Variable Rate Gas Tax

Diesel Tax

 

Texas is looking for more money for roads, and the question of how the state spends its motor fuels tax funds is likely to gain traction in the legislative session. In 2014 motor fuels tax revenue was $3.3 billion, or 6.5% of all state tax collections. This substantial pot of money results from the state’s 20 cents per gallon motor fuels tax on gasoline and diesel, a rate that hasn’t changed since 1991. Everyone agrees that the Texas Department of Transportation (TxDOT) needs more funding, but with little political will to raise taxes and a demonstrated need to find money for Texas highways, the “diversions” from the State Highway Fund are raising some eyebrows.

What is the Gas Tax?

Texas’ tax on gasoline and diesel primarily funds TxDOT and education, as defined in the state Constitution. But millions of gas tax dollars fund other needs, and ending diversions from the gas tax revenue could place a number of other activities into competition for General Revenue with investments in education and health and human services.

The Constitution says one-quarter of motor fuel taxes must go directly to the Available School Fund (ASF), which funds instructional materials, and then is distributed to school districts on a per-student basis. In 2014 the ASF received $810 million in motor fuel taxes. The remaining three-quarters is sent to the State Highway Fund, which received $2.42 billion in motor fuel taxes in 2014.

Diversions

But the Highway Fund is used for a variety of purposes other than funding TxDOT, known as “diversions,” but which are related to the constitutionally designated responsibilities of policing public roadways and administering laws regarding traffic and road safety. As a result, the Legislature allows appropriations from the Highway Fund to the Department of Public Safety ($475 million in 2014) and the Department of Motor Vehicles ($49 million). Notably, the Legislature reduced the appropriation to DMV from $156 million in 2013. Other diversions for related needs accounted for only $22.6 million.
CPPP – Where Does the Gasoline Tax Go?

 

Problem:

• With the improvements in mpg and the creation of hybrids and/or electric cars we are losing tax revenue

• There are roughly 19 states with lower unemployment than Texas and all of them have a higher gas tax. The average for these 19 states is 26 cents

• 5 of the seven states without an individual income tax have a higher state gas tax than Texas. The average gas tax for these 5 states is 32.5 cents

 

Solutions:

• Raising the state gas tax could be better than mandating gas efficient engines

• Tie the current gas tax of 20 cents to inflation (CPI-U)

• Use a 26 cent gas tax and tie it to inflation (CPI-U)

• Use a 32.5 gas tax and tie it to inflation (CPI-U)

• After raising the gas tax and/or tying it to inflation, amend the Texas constitution so at least 5% goes into the general fund

 

Texas Constitution
Code – Tax Code
Chapter – 162 Motor Fuels Tax
Section – 162.202

 

The Atlantic – How Red States Learned to Love the Gas Tax

NY Times – States Should Raise the Gas Tax

ITEP: Building a Better Gas Tax – A New 50-State Report

Houston Chronicle – As gas tax stays flat, state shuffles other sources for road work

CBPP – Should States Suspend Their Gasoline Taxes?

Texas Tribune – Texas Mulls Alternatives to the Gas Tax

CNN – Eight States Raise Their Gas Tax

The Hill – Six States Increase Gas Taxes

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Think Progress – Is the gasoline tax regressive?

Washington Post – Five myths about gas taxes

NPR – GOP Leaders: Gas Tax Hike Could Fuel Fixes To Bad Roads And Bridges

Resources for the Future – How Regressive Are Fuel Taxes? A Comparison of Countries from Around the World

Boston Globe – Jack up the federal gas tax now

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Mother Jones – This Democrat Wants to Double the Gas Tax

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Indiana Institute for Working Families – Tax Rate Cuts to Offset Gas and Cigarette Tax Increases? There are Better Ways

The Advocate – Louisiana Gov. John Bel Edwards still looking at increasing gasoline tax; here’s where money would go

Resources for the Future – Do Low Oil Prices Undermine US Passenger Vehicle Fuel Economy Standards?

Forbes – Obama’s Mistake: Increase The Gas Tax, Not Fuel Standards

Salt Lake Tribune – Raising Utah’s gas tax was supposed to give cities more money, but some cities are getting less

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New York Times – New Jersey Will Increase Gas Tax 23¢, Ending Long Political Stalemate