STATE HIGHWAY FINANCE TRENDS

Although motor fuel revenue still supplies more than half of all state user revenue, its contribution has steadily slipped over the last decade. The foregoing analysis suggests that the traditional method of adjusting motor fuel tax rates is antiquated given today's high inflation and the motor fuel consumption outlook. Future additional motor fuel consumption outlook. Future additional motor fuel tax revenue will be derived solely from increased tax rates. The analysis of motor vehicle tax revenue supports the use of tax devices that are sensitive to price changes. Indexing motor fuel tax rates to the appropriate price variable would accomplish the goal of coordinating tax revenue with highway costs. The pace of fuel tax rate changes for 1981 is heartening, but, for the most part, these rate increases only temporarily resolve the issue. If high inflation persists and motor fuel consumption remains statis, only an automatic tax adjustment process prevents yearly appeals for legislative action in order to retain the highway tax dollar purchasing power and, indeed, to recapture the tax burden attributable to motor fuel found a decade ago. (Author)