Gas Taxes & The “User Pay” Model: Who Damages Our Roads? Who Pays?

This is the first page of a policy paper prepared by Bike Anchorage on user fees and road spending. Read the full paper here.

Overview

Alaska spends more on roads than any other state in the union, and yet our road conditions are ranked among the worst. In 2021, Alaska spent $2,266 in state and local funds for every 10,000 miles driven, more than three times the national average of $659, and yet the Reason Foundation’s most recent Annual Highway Report rated Alaska’s highway system the worst in the nation. Why? Our state faces structural challenges built into our geography, our climate, and the sheer scale of the infrastructure we maintain, and the tools we use to cover these costs haven’t kept up.

The way we fund roads in the United States is described as a “user pay” system. The idea is that drivers who use the roads should pay proportionally for their upkeep through user fees like motor fuel taxes. But in Alaska, as in the rest of the country, this model has failed to deliver for decades.

Gas taxes have stayed flat even as construction and maintenance costs have climbed. Meanwhile, vehicles have become more fuel-efficient, and newer electric vehicles (EVs) use no gasoline at all. This has led some to worry that EV drivers aren’t paying their fair share—a concern sometimes extended to people who bike or walk, since those modes of transportation also don’t burn gasoline.

In practice, though, the shortfall isn’t caused by EVs, bicyclists, or anyone choosing cleaner, lighter, or more efficient ways to travel. It’s built into the structure of the system itself.

No one pays the full cost of their road use through gas taxes, not even drivers of gas-powered vehicles, and not at any level of government. It’s been this way for decades: Alaska’s state gas tax hasn’t been raised since 1970 and remains the lowest in the nation; the federal gas tax hasn’t changed since 1993. Today, less than half of all highway dollars come from fuel taxes and other user fees.

The shortfall is made up from general funds, made up of property, sales, and income taxes that are paid by everyone, regardless of whether they drive or what kind of car they have. In other words, everyone pays for our roads, not just drivers.

What causes Alaska’s road funding challenge, then? The answer is complex, but the heart of the issue is an outdated and unsustainable model that no longer reflects how people use our transportation system, or what it truly costs to maintain it.

The pages that follow explain how the current gas tax system works, how road damage really happens, and what kinds of approaches could make transportation funding more fair, efficient, and sustainable for everyone.