Gas Tax Purchasing Power Calculator

The federal government and every state taxes gasoline and other motor fuels. These taxes typically help pay for transportation infrastructure projects. But their ability to adequately fund these projects is being squeezed by two developments. First, vehicles are becoming more efficient, causing drivers to refuel less frequently and pay less gas tax. Second, as construction costs rise, each dollar collected through the gas tax buys less asphalt, machinery and labor over time.

This calculator can measure how improvements in vehicle fuel efficiency and growth in construction costs are reducing the gas tax's purchasing power. It runs mainly on a mix of historical data from the Federal Highway Administration and projections based on information published by the Energy Information Administration and the Congressional Budget Office. A more detailed description of the methodology underlying these calculations is provided below.

The purchasing power of gas tax rates tends to be eroded over time by two developments: improvements in vehicle fuel efficiency and increases in the cost of transportation construction and maintenance projects.

Illustration of Forces Impacting Purchasing Power

Imagine a driver traveling 10,000 miles per year in a state where gasoline is taxed at 30 cents per gallon and asphalt, which the state typically buys with gas tax dollars, costs $6 per square foot.

In Year #1, this person drives a car that can travel 20 miles per gallon (mpg). They buy 500 gallons of gas and pay $150 in state gas tax: enough to cover the cost of 25 square feet of new asphalt.

In Year #2, two things happen. First, this person upgrades their vehicle to a newer model that gets 5 percent better gas mileage, at 21 mpg. And second, the price per square foot of asphalt rises by 5 percent to $6.30.

In the second year, this driver travels the same distance while buying less gasoline (476 gallons) and paying less gas tax ($143). Moreover, each tax dollar covers the cost of less asphalt because of the product’s new, higher price. In the second year, this driver’s $143 tax payment only funds 22.7 square feet of asphalt purchases, compared to 25 feet a year earlier.

In this example, the purchasing power of this driver’s gas tax contributions has fallen by 9.2 percent, as the state no longer collects the revenue needed to cover the cost of 2.3 square feet of asphalt (out of its previous 25 square foot purchase). Restoring this driver’s tax payment to match its previous purchasing power (that is, requiring them to pay enough to buy 25 square feet of asphalt) could be accomplished by raising the gas tax rate from 30 to 33.1 cents per gallon.

Calculation

The arithmetic undertaken in this calculator applies the logic described above to actual data on fuel efficiency and construction cost trends to arrive at estimates of how federal and state gas tax purchasing power is changing over time.

Core formula

Equivalent rate = Start rate × (HCCIend / HCCIstart) / (MPG indexstart / MPG indexend)

Construction cost factor — Highway Construction Cost Index (HCCI), base year 1936 = 100. The ratio of end-year to start-year index values captures how much more expensive high

Fuel efficiency factor — Light-duty vehicle stock on-road MPG index (base 1936 = 100). As vehicles become more efficient, fewer gallons are purchased per mile driven, reducing the tax base. The ratio of start-year to end-year index values captures this effect.

Revenue impact formula

(current rate − equivalent rate) × state gasoline consumption (gallons) in the end year.

Fuel Efficiency Data

For the fuel efficiency portion of the calculations, we examine the full population of light-duty vehicles in the U.S. using a mix of data from the Federal Highway Administration (FHWA) and projections based on information published in the Energy Information Administration’s (EIA) counterfactual baseline case of its 2026 Annual Energy Outlook.

For 1966-2024, we divide FHWA estimates of vehicle miles traveled (VMT) for the light-duty vehicle stock by FHWA estimates of the amount of fuel those vehicles consumed to arrive at an average, on-road estimate of miles traveled per gallon.

FHWA did not publish data separately broken out for light-duty vehicles for years prior to 1966. We therefore work backwards from the 1966 estimate of miles traveled per gallon and use the percentage change in fuel efficiency observed in the FHWA data for passenger vehicles (a subset of all light-duty vehicles) to arrive at comparable light-duty vehicle estimates for 1936-1965.

Finally, for 2025-2050 we estimate the average on-road fuel efficiency for the light-duty vehicle fleet by dividing EIA’s estimates of light-duty VMT by its estimates of light-duty gallons of fuel consumed. We use the resulting year-over-year percentage changes in fuel efficiency to extend the FHWA historical data through 2050. This approach allows us to account both for improvements in vehicle fuel efficiency among vehicles that use traditional motor fuels, as well as the growing movement toward electric vehicles that add to the nation’s VMT without adding to the total amount of traditional motor fuels purchased.

While much of the conversation over vehicle fuel efficiency tends to focus on the significant gains seen in the newest model year’s vehicles, all the fuel efficiency calculations done here examine the overall light duty stock on the road each year, including both new as well as older vehicles. It is the characteristics of this vehicle stock that determine the purchasing power of any given gas tax rate, and those characteristics tend to change slowly as it takes many years for the vehicle stock to turn over.

Construction Cost Inflation Data

Historical data on transportation construction costs for 1936-2002 are taken from the FHWA’s Bid Price Index (BPI) while data for 2002-2025 come from the FHWA’s National Highway Construction Cost Index (NHCCI). While the two indices are not strictly comparable, they offer the best window available into the long-run trajectory of these costs. We do not directly compare price levels across the two indices, but rather blend them together into one combined index based on the annual percentage change observed separately in each index.

There is a high degree of uncertainty in the future trajectory of transportation construction costs because they are influenced by a host of economic and policy developments. In the absence of an authoritative, long-range forecast of transportation construction costs, we assume that these costs will grow in line with the Congressional Budget Office’s (CBO) projection for the GDP Price Index for 2026-2036. We further assume that CBO’s projection of GDP Price Index inflation for 2031-2036 will persist from 2037-2050.

The GDP Price Index measures inflation in the total price of goods and services produced in the U.S. While it is not specific to the transportation construction sector, it is better suited for this kind of analysis than more familiar measures of inflation, such as the Consumer Price Index, which only examines the price of those goods and services purchased by individual consumers.