Road Taxes: Road Funding by State

Changes from 2025

Idaho’s roadway user revenues covered only 43.1 percent of roadway spending, down significantly from 78.9 percent following drastic increases in roadway expenditures, met with only slight increases in roadway revenues.
Tennessee’s share of roadway spending covered by roadway user revenues fell from 97.2 percent to 76.8 percent following a significant increase in roadway expenditures and a slight reduction in roadway revenues.
Georgia’s roadway user revenues covered only 38.3 percent of roadway spending, down from 58.4 percent, after significant increases in roadway expenditures and a decrease in roadway revenues.
Wyoming increased roadway expenditures with little change in roadway revenues, decreasing the share of roadway spending that roadway user revenues covered from 61.7 percent to 44.7 percent.
South Carolina’s share of roadway spending covered by roadway user revenues fell from 99.1 percent to 83.7 percent following an increase in roadway expenditures that was not compensated by an increase in roadway revenues.
Other states had their share of roadway spending covered by roadway revenues that changed by less than 15 percent. Overall, 41 states had their share decrease, and the national average fell from 73.0 percent to 66.5 percent.

Roadway spending continues to rapidly outpace roadway revenues. Because road use fees fall short of fully funding roadway systems in most states, governments must transfer revenues from other sources to road expenditures. By diverting general funds to roadway spending, the burden of paying for the roads falls on all taxpayers, including people who drive very little or may not drive at all. By relying on other revenue sources to fund roads, states effectively underprice road use. This can manifest in several forms, most notably traffic congestion, but can also distort the transportation market by subsidizing road use relative to alternatives, particularly freight rail.

Gas tax revenues have become increasingly decoupled from road funding needs. Tax rates are often not indexed to inflation, which causes the real value of the revenues to deteriorate even without other changes.

Beyond the effects of inflation, gas taxes are losing ground as an effective proxy for road use. Motor vehicle fuel efficiency increased substantially over the past several decades, meaning vehicles can drive more miles per gallon of gas consumed. This means the gas tax generates declining revenue per mile driven on roads. And EVs don’t pay the gas tax at all. Whatever the benefits of EVs, they still put wear and tear on roads.

These proportions are calculated after considering federal apportionment of the federal roadway user fees. Those roadway revenues at the federal level are also struggling. Recent discussions in Congress surrounded one-time fees on EVs to partially offset their lack of exposure to the gas tax, but there are better options to refuel the Highway Trust Fund. At both the federal and state levels, crude patches in roadway funding holes can at best delay fiscal problems with the road funding system, as the same underlying trends would still affect road revenues despite the new influx of EV fees.

A better long-term fix would be to shift funding from increasingly inappropriate proxies for road use to a direct user fee on each mile driven, a vehicle miles traveled (VMT) tax. Most states and the federal Department of Transportation have begun exploring replacing the existing funding structure with a simpler VMT tax that better aligns use with costs and better approximates the real price of roads. While states may find it difficult to shift to such a system without the federal government as the first mover, state policymakers might nonetheless want to push—and prepare—for such a system. With all but two states unable to fund their roadways using existing user fees, road funding is in dire need of a better system.