NCPA - National Center for Policy Analysis

As Gas Prices Fall, Revenues Rise

February 11, 1999

As gasoline prices plumb their lowest level in years, people are driving more and consuming more fuel. That means revenues from the federal gasoline tax -- which are levied per gallon, rather than the sales price -- are soaring.

  • This year, the federal government will collect about $1.5 billion more in gasoline taxes than expected.
  • Nearly half that windfall, $730 million, will be used to build roads.
  • From the remainder, President Clinton wants to use $291 million for mass transit and $250 million for surface transportation "research."
  • This would be in addition to the $217 billion to be spent over the next five years under the highway bill passed last year.

A number of economists think the money could be better disposed of by returning it to taxpayers in the form of a gasoline tax rate cut.

A 1996 study by the Reason Foundation's Robert Poole revealed that most states lose money from the federal allocation of gasoline taxes to the states. Since the 1950s, 30 states have been net losers -- with their citizens paying more in gas taxes than the states recouped for road projects.

He points out, however, that last year's highway bill improved the allocation formula and fewer states should be losers in the future.

Nevertheless, he says, the federal government turn over road construction to states and localities -- which would be expected to do a better job.

Source: Editorial, "Gas-Tax Hogs," Investors Business Daily, February 11, 1999.


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