State funds for surface transportation are not only key for roadway investments but generally instrumental for transportation planning at all levels. State fuel taxes still represent a major revenue source of transportation funds. This paper makes two contributions. First, we seek to identify a revenue-optimizing gas tax rate. We find that there is considerable room for the majority of states to increase tax rates before reaching the fiscally optimal gas tax rate. Second, the road to maximizing transportation funds through gas tax hikes is bumpy with multiple countervailing forces that may undermine the revenue-enhancing capacity of the tax increases.
American Road & Transportation Builders Association. 2014. “Transportation FAQs.” goo.gl/RpLj3h.
2.
American Society of Civil Engineers. 2013. 2013 Report card: Bridges. Reston, VA: American Society of Civil Engineers.
3.
AndersonS. T.KelloggR.SalleeJ. M.2013. “What Do Consumers Believe about Future Gasoline Prices?”Journal of Environmental Economics and Management66 (3): 383–403.
4.
Ang-OlsonJ.WachsM.TaylorB. D.2000. “Variable State Gasoline Taxes.” Transportation Quarterly54 (1): 55–58.
5.
BentoA. M.GoulderL. H.JacobsenM. R.von HaefenR. H.2009. “Distributional and Efficiency Impacts of Increased US Gasoline Taxes.” American Economic Review99 (3): 667–99.
6.
BhattaS. D.DrennanM. P.2003. “The Economic Benefits of Public Investment in Transportation: A Review of Recent Literature.” Journal of Planning Education and Research22 (3): 288–96.
7.
BowmanJ. H.MikesellJ. L.1983. “Recent Changes in State Gasoline Taxation: An Analysis of Structure and Rates.” National Tax Journal36 (2): 163–82.
8.
BreulH.2016. Crude Oil Prices Started 2015 Relatively Low, Ended the Year Lower. Washington, DC: US Energy Information Administration. goo.gl/TAEeGk
9.
BronsM.NijkampP.PelsE.RietveldP.2008. “A Meta-analysis of the Price Elasticity of Gasoline Demand. A SUR Approach.” Energy Economics30 (5): 2105–22.
10.
BrownA.2013. “In U.S., Most Oppose State Gas Tax Hike to Fund Repairs.” Des Moines Register, April22. goo.gl/r41DYp
11.
ChettyR.LooneyA.KroftK.2009. “Salience and Taxation: Theory and Evidence.” American Economic Review99 (4): 1145–77.
12.
CoyleD.DeBackerJ.PrisinzanoR.2012. “Estimating the Supply and Demand of Gasoline Using Tax Data.” Energy Economics34 (1): 195–200.
13.
CrabbeA. E.HiattR.PoliwkaS. D.WachsM.2005. Local Transportation Sales Taxes: California’s Experiment in Transportation Finance.” Public Budgeting & Finance25 (3): 91–121.
14.
DavisC.2015. “Sweet Sixteen: States Continue to Take on Gas Tax Reform.” Tax Justice Blog. goo.gl/S67RFU
15.
DavisL. W.KilianL.2011. “Estimating the Effect of a Gasoline Tax on Carbon Emissions.” Journal of Applied Econometrics26 (7): 1187–1214.
16.
ErdemC.ŞentürkI.ŞimşekT.2010. “Identifying the Factors Affecting the Willingness to Pay for Fuel-Efficient Vehicles in Turkey: A Case of Hybrids.” Energy Policy38 (6): 3038–43.
FullertonD.1982. “On the Possibility of an Inverse Relationship between Tax Rates and Government Revenues.” Journal of Public Economics19 (1): 3–22.
19.
FullerW. A.1977. “Some Properties of a Modification of the Limited Information Estimator.” Econometrica45 (4): 939–54.
20.
GamkharS.2003. “The Role of Federal Budget and Trust Fund Institutions in Measuring the Effect of Federal Highway Grants on State and Local Government Highway Expenditure.” Public Budgeting & Finance23 (1): 1–21.
GoldmanT.CorbettS.WachsM.2001. Local Option Transportation Taxes in the United States (Part One: Issues and Trends). Institute of Transportation Studies, University of California at Berkeley.
