Drawing on new data from the American Petroleum Institute, the Tax Foundation has presented an updated map of state gas taxes.
Washington’s 49.40 cents now ranks No. 4, behind California’s top ranking 61.20 cents, Pennsylvania’s 58.70 cents, and Illinois’ 54.98 cents. (Compare with our post last week on the search for supplements or alternatives to the gas tax for funding infrastructure. In that post, we linked to the previous TF map, showing Pennsylvania with the highest gas tax, followed by California with Washington ranking third.)
TF explains the methodology.
States levy gas taxes in a variety of ways, including per-gallon excise taxes collected at the pump, excise taxes imposed on wholesalers which are passed along to consumers in the form of higher prices, and sales taxes that apply to the purchase of gasoline. The American Petroleum Institute accounts for these different approaches when it calculates the average tax rate on a gallon of gasoline in each state.
Analyst Janelle Cammenga restates the conventional arguments for the gas tax, while acknowledging some aspects of the funding challenge.
While few taxpayers are cheerleading gas taxes, they do embody the “benefit principle” of taxation relatively well. This public finance concept holds that the taxes a person pays should relate to the government services that person receives. In general, drivers benefit from the government road services that their gas tax dollars pay for, like road construction, maintenance, and repair. Because gas taxes connect drivers to the costs of road upkeep, they encourage efficient road use, which helps limit congestion and the wear and tear that comes from overuse.
Gas taxes and other user taxes and fees are the most suitable revenue tools for generating the funds to maintain and repair public roads over time. But many states and the federal government don’t index those taxes for inflation, so the nominal value of gas tax revenue tends not to keep pace with infrastructure funding needs across the country. Governments serve their constituents well by keeping road construction and maintenance costs at reasonable levels.
As more electric vehicles take the roads and fuel-efficiency grows, the “other user taxes and fees” will like grow in importance in the coming years.