LOUISVILLE, Ky.—State motor fuels tax (MFT) revenues are flat and even declining in some states because automobiles are increasingly more fuel-efficient, ensuring that the trend will continue even without electric vehicles (EV) dominating roadways, transportation funding analysts warn.
“Until we start using flying cars,” new ways to pay for roads are needed, Andrew McLean, transportation policy specialist at CDM Smith, told state lawmakers, legislative staffers, and lobbyists on Aug. 5, the first day of the three-day National Conference of State Legislators’ annual Legislative Summit at the Kentucky International Convention Center in Louisville.
“The biggest problem is your Toyota Camry that gets 5 more miles per gallon than a few years ago,” said Baruch Feigenbaum, senior managing director of transportation policy at the Reason Foundation.
Although Feigenbaum is “less optimistic” than he was several years ago that EVs will be a significant presence in the United States anytime soon, he said they still contribute to transportation revenue shortfalls because they don’t pay the MFT.
EV numbers “are going up,” Feigenbaum said.
“Are they going up exponentially tomorrow? No. But they are going up,” he said.
Feigenbaum provided three scenarios in which 50 percent, 30 percent, and 10 percent of vehicles are EVs by 2050.
“All [of the scenarios] show drop-offs” in revenues, he said.
Feigenbaum said that in Utah, “with an extremely quickly growing population,” MFT revenues are flat. Despite “a lot more miles driven,” gas consumption is “only inching up over the decade,” he said.
Virginia’s MFT revenue in 2023 was “not even close to what it was in 2018 and 2019,” he said, and in California, the “number of gasoline gallons sold is declining.”
Many states aren’t reacting quickly to trends, Feigenbaum said.
“That’s a problem—a big problem,” because the era when the MFT is the largest source of road funding is done, he said.
“The fuel tax is like a rock star on a farewell tour,” Feigenbaum said.
California has the highest state gas tax in the country at 69.8 cents per gallon (cpg) followed by Illinois at 67.1 cpg, Indiana at 56.1 cpg, and Pennsylvania at 62.2 cpg. Alaska’s 9 cpg is the nation’s lowest MFT, with Missouri’s 17.5 cpg and Mississippi’s 18.4 cpg the next-lowest. The federal government’s 18.4 cpg hasn’t been raised in 31 years.
Most MFTs are structured as a fixed cent-per-gallon rate. But 24 states and the District of Columbia impose a variable-rate gas tax that adjusts or “indexes” for inflation.
‘Cafeteria Plan Solutions’
Numerous proposals are being implemented or pondered in state capitals. Panel moderator Kansas state Rep. Shannon Francis, a Republican, said there “may not be one solution,” with lawmakers looking at “cafeteria plan solutions.”On the menu are a road usage charge (RUC), retail delivery fees (RDF), managed toll lane programs, and kilowatt charging fees and high registration fees imposed on EVs.
An RUC program is based on miles driven rather than gallons consumed. Drivers would pay with the transponders or electronic passes now used to pay for the use of toll roads; these would track mileage but not location, and wouldn’t use odometer readings for mileage calculation.
Oregon, which adopted the world’s first gas tax in 1919, implemented the nation’s inaugural RUC program in 2015. Utah’s program was established in 2020 but didn’t begin until January 2023, and Virginia enacted its program in July 2022.
Hawaii’s RUC program begins in July 2025 and will be mandatory for EVs in 2028.
McLean, a former Maine legislator, said RUC programs will require higher administrative costs than the MFT, “one of the most efficiently collected taxes in the country,” and have fostered privacy concerns because they require data collection from private vehicles.
‘Doorstep Tax’ And ‘Lexus Lanes’
Many states are studying RDF programs—which impose a “Doorstep Tax” assessed on packages delivered by Amazon, UPS, FedEx, and other commercial shippers and e-commerce retailers—with Colorado and Minnesota enacting them and Washington state considering doing so, McLean said.Colorado charges 28 cents on every delivery, regardless of value. Adopted in 2022, the fee generated $75.9 million in its first year, he said. Businesses with $500,000 or less in sales are exempt, McLean said.
Minnesota lawmakers enacted an RDF in 2023, and it went into effect this July. Levying 50 cents on deliveries of $100 or more, it is projected to generate $59 million. Businesses with $1 million or less in annual sales are exempt.
In January 2023, the Washington State Transportation Commission projected a $600 million MFT decline by 2050. A 30-cent RDF could generate from $45 million to $112 million in 2026, and as much as $160 million by 2030.
The prospective RDF is opposed by the National Federation of Independent Business, Association of Washington Business, Washington Retail Association, Washington Hospitality Association, and Washington Trucking Associations, among others.
McLean, who led the RDF study for CDM Smith that Washington lawmakers are reviewing, said that as with RUCs and other revenue generators, no one program will replace the MFT.
“It’s one leg of a multi-legged stool,” he said.
Fifteen states have adopted pilot programs testing managed toll lanes as a way to relieve congestion and avoid building toll roads, he said.
“A funny thing happened on the way to the toll road,” Tomlinson said, noting that 70 managed toll lanes—including 14 in California and 11 in Florida—collectively generated $4.2 billion in revenues in 2022.
The managed lanes are new, not redesigned “general purpose” lanes.
“You are not reducing existing choices but adding more,” he said.
Critics call managed toll lanes “Lexus Lanes,” but Tomlinson said they’re more like “Honda Lanes” because studies show that middle- and low-income drivers use the lanes most frequently because time is money.
Paying a toll to avoid being stuck in traffic could mean “not paying $1 a minute” if late picking up children from child care, for example, he said.
Some managed toll programs have static pricing, while in others, the “price goes up during rush hour,” Tomlinson said, noting that it’s cheaper to build toll lanes than toll roads.
It’s part of a matrix of possible revenue generators, he said, agreeing with fellow summit panelists that states “cannot solve urban congestion with any one thing.”
Feigenbaum said that one thing is sure: The federal 18.4 cpg hasn’t increased since 1993, and “there is no hope” that Congress will raise it anytime in the foreseeable future.
