where Congress hasn't raised the federal gas tax since 1993. Because of this, the gas tax has lost 41 percent of its value in the last 18 years.

The report goes on to say that while taxes on fuel have not been raised, the cost of infrastructure such as roads and bridges has continued to go up, and often at a rate higher than inflation.

"It's basic math," said Davis. "The road repairs you could buy in 1990 with 20 cents, for example, are going to cost 34 cents today. But we still see some states collecting the same flat 20-cent tax that they did back in 1990. That's the definition of unsustainable."

In an effort to make a raise in the gas tax more attractive to lawmakers, the report offers three specific policy recommendations to modernize state gas taxes:

1. Increase gas tax rates to (at least) reverse their long term declines. The appropriate contemporary rate for each state will depend on transportation funding needs as determined by lawmakers and the public.

2. Restructure state gas taxes so that their rates rise automatically alongside the inevitable growth in the cost of transportation construction projects. If every state had restructured the last time it raised its gas tax, total state gas tax revenues would be over $10 billion higher per year.

3. Create or enhance targeted tax credits for low income families to offset the impact of gas tax reform.

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