Study Suggests Best Option to Fund Road Work

As gubernatorial candidates and members of the upcoming General Assembly continue to discuss funding solutions for major infrastructure needs, an IUPUI researcher believes a new study has identified the best long-term option. School of Public and Environmental Affairs Assistant Professor Jerome Dumortier, co-author of the research, says a vehicle mileage tax and other adjustments would help boost state and federal road work coffers. The study suggests revenue will continue to drop in states like Indiana, unless changes are made.

Researchers say the revenue dip could exceed 50 percent by 2040 for states, such as Indiana, that do not adjust fuel tax rates along with inflation.

Dumortier says changes like adding a vehicle mileage tax, indexing gas and diesel taxes to inflation and applying state sales taxes to fuel prices in addition to an inflation-adjusted excise tax might not even raise the cost for the average driver. The reason? "Think about the cost to fill up your gas tank as having two components: the fuel itself and the tax," he said. "The tax is relatively small compared to the cost of the fuel. Because your average car uses less fuel over time due to fuel-economy improvements, the cost associated with the fuel decreases significantly."

As fuel efficiency continues to increase across the board, fuel taxes collected will continue to fall, but the authors say an changes to the current tax structure would be a tough sell. They say studies have shown a resistance to financing roads with vehicle mileage taxes, higher fuel taxes, sales and income taxes and tolls.

"State and federal fuel taxes: The road ahead for U.S. infrastructure funding" will be published in the January edition of the journal Transport Policy.

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