What Do Most State Gas Taxes Pay For?


Quick Answer

Gasoline taxes provide the primary revenue source for states to undertake transportation development and maintenance projects, according to Governing.com. The amount of these taxes collected in most states decreased in the early 21st century over previous decades due to the higher fuel efficiency of motor vehicles and a decrease in demand caused by economic slowdown.

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What Do Most State Gas Taxes Pay For?
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Full Answer

Gasoline taxes and other user fees pay for approximately 50 percent of state transportation budgets, according to the Tax Foundation. The falling revenue from gasoline taxes seen in the early 21st century has led many states to raise gas taxes or to explore alternative taxation schemes, such as a vehicle mileage tax tested in Oregon. Other states have responded to the drop in gasoline tax revenue by adding additional toll roads and vehicle fees or by redirecting other tax revenue to funding transportation projects.

However, states such as California and Virginia have actually seen tax revenue from gasoline taxes rise over the same period of time. These states levy a percentage tax on sales of gasoline as well as collecting a flat excise tax as do most other states, so increases in gas prices have allowed the percentage tax portion of their overall gas tax revenue to outpace the fall in excise tax collections due to reduced demand for gasoline, states the Tax Foundation.

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