How Are Your State’s Roads Funded?

Gas taxes are typically used to fund infrastructure maintenance and new projects, but the share of state and local road spending that is covered by tolls, user fees, and taxes varies drastically. It ranges from only 12 percent in Alaska to 76.3 percent in Hawaii. States like Alaska and North Dakota (funded 22.8 percent by fees and taxes) keep their transportation taxes low in the same way that they keep all taxes on state residents low, by exporting taxes (primarily through the severance tax).

While politically unpopular, gas taxes, fees, and tolls are all relatively good applications of the benefit principle, the idea that taxpayers should benefit from the taxes and fees they pay. One of the primary issues, however, with both the federal and state gas tax is that they’re not indexed for inflation. As time goes on and inflation increases, the nominal value of the gas tax decreases, leaving states with budget shortfalls and unfunded infrastructure. States should attempt to fund infrastructure through user taxes and fees as much as possible, internalizing the costs associated with using the state’s transportation systems.