Policy Analysis | February 2013

State Efforts to Fund Transportation

Sujit CanagaRetna

Given the tenuousness of the gas tax in its current format as a reliable source of revenue to fund the transportation needs of states, policymakers in over a dozen states are proposing and exploring alternate mechanisms to generate funds for vital transportation projects. Here are some of these strategies broken down by tax/fee and non-tax/fee categories:

Tax/Fee Category

  • Removing cap on taxes paid by gas stations ‐ PA
  • Raising the gas tax ‐ MN, WY, MA
  • Dedicating vehicle sales taxes ‐ TX, SC
  • Increasing vehicle registration fees ‐ TX, WY, MI, VA
  • Eliminating gas tax and increasing sales tax ‐ VA
  • Shifting from gas tax to tax on fuels at wholesale level ‐ MI
  • Permitting optional local or regional registration fee ‐ MI
  • Imposing vehicles miles travelled (VMT) tax ‐ OR
  • Introducing higher fees on vehicles that pollute more, i.e., older ‐ MA
  • Levying new sales tax on gasoline ‐ MD
  • Hiking income taxes with increased revenues going to transportation ‐ MA
  • Diverting portion of shale gas revenues for transportation - TX

Non-Tax/Fee Category

  • Introducing tolls and increasing tolls ‐ WI, MA, OH
  • Selling bridge and overpass naming rights ‐ NH, VA
  • Sponsoring rest areas ‐ OH
  • Leasing highways ‐ MD
  • Creating a regional authority to raise property taxes for specific project, i.e., METRO expansion ‐ MD
  • Ending raids to transportation funds ‐ WI
  • Diverting part of revenue surpluses for transportation (temporary measure) ‐ IN
  • Tapping state rainy day funds for transportation ‐ TX