Instead of removing the gas tax - subsidize alternative transportation - Sightline Institute

How much are gas taxes? Most people don't know.

So let’s give clear, meaningful transportation subsidies instead.

Image by Washington State Dept of Transportation

A recent surge in gas prices has prompted state and federal legislators in the United States to propose suspending the gas tax. But if consumers didn’t hear about it on the news, would they even notice?

Governments collect gas taxes from a small number of fuel distributors, not directly from drivers. That means consumers often have no idea how much they’re paying back into the transportation system when they fuel up. In that void of information, imagination abounds, as illustrated by a 2019 survey of participants in a Washington State pilot project for a gas tax alternative. When asked to estimate their annual state gas tax expenditure, only one in five participants came within 10 percent of the calculated cost. 55 percent of respondents underestimated their gas taxes by more than 10 percent. The other 24 percent overestimated, sometimes by huge margins:

Another 2017 survey asking Washington’s registered voters about transportation funding found similar results. People often couldn’t guess how much they paid in state gas taxes, but 52 percent of respondents still thought it was too high. DHM Research, which conducted the survey, wrote, “Awareness that there is a gas tax and a tendency to default to the idea that it is too much (whatever it is) may reflect media attention on this issue following implementation of gas tax increases over the past two years.”

When record gas prices make headlines in a competitive election year, it can lead politicians to further subsidize driving.

When record gas prices make headlines in a competitive election year, it can lead politicians to further subsidize driving. For example, the Move Ahead Washington transportation package paid for highway expansions without an increase to the state gas tax (which is unprecedented in its own right). Instead, legislators filled the gap with billions from the state’s General Fund and Public Works Trust Fund. In other words, the state burdened everyone, whether they drive or not, with the cost.

Proponents of suspending the gas tax make quick calculations about how much a family might save. Washington Senator Sefzik, who proposed suspending the state gas tax, claimed it would give an estimated $1 billion of financial relief to families. But as any economist can tell you, the effect of taxes on prices isn’t that simple. And there is scant evidence that all those savings for oil companies would transfer directly to consumers. For instance, according to AAA, on Wednesday March 16th the average cost of gasoline was just a penny cheaper in Oregon than Washington, despite state gas taxes being 11 cents lower in Oregon.


The long-term solution to shield the transportation system from global spikes in fuel prices is, of course, to reduce demand for fossil fuels. And in fact, that is already happening… slowly. Average fuel efficiency of new vehicles is up 20 percent since the last time gas prices spiked in 2008.

In the short term, there are many ways governments could help people drive less and save them money at the same time. At $4 per gallon, which has already arrived in Cascadia, 59 percent of Americans would make changes to their driving habits or lifestyle to offset the costs, according to a recent survey by AAA.

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