Happy Birthday, Gas Tax!

Today marks the 20^th anniversary of the 18.4 cents-a-gallon gas tax.

Like many of us experiencing birthdays, the gas tax is having some growing pains and can’t seem to keep current with the times.  One of the main arguments for not including bicycling facilities in our transportation system has been the inability of the gas tax to cover the cost of transportation.  While the average cost of living has increased over the last 20 years, the gas tax has remained the same.  

Unlike other taxes, the gas tax isn’t a percentage so it doesn’t rise with the price of an item, and it isn’t indexed to inflation, so it hasn’t risen with the cost of repair, maintenance and repair. Since 1997, the entire gas tax has gone into the Highway Trust Fund and has been reserved for transportation needs.  While we often hear that increased fuel efficiency is to blame for the inability of the gas tax to pay for roads, transit and other infrastructure like bikeways and walkways, the lack of purchasing power actually has a lot to do with the increasing cost of construction.   (The 29 percent increase in construction costs since 1997 is actually less than the 40 percent increase in consumer prices over that period.)

An uncertain future?

There’s more trouble ahead for the gas tax and its ability to fund transportation. That often translates into more trouble for funding bicycling, walking and multi-modal transportation projects.  As the economy continues to improve so will the cost of construction.  Add that to the growing demand for fuel efficient cars, and the drop in vehicle miles travelled and its clear that the gas tax will have to change with the times, be replaced, or have its purpose narrowed.  Even as the trend towards less driving and more biking gains momentum, the push among state DOTs and federal lawmakers has often been to do less of these projects when the money gets tight. 

Aggregate Vehicle-Miles Traveled in the United States under Several Scenarios of Future Travel Growth, 1946-2040

Source:   A New Direction: Our changing relationship with Driving and the Implications for America’s Future. US PIRG, Spring 2013 

On Sept. 30, 2014 the current transportation bill expires and Congress will need to decide whether to cut the U.S. investment in transportation or increase revenue. Over the last few months they’ve started grappling with how to maintain a world class transportation system, holding several hearings to hear possible solutions to the transportation fundin.  Solutions vary from increasing revenue by replacing or enhancing the gas tax with a sales tax or creating a vehicle miles traveled tax –– to cutting transportation spending by cutting funding for transit, biking and walking or limiting funding to just the interstate and leaving local projects to already hurting local governments. 

 Throughout all these discussions, one answer is clear.  As Janet Kavinoky of the U.S. Chamber of Commerce stated in a recent Senate hearing, “There is no free lunch. There is no creative option. And there is no avoiding the revenue discussion.”

 Quick History of the Gas Tax

The gas tax was first created in June of 1932. Today is the anniversary of its current iteration. 

Here’s a short history of the Gas Tax:

• 1 cent – 1932: funds went to reduce the $2.1 billion federal deficit.

• 1.5 cents –  1933: gas tax extended and increased the gas tax

• 1 cent – 1934: gas tax reduced

• 1.5 cents – 1940: gas tax increased to boost national defense. Congress also made the tax permanent. 

• 2 cents – 1951: gas tax increased again to boost national defense during the Korean War

• 3 cents – 1956:  The Highway Trust Fund (HTF) was established to pay for construction of the Interstate system. The gas tax was increased and redirectedt to the HTF

• 4 cents – 1959: Gas tax increased to fund the HTF

• 9 cents – 1983: President Reagan supported a 5 cent increase to help fund highway (and now transit) across the country. Reagan stated in support of the tax, “We simply cannot allow this magnificent system to deteriorate beyond repair.”

• 9.1 cents – 1987: A 0.1 cent increase was added to help pay for repairing leaking underground storage tanks.

• 14.1 cents – 1990: The gas tax was increased again, with half going to the HTF and half going to deficit reduction. 

• 18.4 cents – 1993: Congress raised the gas tax by 4.3 cents a gallon. All the additional revenue went to deficit reduction. 
• 18.4 cents – 1996-7: Gas tax revenue was redirected so that it all went to the Highway Trust Fund.