Governors and states have long recognized the importance of investing in surface transportation. The nation’s roads, rails, and bridges provide for personal mobility and facilitate commerce and shipping. When operated efficiently, the surface transportation system can enhance the economic competitiveness of states and the nation, as well as increase safety and quality of life for users. However, a growing imbalance between use of the system and its capacity is leading to an increasingly strained system in many parts of the country. States are looking to a number of innovative funding and financing approaches to help meet the dual challenges of better managing demand, particularly in congested areas, and increasing investments in capacity.
Today, states and the federal government rely primarily on motor fuel taxes to fund the surface transportation system. Motor fuel taxes have offered revenue stability and predictability with a relatively low administrative burden. Compliance costs in paying motor fuel taxes are also limited, and there is a low risk of tax evasion. Fuel taxes can generate substantial amounts of revenue at a relatively low cost to individual users. By charging per gallon, fuel taxes provide an incentive for users to purchase more efficient vehicles.