Report finds some states diverting large portions of gas tax from roads, bridges

Half the states in the nation are taking gas tax revenues and directing them to other areas of need, despite the gas tax’s purpose in funding infrastructure

July 01, 2020 / 1 minute
Report finds some states diverting large portions of gas tax from roads, bridges

A new report released by the Reason Foundation has found that 25 of the 50 U.S. states divert gas tax revenue away from roads, bridges, and highways, which the taxes are designed to fund.

New York, Rhode Island, New Jersey, Michigan, and Maryland are among the most egregious of the pack, each of them diverting more than 30% of their respective state gas tax revenues away from roads. In terms of total dollars, the report found that Texas diverts the most money—$900 million—away from roads.

The 10 states diverting the largest percentage of their state gas tax money to non-road projects are:

1. New York - 37.5% ($600 million)
2. Rhode Island - 37.1% ($58 million)
3. New Jersey - 33.9% ($360 million)
3. Michigan - 33.9% ($770 million) 
5. Maryland - 32.5% ($365 million)
6. Connecticut - 27% ($218 million)
7. Texas - 24% ($900 million)
8. Massachusetts - 23.9% ($203 million)
9. Florida - 13.6% ($386 million)
10. Vermont - 13.2% ($14 million) 

The largest and most common areas for diversion are transit, pedestrian, and bicycle projects. Overall, 20 states divert gas tax money for such purposes; New York and New Jersey use over one-third of their respective gas tax revenues to fund their transit systems.

Ten states transfer a portion of their gas tax revenues to law enforcement and safety services, marking the second most common diversion. And two states shift nearly a quarter of their gas tax revenues to education programs—Michigan (25.9% of its gas tax revenue) and Texas (24.7% of its gas tax revenue).

The policy brief catalogs the state gas tax diversions of the 25 states that employ that practice and outlines potential policies that will strengthen the users-pay/users-benefit model of transportation funding. The full report itemizes all diversions of state-level gas taxes and provides explanations for each state’s diversion rate.

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