George Gibbs Center for Economic Prosperity

“The Road Ahead: Why Flor⁠i⁠da Should Sh⁠i⁠f⁠t⁠ from Per-Gallon Gas Taxes ⁠t⁠o Per-M⁠i⁠le Charges- and How ⁠t⁠o Do I⁠t⁠”

By: Logan Padgett / 2020


By Robert Poole


Florida’s road network depends heavily on per-gallon taxes on gasoline and diesel fuel. The gas tax was invented in Oregon in 1919, and within a decade it was adopted by all of the then-48 states. Nearly all states dedicated the revenue from these fuel taxes to the construction and maintenance of their roadway systems, as Florida also did. The first federal fuel tax was adopted during the Great Depression as a general revenue source. Dedicating federal fuel tax revenues to highways did not occur until the 1956 legislation to pay the majority of the cost to construct the Interstate Highway System. The increased federal gasoline and diesel taxes became the primary source of funding for the newly-created Highway Trust Fund (HTF). Ever since then, states have received annual federal highway (and some other transportation) funding from the HTF, to supplement what they raise from their state fuel taxes.   Unfortunately, this funding system is threatened with a long-term decline in revenue. The reason is that long-standing federal policies are focused on reducing the use of petroleum-based fuels over time. In response, auto companies continually increase new-vehicle fuel economy, and are now making major investments in electric vehicles, which use no petroleum.   This problem was first studied by a special committee of the Transportation Research Board of the National Academy of Sciences in 2005. (The author of this brief was a member of that committee). It concluded that fuel taxes would not remain viable as the primary highway funding source for the 21st century.[1] In response, Congress appointed a national commission to look into how surface transportation should be funded in the longer term. After considering a large number of alternatives, the Commission concluded that (1) the original users-pay/users-benefit principle should be retained and (2) the best way for users to pay would be a charge per mile driven, rather than per gallon consumed. It also recommended that the new mileage-based user fees (MBUFs) should be the replacement for fuel taxes, rather than being charged in addition to them.[2]   In the decade since that Commission report, Congress has authorized federal funding for state departments of transportation (DOTs) to carry out a number of pilot projects, under which motorists and truckers operate their vehicles under a simulated mileage-based user fee (MBUF) charging mechanism. Most of those pilots have taken place in western states, plus Minnesota. The only pilot projects in the eastern half of the country have been carried out by the I-95 Corridor Coalition.[3] Florida has not participated in any of these pilots.   This policy brief focuses on how Florida policymakers might address this looming highway-funding problem. First, it provides estimates of the likely shrinkage of fuel-tax revenues over the next 30 years. Then it discusses the general lack of understanding among some policymakers and especially the general public about the shrinking-fuel-tax problem and the potential per-mile charging alternative. Following that, the brief suggests a policy framework for how such a system might be developed for Florida. And it suggests a first implementation step that would build on systems already in place on portions of the state’s major highways.

[1] The Fuel Tax and Alternatives for Transportation Funding. Special Report 285. Transportation Research Board. 2006

[2] Paying Our Way: A New Framework for Transportation Finance. National Surface Transportation Infrastructure Financing Commission. February 2009.

[3] “I-95 Corridor Coalition Phase 3 Pilot.” (accessed April 13, 2020).