HahnJ.HausmanJ.KuersteinerG.2004. “Estimation with Weak Instruments: Accuracy of Higher-Order Bias and MSE Approximations.” Econometrics Journal7 (1): 272–306.
25.
HajiamiriS.WachsM.2010. “Hybrid Electric Vehicles and Implications for Transportation Finance. Public Works Management & Policy15 (2): 121–35.
26.
HanleyP.KuhlJ.2011. “National Evaluation of Mileage-Based Charges for Drivers.” Transportation Research Record2221:10–18.
27.
HannayR.WachsM.2007. “Factors Influencing Support for Local Transportation Sales Tax Measures.” Transportation34 (1): 17–35.
28.
HansonA.2015. “Iowa legislature approves 10-cent gas tax increase.” Iowa State Daily, February24. goo.gl/HVYQmv
29.
HymelK. M.SmallK. A.Van DenderK.2010. “Induced Demand and Rebound Effects in Road Transport.” Transportation Research Part B: Methodological44 (10): 1220–41.
30.
Institute of Transportation Studies, and ICF Consulting. 2005. “Metropolitan-Level Transportation Funding Sources.” goo.gl/HxSLg9
31.
JungeJ. R.LevinsonD.2012. “Financing Transportation with Land Value Taxes: Effects on Development Intensity.” Journal of Transport and Land Use5 (1): 49–63.
32.
KalyanaramG.WinerR. S.1995. “Empirical Generalizations from Reference Price Research.” Marketing Science14:G161–69.
33.
KarplusV. J.PaltsevS.BabikerM.ReillyJ. M.2013. “Should a Vehicle Fuel Economy Standard Be Combined with an Economy-wide Greenhouse Gas Emissions Constraint? Implications for Energy and Climate Policy in the United States.” Energy Economics36 (March): 322–33.
34.
KiokoS. N.MartellC. R.2012. “Impact of State-Level Tax and Expenditure Limits (TELs) on Government Revenues and Aid to Local Governments.” Public Finance Review40 (6): 736–66.
35.
LaingK.2015. South Dakota hikes gas tax. March18. goo.gl/OAXJTS
36.
LiS.LinnJ.MuehleggerE.2014. “Gasoline Taxes and Consumer Behavior.” American Economic Journal: Economic Policy6 (4): 302–42.
37.
LinC.-Y. C.PrinceL.2009. “The Optimal Gas Tax for California.” Energy Policy37 (12): 5173–83.
38.
LindblomM.2015. “Lawmakers Release $16 Billion Transportation Plan with 11.9-Cent Gas Tax.” The Seattle Times, June29. goo.gl/naEHRq
39.
LitmanT.2005. “Efficient Vehicles versus Efficient Transportation: Comparing Transportation Energy Conservation Strategies.” Transport Policy12 (2): 121–29.
40.
MarlowM. L.OrzechowskiW.1996. “Public Sector Unions and Public Spending.” Public Choice89 (1): 1–16.
41.
MartinJ. W.1924. “The Administration of Gasoline Taxes in the United States.” National Municipal Review13 (10): 587–600.
42.
MazeT.AgarwaiM.BurchettG.2006. “Whether Weather Matters to Traffic Demand, Traffic Safety, and Traffic Operations and Flow.” Transportation Research Record1948 (January): 170–76.
43.
MoonS.RussellG. J.DuvvuriS. D.2006. “Profiling the Reference Price Consumer.” Journal of Retailing82 (1): 1–11.
44.
MullinsD. R.2010. “Fiscal Limitations on Local Choice: The Imposition and Effects of Local Government Tax and Expenditure Limitations.” In State and Local Fiscal Policy: Thinking Outside the Box?, edited by WallaceS., 201–65. Northampton, MA: Edward Elgar.
45.
NesbitT. M.KreftS. F.2009. “Federal Grants, Earmarked Revenues, and Budget Crowd-Out: State Highway Funding.” Public Budgeting & Finance29 (2): 94–110.
46.
