Executive Summary:
Funding roads in the U.S. has become increasingly difficult due to rising road construction costs, reduced revenues from state and federal gas taxes, and policymakers’ reluctance to raise the federal gas tax and to reform an outdated funding model. The federal gas tax, unchanged since 1993, has lost roughly 81% of its purchasing power, driven largely by increases in the costs to build and repair roads. The cost of building and maintaining public roads has increased not only due to inflation but also due to limited staffing capacity of government agencies and limited competition in government construction contracts, leaving critical infrastructure in disarray.
As cleaner, more fuel-efficient vehicles enter the market, further eroding revenues based on gas consumption, Congress will face increasing pressure to explore alternatives to the federal gas tax. In response to a rapidly shifting vehicle fleet, state lawmakers are also struggling with how to maintain road funding revenues while experimenting with new revenue collection strategies. Policymakers must also reevaluate the continued system of subsidizing heavy-duty vehicle travel if these vehicle classes are going to pay closer to their fair share relative to their impact on road deterioration.
This paper lays out a set of five key principles that policymakers should consider when evaluating the equity and viability of proposed road funding approaches. It then reviews five prominent road funding strategies—annual taxes on electric vehicle (EV) registrations, pay-per-mile charges (vehicle miles traveled fees), taxes on public EV charging, toll roads, and General Fund transfers—and evaluates their impact on consumers and their alignment with CR’s policy principles. By using this set of principles as a guide, policymakers can better design transportation funding strategies that deliver revenue stability while improving equity and limiting negative impacts on consumers or other vulnerable populations.
Throughout this paper, it will become clear that there is no perfect suite of policies that can adequately address all principles put forward, and it will be up to policymakers to weigh the benefits and drawbacks of each funding approach. To illustrate the imperfections across funding approaches, we have created a matrix weighing the alignment of each policy principle to the primary funding strategies discussed in this paper.