Research Rest-Stop │ Biking and Saving Cities Money All at the Same Time

Every Wednesday, the Mayor’s Office of Transportation and Utilities (MOTU) highlights some interesting research related to or innovations in transportation, sustainability, or energy.

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A new report from the Institute on Taxation and Economic Policy (ITEP), “Building a Better Gas Tax: How to Fix One of State Government’s Least Sustainable Revenue Sources,” argues that state governments are typically missing out on more than $10 billion from not updating their gas taxes. The report, which is based on an analysis of all fifty states, determines that this reluctance to update gas taxes has resulted in close to $201 million lost in annual revenues per state. This then means that potential revenue is not being gained. According to the report, “the average state’s gas tax rate has effectively fallen by 20 percent, or 6.8 cents per gallon, since the last time it was increased.”

The report argues that states have much to gain by supporting gas tax increases. By increasing gas taxes to match current transportation construction costs, the report projects that states will be able to manage and implement transportation projects more effectively. As higher gas taxes are likely to affect low-income families more significantly, the report recommends the establishment of a tax credit aimed at reducing this disparity. In addition, the report offers three policy proposals to help bring the state gas tax to a more modern standard:

  • Increase gas tax rates to address their current inefficiencies in contributing to transportation projects;
  • Reorganize the structure of state gas taxes so that rates rise proportionally as costs for transportation projects grow; and
  • Develop or enhance targeted tax credits to ensure that low-income families are not impacted too greatly by increased gas taxes.

In looking to these recommendations, how do you feel the issue of the state gas tax should be addressed? Do you feel that state gas taxes should increase over time to support the transportation projects occurring in each state?

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