As gas tax revenues plunge, several states are scrambling to fund basic infrastructure repairs—a crisis made worse by clean air mandates pushing automakers toward electric vehicles, according to an energy policy expert.
States primarily use gas tax revenues to fund the maintenance of infrastructure, like bridges and roads. In Oregon, a state with aggressive climate goals, the Department of Transportation has anticipated that it will face an estimated $350 million budget shortfall due in part to declining gas tax revenues. California, which requires auto manufacturers to sell a certain percentage of zero-emission vehicles, is looking at a potential loss of $5 billion – or 64% – over the next decade, according to analysts.
Jason Isaac is the founder and CEO of the American Energy Institute, a trade organization representing mainly oil and gas companies. He told Fox News Digital that states are losing about $2,506 in gas tax revenue per every EV sold. Isaac said that, in his view, strict EV mandates are exacerbating the dearth in gas tax revenues.
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“The regulations and requirements from the federal government for automobile manufacturers to make and sell electric vehicles is having a profound impact on revenue collection for states and the federal government to fund our highway infrastructure,” Isaac said.
In particular, he pointed to clean air fuel economy requirements.
“Automobile manufacturers are all losing billions of dollars making EVs. The only company that’s making money selling EVs is Tesla, and they’re making money because they’re selling fuel emissions credits to other automobile manufacturers,” Isaac said. “Tesla would just break even, maybe a little bit of profit, if it wasn’t for the selling of the credits to Ford and GM, Stellantis, and other automobile manufacturers that are forced to buy fuel economy credits because of requirements from the federal government.”
As a result, Isaac said, gas-powered car manufacturers are compelled to make more electric vehicles in an effort to keep up with government mandates.
“It’s really destroying the market,” he said.
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Meanwhile, Isaac posited, fuel economy mandates and the ongoing credit-buy-back system have generated a “multi-billion dollar market out of nothing that’s not improving fuel economy.”
“There’s bipartisan support to get rid of these credits,” he said, adding that the move would help auto manufacturers relying on the system “to make a comeback and truly improve fuel economy and vehicles, because they won’t be wasting billions of dollars from vehicles that people just overwhelmingly don’t want. The rates of repurchases are decreasing significantly.”
According to McKinsey & Co.’s 2024 Mobility Consumer Pulse, 46% of EV owners in the U.S. said they were “very” likely to switch back to owning a gas-powered vehicle in their next purchase, due mainly to a lack of charging infrastructure and range limitations.
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The Trump administration’s Environmental Protection Agency (EPA) said this month that it was beginning the process of rolling back automotive pollution and fuel economy standards set under former President Joe Biden, part of a broader initiative to peel back green energy initiatives. In January, President Donald Trump’s Secretary of Transportation, Sean Duffy, also issued an order directing regulators to review the current Corporate Average Fuel Economy, or CAFE, standards.
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Different solutions are being considered by states to supplement their lost gas tax revenues, including mile-based road usage charges, taxes on EV charging stations, and increased registration fees for EVs. A debate has also emerged over raising the federal gas tax—which has not increased since 1993—as a potential solution.
Isaac said that in addition to amending federal fuel economy standards, he noted that raising the registration fee for EVs is a good solution. He said putting a tax on electric-vehicle charging stations would likely not generate enough funds to make up for the lost revenue.
Isaac also posited that he was not very keen on the implementation of a vehicle-mile travel tax. He suggested that it could serve as a “regressive” tax on lower-income people who are struggling with the cost of housing, because they will have to move out of urban areas to rural or suburban areas, increasing the amount of miles they need to travel for work and other activities.
Isaac is not a proponent of raising the federal gas tax either.
“We don’t need to raise the tax, we just need to spend our dollars more efficiently,” Isaac said. “I think DOGE is going to help with that efficiency, so that dollars are truly making it to the maintenance of our nation’s infrastructure.”
