Beyond Fuel Taxes

For over a century, gas and diesel taxes have been the primary tools for funding local, state, and federal transportation investments in the U.S. However, increasing fuel efficiency and political resistance to tax hikes have weakened this model. 

Many states, including the entire West Coast and over half the U.S. auto market, have pledged to ending the sale of internal combustion vehicles. Therefore, we must develop a new transportation funding strategy. This involves innovative strategies that include collaboration, technology testing and new regulatory frameworks.

Transportation electrification presents an opportunity to create a system that addresses many drawbacks of fuel taxes while creating a stronger transportation system for the coming century. A better transportation funding system should be:

Stable. Fuel tax revenues decline with inflation, efficiency and volatile fuel prices. A better system should give transportation planners more revenue certainty. 

Economically efficient. Fuel taxes only roughly reflect the amount the road system is used, and do not accurately reflect other costs imposed, for example by heavier vehicles, studded tires, driving on heavily used bridges or road segments, or traffic congestion at certain times of day.

Environmentally sustainable. Fuel taxes serve only as a rough estimate of environmental costs. A more effective system should accurately assess these costs, differentiating between fuel types and within categories (e.g., more efficient electric vehicles versus less efficient ones).

Multimodal. Fuel taxes are often designated specifically for roads, skewing transportation decisions in favor of roadway investments, regardless of whether these are the most cost-effective options. This approach undermines other transportation modes such as rail, biking, pedestrian facilities and public transit.

Equitable. Fuel taxes disproportionately affect low-income drivers, taking a larger share of their income, and penalizing owners of less efficient vehicles. A new system could better promote equity, particularly for frontline communities with limited transportation options.

Forth is working to develop demonstration projects and build support coalitions for better transportation funding at the state and federal levels.

We are working to advance better approaches through Oregon's Road User Fee Task Force.