In February, the average price of gas was less than $3 a gallon. Today it’s nearly $4.50. Since the start of the Iran war, Americans have spent an extra $39 billion filling the tank.
As summer travel season arrives, Congress is considering suspending the 18.4-cent-per-gallon federal gas tax, which largely funds the nation’s highway and transit capital spending, for the first time ever. Democratic Senators Mark Kelly and Richard Blumenthal proposed a “gas-tax holiday” in March; Republican Senator Josh Hawley introduced a bill to suspend the tax. Donald Trump has urged doing so. GOP Senator Mike Lee—who, as recently as 2022, said that letting Joe Biden pause the gas tax would be “treacherous” and “wrong”—wrote on X that it might as well be abolished altogether. Graham Platner, the Democratic U.S. Senate candidate from Maine, has proposed the same.
A pause is unlikely to happen: Several key senators are opposed. That it is being considered at all is a sign of the gas tax’s zombie status, not yet dead but not really alive. “It’s not as important as it used to be in any dimension,” Severin Borenstein, a professor of public policy at UC Berkeley’s Haas School of Business, told me. Pausing the tax is a lose-lose proposition: It won’t do much to bring down the price at the pump—but it will accelerate a crisis of infrastructure funding that no one wants to solve.
[Ian Bogost: The romance of the gas-station sign]
It’s a miracle the United States has a gas tax at all. Since its introduction nearly a century ago, the levy has been derided by the oil industry, the auto industry, AAA, trucking and manufacturing interests, and coalitions of governors. And yet, hidden from consumers at the pump, it has endured as the main way Washington sends road money to the states. Gas and diesel taxes contribute 83 percent of the approximately $64 billion that the Highway Trust Fund distributes every year.
Lately, however, the gas tax has been less effective. For one thing, the fee, which has not been raised since 1993, is too low to meaningfully discourage gas consumption. Gas prices exhibit what economists call low elasticity—meaning demand doesn’t change much when prices fluctuate—because most Americans can’t just stop driving. They will be going to work in their car whether gas is $4.50 or $4.32. For discretionary travel such as summer vacations, gas usually represents a small share of expenses, and few people shape their travel plans around small changes in price.
Many peer countries including Canada, Norway, and Australia have reduced or paused their fuel taxes this spring to give drivers a break. But they have the advantage of starting from a higher baseline. Canada’s gas tax is about 37 Canadian cents a gallon. Australia’s is nearly $2 (in Australian dollars). With more wiggle room, these countries can drop the price at the pump more significantly when oil prices spike—and still hold on to some revenue.
For the same reason the gas tax doesn’t shift behavior, it has become insufficient to cover the federal outlay for highways and mass transit. Three decades of inflation, two decades of fuel-efficiency gains, and one decade of electric vehicles have sent tax revenue’s purchasing power to its lowest point in more than 40 years. That means that Congress has grown accustomed to backfilling the Highway Trust Fund every few years—accepting the obsolescence of the gas tax rather than bringing it up to speed. With politicians hacking away at taxes on overtime, tips, property, and anything else they can see, the national mood could hardly be less conducive to hiking the gas tax. Last week, voters in Oregon rejected a state gas-tax hike to pay for infrastructure by the astounding margin of 83 to 17.
A decade from now, the collective shortfall for the fund’s accounts is projected to rise to $294 billion. As a result, holiday or no holiday, Congress is trying to come up with some sort of replacement, exploring a tax on vehicle miles traveled or federal registration fees on electric cars. A new House bill intended to address this problem proposes an annual charge to EV owners starting at $130, nearly twice as high as the average driver’s gas-tax burden. If that seems like the wrong incentive, it’s of a piece with the GOP quest to crush Democratic policies that encourage fuel efficiency.
The faltering trust fund will have huge implications for infrastructure spending over the next few years if Congress doesn’t come up with a solution. State leaders will have to make difficult choices between highway repair and expansion. Roads and transit that are automatically funded by gas, diesel, and tire taxes today will have to compete more and more with other spending priorities for general-fund revenue during budgeting.
That might not be such a bad outcome. Liberals have often viewed the gas tax as a small but significant force for good, a building block of the elusive carbon tax that encourages sustainable practices and holds people accountable for their wasteful habits, such as driving an F-150 40 miles to an office job each day. Long periods of high gas prices (of which the tax is a small piece) do seem to produce higher transit ridership, a shift to more fuel-efficient or electric vehicles, and more cautious choices about living far from work and amenities.
A 2025 paper by the urban planners Adam Millard-Ball and Erick Guerra, however, argues that the gas tax has not been such a friend of the environment, because it has dedicated so much money to highway expansion without any political trade-offs. Millard-Ball and Guerra estimate that about 40 percent of the 89,000 new urban-highway-lane miles built from 1981 to 2021 were funded by the gas tax, increasing urban-highway travel by 153 billion vehicle miles a year.
[David Frum: Why Trump didn’t predict the gas-price spike]
“The U.S. is unusual in having a gas tax that is legally dedicated to transportation,” Millard-Ball told me. “Most other countries, they have gas taxes, but it goes into a general fund and pays for schools, health care, and all the other functions of government.” If transportation had to pay its own way, he suggested, we might choose our projects more carefully. We’d focus more on road repair than expansion, and more on transit projects that pass cost-benefit analysis than those that please elected officials.
As a “Pigouvian” tax aimed at discouraging behavior, the gas tax has a poorly tuned relationship to the externalities of driving, which include not just greenhouse-gas emissions but also local pollution, crashes, and congestion. “Driving in Manhattan at 8 a.m. has way worse impacts than driving in the middle of the night in North Dakota,” Millard-Ball said. The gas tax treats both miles equally.
But more important, its designation for construction spending may undermine this power entirely, creating more and not less demand for gas. The gas tax is the silent force behind the ever-larger highway network that has reshaped our society in favor of driving everywhere, always. No wonder people get fed up when gas prices rise.
The post The Gas-Tax Reckoning appeared first on The Atlantic.
