Transportation User Fees & the Motor Fuel Tax

Recently, at a church game night social event we were playing Family Feud and the question was, “Name something your tax dollars pay for.” Participants came up with “schools” and “libraries” and “parks” and “defense”, but three strikes were earned before anyone came up with “roads/transportation”. When this answer was revealed, there were few expressions of “Oh, yes, we should have gotten that one.” One guy even exclaimed, “Really? I never knew that!”

Most drivers and commuters recognize the need to improve the condition of our transportation infrastructure. “Fix the damn roads!” campaigned Minnesota Governor Gretchen Whitmer in 2018. As some 35 states consider increasing what is typically termed the “motor fuel tax” to raise revenue for transportation infrastructure and maintenance, residents are learning how such initiatives will be financed.

Some states are using the term “user fee” instead of “fuel tax” to frame a modern way of thinking about paying for transportation. Oregon was the first state to impose a motor fuel tax back in 1919. Within a decade, every state had a motor fuel tax for transportation infrastructure and maintenance. 

For much of the 20th century, most vehicles were similar in fuel efficiency, so putting a tax on fuel per gallon was an indirect user fee per mile. For example, if the motor fuel tax was 12 cents per gallon and a Mercury Marquis Brougham V-8 got 12 miles per gallon, then the “user fee” was: 12?/gallon ÷ 12 miles/gallon = 1? per mile.

Today, my 4-cylinder compact gets 35 miles per gallon and even though my state motor fuel tax is now 20 cents per gallon, I’m paying a state “user fee” (20?/gallon ÷ 35 miles/gallon = 0.6? per mile) that is less than what my parents paid. Hybrid cars pay less. Electric cars use the transportation system for free since they use no fuel and pay no fuel tax!

The federal motor fuel tax has not been raised since 1992. Many states have not raised their motor fuel tax in decades. Meanwhile, the cost of building and maintaining transportation infrastructure has increased with inflation over this same period.

Thus, improved vehicle fuel economy and motor fuel taxes not indexed to inflation have created the current underfunded state of transportation affairs in the U.S.

Since we have no current accepted method to have vehicles pay per mile, states are increasing their motor fuel tax and imposing increased registration fees on hybrid and electric cars to distribute more equitably the “user fee” for the transportation system.

Transportation remains a bargain, even with increased “user fees”. Let’s say my state motor fuel tax is raised 50% to 30 cents per gallon and I drive my compact 1,000 miles per month. At 35 miles per gallon, that’s a user fee of: 1,000 miles/month ÷ 35 miles/gallon x 30?/gallon = 857?/month or $8.57 per month. For a 20 miles per gallon vehicle, the user fee would be only $15 per month.

As of April 2019, Netflix will cost $9 to $16 per month depending on basic or standard or premium service. In 2019, Amazon costs $119 per year; that’s about $10 per month. Cell phone unlimited plans range from $20 to more than $100 per month. Monthly utility costs are in the hundreds of dollars.

Yet, my state transportation user fee is less than $25 per month to drive nearly 3,000 miles. Yours may be a bit higher or lower based on your fuel economy, but that’s still a bargain…