Exploring transportation taxes and their impact in the Mountain States

As Americans hit the road this summer, what types of transportation-related taxes will they be paying? We answer this question in our new study (Transportation taxes and spending throughout the Mountain States).

Highway infrastructure is funded primarily at the state and federal level, with every state in the country levying a tax on gasoline and diesel fuel, ranging from $0.0895 per gallon in Alaska to $0.629 per gallon sold in California. The federal government taxes gasoline at $0.184 per gallon and diesel fuel at $0.244 per gallon. Other road and highway funding comes from license fees, vehicle registration fees, tolls, general taxation, truck fees, title fees and other taxes and fees.

Similarly, metropolitan, county, and city governments might also impose taxes and fees for roads and transportation. These can involve property taxes, sales taxes, car registration fees, fuel taxes, or other taxes and fees.

Gasoline taxes, tolls, registration fees, and others are generally considered “user fees.” User fees are paid by drivers to support building, maintaining, and expanding the road and highway network they use. Sales taxes and property taxes, though often paid by drivers, are not considered user fees, as they are broad-based and not specific to the act of driving, registering, or operating a motor vehicle.

Yet, as is often the case with government programs and taxes, politicians may look to divert dedicated driver user fees to other, more general, transportation purposes. Recently, lawmakers in many states have proposed and enacted new driver-related taxes and fees, seeking to divert money to other purposes, like public transit and cycling, while unfunded needs and maintenance continue to grow.

In fact, a recent Pew Charitable Trusts study stated deferred maintenance on roads and bridges across the country has reached more than $100 billion and continues to grow.

In the Mountain States, the state excise tax on gasoline as of July 2025 is as follows:

• Idaho - $0.32 per gallon;
  

• Montana - $0.33 per gallon;
  

• Washington - $0.554 per gallon (not including the impact of the state climate tax); and
  

• Wyoming, $0.24 per gallon.

Since 1980, lawmakers have increased the federal gas tax and Wyoming’s gas tax three times, increased Idaho’s seven times, increased Montana’s eight times, and increased Washington state’s 14 times.

As lawmakers increased the fuel tax rates, more revenue was generated for highway accounts. Despite many public officials claiming gas tax revenue has not kept up with inflation, state gas tax revenues have soared far beyond, according to the U.S. Census Bureau.

Additionally, one reason cited for potentially declining fuel tax revenues is the adoption of electric vehicles. Yet lawmakers in the Mountain States have already considered this by imposing an annual $140 electric vehicle fee in Idaho, $130 annual fee in Montana, $225 annually in Washington state, and $200 annually in Wyoming, allaying concerns of officials that EV’s are not paying for their use of the road network.

Each of the Mountain States has some form of constitutional protection against diverting gas taxes and fees to other purposes. Yet subtle differences in languages provide openings for diversion. Some states allow for diversion under certain circumstances, for example, in Washington state, if the law states that a gas tax or fee is not intended for highway purposes, it may be diverted. In Montana, the legislature can divert protected fees for non-highway purposes through a supermajority vote.

In addition, other driver-related taxes, such as the carbon tax in Washington state, effectively tax gasoline at approximately $0.43 per gallon, to the cost of gas at the pump in 2023, but revenues are diverted to other programs.

For more than a decade, states like Washington, Oregon and Utah have moved forward with pilot programs to tax VMT, vehicle-miles traveled, or the amount people drive (another term used for this type is a RUC – a Road Usage Charge). Presumably, this would require either GPS monitoring, tracking and reporting or some kind of odometer reading. Boosters argue it is a fair way to pay for roads.

Yet some lobbying groups and lawmakers want to use highway dollars for mass transit. Transit lobbyists like the Transportation Choices Coalition in Washington state say it wants an “Equitable Road Usage Charge” that is a “progressive user fee that could be used for multimodal transportation.”

While a VMT tax has the potential to replace a fuel tax responsibly, policymakers should focus on the following areas to ensure taxpayers are protected should they desire a mileage tax:

• Taxpayers should not pay a fuel tax and a mileage tax concurrently, even with a refund mechanism;
  

• A mileage tax should be a direct replacement of the gas tax, which means it is deposited into each state’s respective trust fund to be used for highway purposes only. A tax that is diverted to other purposes is not a replacement of the fuel tax;
  

• Strict protections on GPS tracking or eschew GPS tracking altogether;
  

• Costs to administer the program should be on par with current fuel tax collection costs; and
  

• Taxes should not vary by time of day, road choice, or distance.

It has been nearly a century since the first gas tax was imposed on the traveling public, and for 100 years it has been used to benefit the traveling public, with constitutional protections to realize those benefits. Any exploration of a mileage-based fee, new tax on fuel, or special taxes and fees paid by drivers should be spent to directly improve personal and business travel on the state road network instead of indirectly through other modes like transit.