Falling Gas Tax Revenue Could Create Budget Problems for States

What could possibly be a downside of shifting our mode of transportation from gas-powered cars and trucks to electric and hybrid vehicles? With any major technological shift, there will be hurdles that few even see coming. One of those might be massive state budget deficits.

Take the example of Washington state. A recent report compiled for the Legislature’s Joint Transportation Committee found that by 2025 — only 15 years from now — the adoption of electric and hybrid vehicles will lead to a decline in the average per-capita gasoline consumption from 500 gallons to 425 gallons or less. Washington finances its road projects largely through a gas tax of 37.5 cents per gallon, and the projected shortfall in state coffers is expected to reach $3.8 billion by 2025.

Washington is not unique, though. Every state makes a good chunk of revenue by taxing gas. Alaska has the lowest at 8 cents per gallon, and New York levies 44.5 cents per gallon. On average, states collect 18.4 cents per gallon. They use this money mostly to pay for highway projects and maintain infrastructure. As gas consumption falls over the next two decades and beyond — as surely everyone wants it to, whether you’re worried about climate change or foreign oil interests — states will have to figure out how to make up the gap in revenue.

Moreover, the federal government charges a gas tax of 18.4 cents per gallon, which also goes toward funding road projects across the country. As this revenue declines, the government will have to figure out how to keep infrastructure from falling into decay. Lower taxes in one sphere usually means higher taxes in another, but proposing a tax hike of any kind is a political headache.

It will be interesting to see how notoriously cash-strapped states like California — primed to be an early adopter of electric vehicles — and Illinois handle this new budget challenge, let alone our consistently gridlocked national legislature.

Fuel-Efficient Cars Affecting Washington Gas Tax (Seattle Times)

Comments

Forget 'budget'
Look up CAFR-comprehensive annual financial report
The states have ripped you off, and are continuing to do so until we stop them.

A "budget" is different from actual expenses.

George is wrong. The states must raise their gasoline taxes per gallon to make up for lost revenue. The money is used to fix roads. I'm tired of whiners like George who think roads should be perfect but that the state is ripping people off to get the revenues to build and repair those roads. Raising gasoline taxes also automatically puts an incentive into people buying hybrids, plug-in hybrids and pure electrics, which is the direction we must move in.

"The states must raise their gasoline taxes per gallon to make up for lost revenue." States should reduce their spending instead of asking taxpayers to pay even more. The 'Major' clearly lacks a college education.

Ed,
If states cut their spending who pays for your welfare check? Grow up and face the fact that somebody has to pay for the roads we build and it makes sense to have the users pay with a gasoline tax. When revenues drop the tax per gallon has to go up. People who drive wasteful vehicles pay more for the damage they inflict on the roads, while hybrid drivers pay less. Good luck on trying to undo 100 years of transportation policy, genius.

Lower the gas price by 10 cents, raise the tax amount by 10 cents to offset the gas price.

2.50 - 10 + 2.40

2.40 + 10 = 2.50

I agree with 'Ed' as 'Major Fart' clearly has no idea what he is talking about. The same can be said about 'Troy' as obviously he doesn't understand that States don't set gas prices. Two dingalings on one post!

John Clarke,

It's obvious you didn't realize the 'Major Fart' and I "clearly" made seperate posts.

John Clarke = FAIL

Troy is correct, and don't bother responding Clarke regarding issues for which you are ignorant.
There are federal and state taxes levied on every gallon of gasoline sold in the US, with the money dedicated to building and repairing roads.

"Lower the gas price by 10 cents". Again for Dingaling 1 & 2 - States don't set gas prices. You have been schooled once again. One more time and I'll have to start charging you. Now run along juniors.

John Clarke,

FAIL

Troy,
don't waste your time on clarke. Since the posting is about the impact of gasoline taxes on the revenues of states, only a psychotic person like clarke would contend that states and the the federal government have no impact on gasoline prices. In California, the state and federal taxes on gasoline add up to 65 cents per gallon.

The previous poster said the States do not set gas prices. That's much different than saying the Fed and States have no impact on gas prices. Go brush up on your reading comprehension.

Troy S did not say the states set the price of gasoline, did he? No one posted that statement as far as I can see. Maybe you should check YOUR reading comprehension.

bit.ly/19Axl3

Trainer,
The poster John Clarke wrote, "Again for Dingaling 1 & 2 - States don't set gas prices." I guess he needs to update that statement to read "Dingaling 1, 2, & 3" to include you. Good luck with the reading comprehension lessons.

Brian Greenberg,

Might as well add you to the dingaling list too. Why? You did it so why can't I?

Cutting government spending is one of those perpetual cliches that describes a fantasy. There is nothing like a crappy enconomy with job losses to really cut into tax revenues. That would lead to much more robust spending cuts in government.

Without going more into politics, if gas taxes were to be raised to, say, 100% of gas prices, a lot more people would actually save money in the long run by carpooling, riding a bicycle (imagine the billions we can save when fewer people go to the hospital from the consequences of obesity!), etc. But of course that's a ridiculous idea. So we continue to whine.

Just as a means of contrast, in the UK the price of gas, including tax and transportation is slightly less than the actually tax on the gas.

If a litre of unleaded gas is 108p/litre the gas itself is 30p, and taxation is 56p.

It's why we don't have collapsing bridges.

http://www.petrolprices.com/price-of-petrol.html

DL and Martin:
Thanks for restoring some sanity to this string. Roads cost money to build and repair and states will have to raise their per gallon gasoline tax to maintain revenue, unless a whole new revenue system is devised, which will really get George, Ed, Clarke and the rest of the nut cases going.