Wikipedia Deep Dive

Highway Trust Fund

8 min read

The Gas Tax That Built America—And Can't Keep Up

Every time you fill up your car, you're paying for highways you may never drive on. That's the deal Americans struck back in 1956, and it worked beautifully for decades. But here's the problem: the tax hasn't changed since Bill Clinton was president, while everything else has.

The Highway Trust Fund is one of those invisible systems that shapes American life. It collects a federal tax of 18.3 cents on every gallon of gasoline you buy, plus 24.3 cents on diesel. That money doesn't disappear into the general government budget—it goes specifically toward building and maintaining roads. Think of it as a user fee. Drive more, use more gas, pay more for the roads you're wearing down.

Simple enough. Except it's not working anymore.

How We Got Here

Before 1956, federal road projects were funded the same way the government funds everything else—out of the general treasury, competing with schools, defense, and whatever else Congress wanted to spend money on. President Dwight Eisenhower changed that with the Federal Aid Highway Act, which created a dedicated funding stream for what would become the Interstate Highway System.

The original tax was three cents per gallon. If that sounds quaint, remember that gasoline cost about 30 cents a gallon in 1956. So the federal tax represented roughly ten percent of what you paid at the pump.

Today? That 18.3-cent tax on a three-dollar gallon represents about six percent. The tax hasn't kept pace with inflation, let alone with the actual costs of building roads.

The tax crept upward over the decades, but always grudgingly. President Reagan raised it to nine cents in 1983. President George H.W. Bush bumped it to 14 cents in 1990—though half of that increase went to deficit reduction rather than roads. President Clinton brought it to its current 18.4 cents in 1993, again directing the increase toward reducing the deficit rather than the Highway Trust Fund.

That last increase happened over thirty years ago. Since then: nothing.

Two Pots of Money

The Highway Trust Fund actually contains two separate accounts, which is worth understanding because they serve different purposes.

The larger one, the Highway Account, does what you'd expect—it pays for road construction, bridge repairs, repaving, and other surface transportation projects. This is the workhorse of American infrastructure spending.

The smaller one, the Mass Transit Account, was created in 1982 to support public transportation. Buses, subway systems, commuter rail—if it moves people without requiring them to own a car, this account helps pay for it. One cent of that 1983 tax increase under Reagan went here, establishing the principle that gas taxes could fund alternatives to driving.

There's also a separate fund you've probably never heard of: the Leaking Underground Storage Tank Trust Fund. It collects an additional 0.1 cents per gallon to clean up contamination from old gas stations and other fuel storage sites. It's a tiny slice of what you pay, but it addresses a real environmental problem that the petroleum industry created.

The Math Stopped Working

For decades, the system was elegant. Americans drove more miles every year. They bought bigger cars and trucks that guzzled more fuel. Tax revenues grew automatically, without Congress having to vote for unpopular tax increases.

Then several things happened at once.

Cars got more fuel-efficient. This is good for the environment and good for consumers, but it means less tax revenue per mile driven. A car that gets 40 miles per gallon generates half the tax revenue of one that gets 20 miles per gallon, even though both cars create similar wear on the roads.

Gas prices spiked. When gasoline hit four dollars a gallon in 2008, people drove less. They carpooled, combined trips, and bought smaller cars. Again, good for many reasons—but devastating for Highway Trust Fund revenues.

The Great Recession hit. With unemployment soaring and economic activity contracting, Americans simply traveled less. Fewer commutes, fewer business trips, fewer vacation drives.

The result? In 2008, for the first time, the Highway Trust Fund couldn't cover its obligations. Congress had to transfer eight billion dollars from the general treasury to keep checks from bouncing. The next year, another seven billion. The year after that, nearly twenty billion more.

This wasn't a one-time rescue. According to the Government Accountability Office, Congress has transferred over 270 billion dollars from general revenues to the Highway Trust Fund between 2008 and 2021. The trust fund, in other words, stopped being a trust fund. It became another program dependent on deficit spending.

Why Can't Congress Just Raise the Tax?

Here's where politics crashes into arithmetic.

Raising the gas tax is one of the least popular things a politician can do. It affects almost everyone, the impact shows up immediately at the pump, and opponents can reduce your vote to a simple attack line: "He raised your gas taxes."

Since 2000, there have been at least half a dozen attempts by individual members of Congress to actually suspend the federal gas tax—to temporarily eliminate it entirely, usually when gas prices spike and politicians want to look like they're doing something. None of these attempts succeeded, thankfully, because suspending the tax without replacing the revenue would have halted federal highway projects across the country.

But the opposite—raising the tax to sustainable levels—has proven equally impossible. Even the U.S. Chamber of Commerce, not exactly a bastion of pro-tax sentiment, publicly supported a gas tax increase in 2013 to keep the fund solvent. It didn't matter. The political will simply isn't there.

In 2015, gas prices dropped significantly. You might think this would be the perfect moment to raise the tax—consumers were already saving money at the pump, so an increase would hurt less. But surveys showed little public support, and Congress showed even less interest.

The Deeper Problem

The Highway Trust Fund's troubles point to a more fundamental challenge: how do you pay for roads when the whole premise of the funding mechanism is becoming obsolete?

The gas tax assumes a direct relationship between fuel consumption and road use. But that relationship is weakening. Electric vehicles use roads without buying any gasoline at all. Hybrids use roads while buying very little. Even conventional cars are legally required to become more efficient every year.

This creates a perverse situation. We want people to drive fuel-efficient cars for environmental reasons. We want people to switch to electric vehicles to reduce carbon emissions. But every car that sips fuel instead of gulping it reduces highway funding. Every electric vehicle that pays no gas tax at all is a free rider on infrastructure that someone else is paying for.

Some states have started experimenting with alternatives. Oregon pioneered a voluntary program where drivers pay a per-mile fee instead of gas taxes—their odometer gets tracked, and they pay based on actual road use regardless of what powers their vehicle. Utah, Virginia, and others have followed. But no federal version exists yet.

What This Means for Your Drive

The next time you hit a pothole or crawl through construction traffic, you're experiencing the Highway Trust Fund in action—or, increasingly, the consequences of its chronic underfunding.

Federal highway spending decisions ripple through every state. That widening project on your local interstate? It probably depends partly on federal funds. The bridge repair that keeps getting delayed? Federal money likely plays a role. Transit expansions in cities across America compete for scraps from the Mass Transit Account.

The fund lurches from one short-term fix to another. Congress passes stopgap measures—it did exactly that on July 31, 2014, to prevent a funding lapse—but refuses to address the underlying structural problem. The Congressional Budget Office periodically issues warnings that the fund will become insolvent by some specific date, Congress transfers more general revenue, and the cycle continues.

It's a strange situation. Americans consistently say they want better roads and less traffic. They just don't want to pay for it through higher gas taxes. And so far, no one has figured out how to square that circle.

The infrastructure we built in the twentieth century with those steady gas tax revenues is aging. Bridges need replacement. Highways need expansion. New technology requires new investment. But the funding mechanism that made it all possible has become a political third rail—too broken to work, too dangerous to fix.

Those 18.3 cents per gallon, unchanged since 1993, buy less every year. And the highways keep crumbling anyway.