Nguyen-HoangP.2015. “Volatile Earmarked Revenues and State Highway Expenditures in the United States.” Transportation42 (2): 237–56.
47.
Nguyen-HoangP.YeungR.2014. “Dollars for Lives: The Effect of Highway Capital Investments on Traffic Fatalities.” Journal of Safety Research51: 109–15.
48.
O’ConnellL.YusufJ.-E.2013. “Improving Revenue Adequacy by Indexing the Gas Tax to Indicators of Need a Simulation Analysis.” Public Works Management & Policy18 (3): 229–43.
49.
ParryI. W. H.SmallK. A.2005. “Does Britain or the United States Have the Right Gasoline Tax?”American Economic Review95 (4): 1276–89.
PoterbaJ. M.1991. “Is the Gasoline Tax Regressive?” In Tax Policy and the Economy, edited by BradfordD. F., 145–64. Cambridge, MA: MIT Press.
54.
RallJ.WheetA.FarberN. J.ReedJ. B.2011. Transportation Governance and Finance: A 50-State Review of State Legislatures and Departments of Transportation. Washington, DC: National Conference of State Legislatures and AASHTO Center for Excellence in Project Finance.
SmallK. A.Van DenderK.2007. “Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect.” Energy Journal28 (1): 25–51.
57.
StraszheimM. R.1972. “Researching the Role of Transportation in Regional Development.” Land Economics48 (3): 212–19.
58.
StrulikH.TrimbornT.2012. “Laffer Strikes Again: Dynamic Scoring of Capital Taxes.” European Economic Review56 (6): 1180–99.
59.
TaylorB. D.1995. “Public Perceptions, Fiscal Realities, and Freeway Planning: The California Case.” Journal of the American Planning Association61 (1): 43–56.
60.
TaylorB. D.2000. “When Finance Leads Planning Urban Planning, Highway Planning, and Metropolitan Freeways in California.” Journal of Planning Education and Research20 (2): 196–214.
61.
TaylorB. D.FinkC. N. Y.2013. “Explaining Transit Ridership: What Has the Evidence Shown?”Transportation Letters5 (1): 15–26.
62.
TrabandtM.UhligH.2011. “The Laffer Curve Revisited.” Journal of Monetary Economics58 (4): 305–27.
63.
UpchurchJ.2006. “The Future of Highway and Transit Finance.” TR News. goo.gl/Bw7qkQ
64.
UriN. D.BoydR.1998. “Aggregate Impacts of the Proposed Reduction in the Motor Fuels Excise Tax in the United States.” Energy Economics20 (3): 309–23.
65.
VankaS.HandyS.KockelmanK. M.2005. “State-Local Coordination in Managing Land Use and Transportation along State Highways.” Journal of Urban Planning and Development131 (1): 10–18.
66.
VarmaA.SinhaK.1997. “Long-Term Highway Revenue Forecasting for Indiana.” Transportation Research Record1576 (January): 46–55.
67.
WachsM.2003. “A Dozen Reasons for Gasoline Taxes.” Public Works Management & Policy7 (4): 235–42.
68.
WattsR. A.FrickK. T.MaddisonJ.2012. “Policy Making, Incrementalism, and News Discourse Gasoline Tax Debates in Eight U.S. States.” Public Works Management & Policy17 (3): 238–55.
69.
WestS. E.WilliamsR. C.2007. “Optimal Taxation and Cross-Price Effects on Labor Supply: Estimates of the Optimal Gas Tax.” Journal of Public Economics91 (3-4): 593–617.
70.
WinstonC.LangerA.2006. “The Effect of Government Highway Spending on Road Users’ Congestion Costs.” Journal of Urban Economics60 (3): 463–83.
71.
World Bank. 2015. “World Bank Commodities Price Forecast (Nominal US Dollars).” Washington, DC: World Bank. goo.gl/NxG0mh.
72.
ZhaoZ.GuoH.CoyleD.RobinsonF.MunnichL.2015. “Revisiting the Fuel Tax-Based Transportation Funding System in the United States.” Public Works Management & Policy20 (2): 105–26.
