Research & Commentary: Gas Tax Dollars Should Be Reserved for Roads, Not Schools

Published October 9, 2018

In November, Utah voters will consider a nonbinding ballot initiative that would increase the state’s gasoline tax by 10 cents per gallon. The proposed tax increase would indirectly fund public education in the Beehive State.

The proposed fuel tax increase originated from a compromise between the legislature and education groups. If enacted, the 10-cent increase would be gradually implemented over the next five years. Although major reforms are needed to increase Utah’s education funding, a gas tax increase is not the solution.

The public’s reaction to the proposed tax hike has been negative. Fifty-six percent of registered Utah voters oppose the tax increase, compared with just 42 percent who support boosting the state’s gas tax, according to a June poll by The Salt Lake Tribune.

Utah residents are right to question the efficacy of fuel taxes. Mounting evidence shows gasoline levies are an ineffective, regressive form of taxation that have increasingly left transportation systems shortchanged.

The current gas tax rate in Utah is 29.40 cents per gallon (47.81 cents per gallon when combined with local, state, and federal taxes). Although this rate is below the national combined average of 52.49 cents, it is higher than many of Utah’s neighbors, including Arizona, which averages 37.40 cents, and Colorado, which averages 40.40 cents. A 10-cent increase would place the Beehive State above the national average and further reduce its regional economic competitiveness.

Wendell Cox and Ronald Utt argue gas taxes have a more detrimental effect on lower- and middle-income families than they do on the wealthy. Americans for Prosperity estimates lower gas prices amount to approximately $100 in additional spendable income per month for an average family. On the other hand, a tax hike would raise prices on goods and services throughout the economy, not just on gasoline, because virtually all consumer goods are transported using gasoline-powered vehicles. Businesses will simply pass the added costs on to consumers.

Although proponents of the gas tax increase claim it is necessary to improve the quality of Utah’s public education system, evidence demonstrates more education funding often does not improve educational outcomes. For example, real spending per student nationwide has increased by 23.5 percent over the past decade, but education outcomes have not improved. Scores on the National Assessment of Educational Progress test have remained stagnant despite record spending.

Instead of throwing more money at the problem, Utah residents should demand educational choice. Overwhelming evidence shows that education freedom, not increased funding, produces better outcomes. This can be accomplished through a variety of measures. One solution is flexible spending accounts (FSA), which are private accounts managed by parents that are used on educational expenses for their child. Parents can use the funds to pay for online classes, private school tuition, personal tutors, books and other curricular materials, or even used to save for higher education. FSAs would allow all Utah families to meet their child’s educational needs—and to do so at a lower cost.

The following documents provide additional information about how motor-fuel taxes are applied and the impact they have on states’ economies.

Does Spending More on Education Improve Academic Achievement?
Dan Lips and Shanea Watkins of The Heritage Foundation discuss the rising cost of education and whether increasing education spending has improved education outcomes. “Taxpayers have invested considerable resources in the nation’s public schools. However, ever-increasing funding of Education has not led to similarly improved student performance. Instead of simply increasing funding for public Education, federal and state policymakers should implement Education reforms designed to improve resource allocation and boost student performance,” wrote Lips and Watkins.

School Spending and Student Achievement in Michigan: What’s the Relationship?
In this report, Ben DeGrow and Edward C. Hoang of the Mackinac Center for Public Policy examine the relationship between school spending and student achievement in Michigan. “The results suggest that there is only a very limited correlation between these two factors. Only one out of the 28 academic outputs analyzed showed a result that was positive and statistically significant, or different from zero,” the authors reported.

23rd Annual Highway Report on the Performance of State Highway Systems
In this report, the Reason Foundation ranks the performance of state highway systems in 11 categories, including spending per mile, pavement conditions, deficient bridges, traffic congestion, and fatality rates.

State Motor Fuel Taxes: July 2018
The American Petroleum Institute documents each state’s current motor-fuel taxes (both gasoline and diesel).

GSI Analysis: State Revenue Report—New Taxes Increase Some Revenues, Others Show Weakness
The Garden State Initiative examines several novel New Jersey taxes and their effects on revenue. The author discusses the state’s gasoline tax, New Jersey’s revenue shortfall, and the possible need for additional tax hikes.

Alternatives to the Motor Fuel Tax 
This report, prepared by the Center for Urban Studies at Portland State University and submitted to the Oregon Department of Transportation, evaluates potential alternatives to motor-fuel taxes. The report also identifies the economic and technological problems that must be addressed when designing alternative revenue sources.

Designing Alternatives to State Motor Fuel Taxes
Writing in Transportation Quarterly, Anthony M. Rufolo and Robert L. Bertini consider the future of motor-fuel taxes as more fuel-efficient vehicles become available. They also report on the economic effects of road pricing as a substitute for fuel taxes.

Paying at the Pump: Gasoline Taxes in America
In this paper from the Tax Foundation, Jonathan Williams argues gas taxes can be an effective means of funding transportation improvements. In many cases, however, governments exploit the taxes for political reasons, spending them on projects unrelated to roads and other transportation improvements.

Research & Commentary: Congestion Traffic Pricing
Congestion pricing, an alternative to gasoline taxes, uses market principles to address traffic congestion. Under congestion pricing, operators of a road charge a variable price based on congestion, allowing the operator to manage demand and limit congestion. Heartland Senior Policy Analyst Matthew Glans examines several proposals for implementing pricing systems to alleviate traffic congestion.

Raising Gas Taxes Won’t Fix Our Bridges
In the aftermath of the I-35 bridge collapse in Minneapolis, Minnesota, Adrian Moore of the Reason Foundation argues increasing fuel taxes should not be the only response to state transportation funding problems. Moore wrote, “First we must examine how we spend transportation dollars now. Then we maximize the value out of those dollars. Finally, the last step is to address the need for additional revenue.”


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Charlie Katebi, Heartland’s state government relations manager, at [email protected] or 312/377-4000.