What to Do When Your Gas Tax Is Dying: From Denial to Acceptance to Action

Nearly 50 years after Elisabeth Kübler-Ross laid out the five stages of grief in her landmark book, On Death and Dying, a white paper by IBTTA honorary member Ed Regan, Senior Vice President at CDM Smith, looks at the terminal decline of the gas tax—an outcome that is less directly traumatic for most Americans, but no less inevitable, than the one the Swiss-American psychiatrist wrote about.

Kübler-Ross’s five stages—denial, anger, bargaining, depression, acceptance—might actually be a reasonable reflection of the steps the country has gone through so far in its decades-long struggle for adequate infrastructure investment. Ever the pragmatist, Regan gets the sequence down from five steps to four, and his version includes an element that couldn’t realistically factor into Kübler-Ross’s thinking—a practical solution that moves beyond acceptance and into action.

Moving Beyond Denial

Regan notes that, after a nearly 100-year run as America’s primary source of transportation funding, the gas tax “is elegant in its efficiency, widely accepted by the public, and probably doomed to fail in the future, at least in its current form.” With increased fuel efficiency and the rise of alternative vehicles, the simple reality is that drivers are using less gas.

“That is great for reducing greenhouse gas emissions and our dependency on foreign oil supplies, but it is terrible for transportation funding,” he writes, “as long as we continue to primarily rely on the gas tax as our major funding source.”

The problem is compounded by elected officials’ reluctance to raise taxes of any kind, though many state legislatures have boosted gas taxes in recent years without incurring significant pushback from voters. But Regan says the challenge so far is just a sign of things to come: by 2040, the U.S. Energy Information Administration expects fuel sales to decline 34 to 45%, depending on the number of drivers who opt for electric vehicles.

The result? “By 2025, just eight years from now, increasing fuel efficiency may cost state and federal coffers as much as $20.8 billion per year in fuel tax revenue,” he warns. To keep revenues steady—without even beginning to attack a massive, accumulated gap in highway maintenance funding—gas taxes would have to rise by a monumental $1.16 per gallon.

Which is pretty much where the anger, bargaining, and depression start to kick in. But it’s easier to move toward acceptance when there’s a viable solution on offer.

MBUF to the Rescue

Regan points to Mileage-Based Usage Fees (MBUF) as a strategy that draws a more direct link between road usage and user charges, allowing highway agencies to vary rates by time of day to manage demand. As well, MBUF technology “can be used to collect tolls, without the need for expensive roadside equipment and electronic toll gantries,” and “revenue collected on certain routes, or in certain regions, can be directly allocated to those routes or regions. This may open up new opportunities to support public-private partnerships for major reconstruction and long-term maintenance agreements.”

The white paper lays out the challenges with MBUF—from limited public awareness, to the system’s complexity compared to a gas tax, to public concerns about data and privacy. “The first step is to challenge the technology industry to develop (and prove) that there are ways to easily collect road use data (in aggregate), while ensuring that the government is not tracking us or otherwise invading our privacy,” Regan writes. “This should be, without a doubt, the highest priority in RUC pilots of the future.”

Beyond that first, essential piece of research, Regan suggests a streamlined path for state governments to move toward MBUF. It begins with recognizing the problem they face with declining gas tax revenue, then considering short-term solutions to sustain revenues through 2025—while planning for “a whole new paradigm” for transportation funding. “Now is the time to start,” he stresses, “before the gas tax craters entirely.”

Regan stresses that MBUF development is not about moving off the gas tax immediately. “It is about designing and testing new solutions, so we will be ready to make a change in the future, when the time comes.” But it still means moving from denial to acceptance—recognizing that “the unsustainability of the gas tax is almost a certainty, not so much a question of ‘if’, but ‘when’.”

Download a copy of Ed Regan’s white paper on gas tax revenue decline and mileage-based usage fees.