driver pumping gas

User Fees Continue to Drive State Transportation Revenues

By Mia Geoly | Aug. 12, 2021 | State Legislatures News | Print

As high mileage per gallon and electric vehicles continue to impact state gas tax revenues, legislatures are looking for alternatives to bolster their gas taxes or create entirely new transportation revenue streams.

States continue to rely on user fees for the bulk of their transportation funds, with gas taxes accounting for 40% of state transportation revenue according to the 2020 State Expenditure Report from the National Association of State Budget Officers, and other transportation related revenue comprising another 31% of state transportation revenue.  

This trend continued in 2021, with three states—Colorado, Connecticut and Missouri—enacting legislation increasing or creating transportation user fees in 2021. Since 2013, 33 states and the District of Columbia have enacted legislation to increase gas taxes. Colorado and Missouri became the latest states to do so in 2021.

The Missouri Legislature passed Senate Bill 262, which increased the gas tax of 17 cents per gallon by 2.5 cents per gallon each year for five years beginning in October 2021 until reaching 29.5 cents per gallon on July 1, 2025. Motor vehicles driven on highways and below a certain weight threshold are exempt from the additional tax and are eligible for a refund. Taxpayers must apply annually for the exemption and refund through the Department of Revenue.

The Colorado General Assembly passed Senate Bill 260 in 2021 which created “road usage fees” on gas purchases, phased in starting at 2 cents per gallon and increasing one cent each fiscal year from 2022 through 2032. After 2032, the fee is indexed to the Highway Construction Cost Index. The revenue raised from the fee increase is credited to the Highway Users Tax Fund, which is the main funding source for transportation infrastructure in the state.

Although the revenue raising mechanisms in the bill are called fees, they have essentially the same impact as tax increases. Colorado lawmakers created fees because they are restricted in their ability to raise taxes by a law called the Taxpayer’s Bill of Rights (TABOR), which was enacted around the same time as the last gas tax increase in the state.

SB 260 also includes new fees on transportation network companies like Uber and Lyft, as well as retail delivery fees on services like Doordash and UberEats. The fees are predicted to raise $113.2 million in the first fiscal year and larger amounts in the following years, which the state will use not only to fund transportation infrastructure but also other enterprises such as clean vehicle fleets, air pollution mitigation, clean transit, and community access.

After several years debating the creation of a toll network with tolls to be paid by all drivers, the Connecticut General Assembly took a different approach to address the anticipated deficit in the state’s Special Transportation Fund in 2021. Connecticut House Bill 6688 imposes a highway use fee on trucks weighing more than 28,000 pounds, which is expected to raise $90 million annually. Beginning in 2023, vehicles must pay a tax per mile determined by vehicle weight, ranging from 2.5 cents for 28,000-pound vehicles to 17.5 cents for 80,001-pound vehicles. Truck operators must apply, track their miles and submit payment of the tax for the Commissioner of Revenue Services beginning in January 2023.

Mia Geoly is an intern in NCSL’s Transportation Program.