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June/July 2010 – Web Exclusive

More MPG, Less Tax.

A smaller portion of the state’s revenue will come from gas taxes at a time when new roads and more road maintenance are needed to cope with the state’s rapid growth.

by Gerard MacCrossan

Whether technology can keep pace with federal emission and fuel economy standards is an open question. One thing that’s for certain, however, is that increased fuel efficiency will further deplete the share of Texas’ income derived from fuel taxes.

In April, the Comptroller’s Chief Revenue Estimator John Heleman told state lawmakers that, while an increasing number of cars on the road has contributed to some growth in revenues from the state gasoline tax, gas tax revenue per Texan has declined more than 5 percent during the past decade.

Gasoline Tax Revenue Fiscal 2000 – 2009

The Texas gasoline tax revenue has increased as the number of gallons of motor fuel sold in the state has increased. Increased efficiency among vehicles purchased in Texas has meant that gasoline revenue per capita is declining.

Fiscal YearGas Tax Revenue (millions)Gas Tax Revenue Per Capita
2000$2,124.5$102
2001$2,152.3$101
2002$2,225.0$103
2003$2,226.6$101
2004$2,272.2$102
2005$2,259.6$99
2006$2,257.1$97
2007$2,300.9$97
2008$2,315.5$95
2009$2,326.1$94

Source: Texas Comptroller of Public Accounts

Texas taxes gasoline at a fixed rate of 20 cents per gallon. Obviously, federally mandated improvements in fuel efficiency, as well as greater numbers of hybrid and electric vehicles, will further erode the tax base.

This means that a smaller portion of the state’s revenue will come from gas taxes at a time when new roads and more road maintenance are needed to cope with the state’s rapid growth.

University of Iowa Public Policy Center researchers are investigating another tax approach to support roads. It would use technology to record the miles driven by each vehicle in the state, and levy the tax on a per-mile basis.

A pilot program tested this approach in 2008 and 2009 with 1,207 drivers in cities across the country, including 195 in Austin. Vehicles in the pilot program were equipped with computers to record their trips. Researchers acknowledge that public concerns over the right to privacy, and the cost of installing the equipment on existing autos, are issues that would have to be overcome before this approach could be adopted successfully.

Dr. Paul Hanley, one of the study coordinators, told January’s Texas Transportation Forum in Austin that from December 2008 to July 2009, the participants drove a total 1.82 million miles. Based on a per-mile charge of 1.6 cents, the Texas study group averaged less than $20 per month in charges during the eight-month study period.

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