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While the cost of asphalt, concrete, and machinery has been rising, too many state gas tax rates haven’t budged. Twenty-two states have gone a decade or more without a gas tax increase, and sixteen of those states have not acted in two decades or more. Alaska (44.8 years) and Oklahoma (27.8 years) are the top two gas tax procrastinators and it’s unlikely that will change this year. But Iowa and South Carolina (tied for #3 at 26.1 years each) are seriously considering gas tax increases, as are #6 Tennessee (25.6 years) and #8 New Jersey (24.6 years).
All of these states have one thing in common: a fixed, cents-per-gallon gas tax that is guaranteed to fall short over time as inflation chips away at its “real” value. Fortunately, our other brief shows that a large, and growing, group of states now levy smarter, variable-rate gas taxes that trend upwards over time. Eighteen states, home to over half of the county’s population, have this type of gas tax—either with a price-based (sales tax) on gas, or a gas tax rate that’s simply indexed to inflation. And as we noted recently, more states such as Minnesota, South Dakota, and Utah could join that list soon.
Stagnant gas tax rates that have not been updated in years, or even decades, are not generating enough revenue to cover the growing cost of maintaining and expanding our infrastructure. To accomplish that goal, outdated gas tax rates need to be increased, and gas taxes need to be set on a more sustainable course by adopting variable-rate structures better geared for long-run growth.
Read the briefs: