Georgia Debates Gas Tax Hike, Transportation Infrastructure Needs

Published December 26, 2014

In December 2014, Georgia state officials and infrastructure consultants met at an annual industry conference in Athens to discuss mounting transportation problems in the Peach State.

Addressing the dual problem of declining gas tax revenue and increasing transportation construction and repair costs has been a priority for the current session of the Georgia legislature. In April 2014, the Georgia General Assembly created a Joint Study Committee on Critical Transportation Infrastructure Funding, tasking the committee with producing recommendations on how to pay for road improvements deemed necessary.

At the conference—sponsored by the state Department of Transportation, the state affiliate of the United States Chamber of Commerce, and several private trade groups—private infrastructure consultant Keli Kemp estimated the total cost of rehabilitating the state’s 123,546 miles of public roads would exceed $3.9 billion per year

Official state estimates are closer to $1.8 billion, according to Reason Foundation Transportation Policy Analyst Baruch Feigenbaum. He says Kemp’s higher estimates are similar to the numbers promoted by the Atlanta Chamber of Commerce.

“There is a general consensus that Georgia needs more revenue for maintenance,” he said. “However, the amount of revenue needed is subject to much debate.”

Feigenbaum said the higher estimates submitted by Kemp and the Chamber of Commerce “likely include a lot of wasteful improvements” with lower benefit-cost ratios.

Inefficient Spending Cited

In 2014, Georgia collected 27.49 cents per gallon in state fuel taxes and fees, in addition to the $0.18 per gallon collected by the federal government. The state adds $0.0749 per gallon in excise taxes and an extra 19.99 cents per gallon in “other state taxes and fees,” according to the American Petroleum Institute. Sales taxes applied by counties and the state also add to the price of gasoline. 

“A higher gas tax will take money out of folks’ pockets—particularly lower income folks,” Feigenbaum noted. “This causes them to cut back expenses on other products, and can harm the economy.”

Insufficiently high taxes on gasoline are not to blame for the state’s current problem, he explained. Instead, the state government spends its gas tax revenue inefficiently. 

“Georgia’s gas taxes are 23rd highest in the country, but per capita spending on transportation is ranked 49th. How can this be? About 48 percent of gas taxes in Georgia are spent on non-transportation purposes,” Feigenbaum explained. “Georgia has two gas tax components. The first is a flat 7.5 cent gas excise tax. The second is a sales tax on gasoline: the state gasoline sales tax rate is 4 percent, and the counties all add an additional 2 to 4 percent.

“Although all of the flat 7.5 cent tax funds highways, only 3 percent of the sales tax funds transportation. One percent is deposited into the general fund. The rest of the taxes are enacted by counties, and [are] used for everything from education to sewer repairs … but seldom transportation,” he said. 

“If Georgia dedicated the transportation gas sales tax to highways, it would generate $812 million in additional revenue [for highways] per year, without raising taxes. This would likely be enough new revenue to solve the maintenance issue and build a number of new projects,” he said, disputing Kemp’s quoted figures.

Federal Funding Falling

Another factor in state transportation funding problems, Feigenbaum says, is the increasing unreliability of the U.S. Highway Trust Fund, which is financed by the national gasoline tax established in 1956.

“The other question mark is federal funding. Georgia, like many states, gets more than 50 percent of its transportation revenue from federal gasoline taxes,” he explained. “However, the federal gasoline tax—due to improving fuel economy and transfers [of funds] to non-highway purposes—is in much worse shape than most state gasoline taxes.”

Calling the Highway Trust Fund “a bad way to fund transportation” and “not politically sustainable over the long run,” Feigenbaum said “many states are worried that the federal government will provide substantially fewer transportation funds in the near future,… perhaps as soon as next year.”

There are ways to increase transportation funding without increasing taxes, he said.

“There are several alternatives,” he said. “Mileage-based user fees (MBUFs) are a per-mile fee that varies based on the type of road and level of congestion. Since different prices can be charged by time of day and type of road, they are a more ideal ‘user-pay, user-benefit’ mechanism than the gas tax.”

Feigenbaum suggested toll roads as another solution, calling them “a precursor to MBUFs that would also increase transportation revenue without hiking gasoline taxes.”

Opportunity to Experiment

Feigenbaum suggests Georgia policymakers use the declining gasoline tax revenues as an opportunity to explore the alternatives to gasoline tax hikes. 

“Not raising the gas tax, so MBUFs can be implemented, would be a good thing, although I would want the gas tax to sunset when MBUFs become operational. Not raising the gas tax so tolling becomes more attractive also has positives,” he said.

“If our goal is to improve the environment or reduce congestion, then declining [gas tax] revenue is a good thing,” Feigenbaum said. “But if our goal is to improve the transportation network, which I argue it is, declining gasoline tax revenue is a bad thing. We can use mileage-based user fees or tolls to manage congestion.” 

Tom Gantert ([email protected]) is the Mackinac Center for Public Policy’s senior news correspondent.

Internet Info:

“State Motor Fuel Taxes by State, October 2014,” American Petroleum Institute,