Oregon voters have until Tuesday to decide whether to reject a recently enacted gasoline tax increase that ignited political backlash from the right but whose backers say is necessary to shore up the state’s transportation budget.
Oregonians, who already pay among the highest prices in the country at about $5.30 a gallon, are being asked whether to accept or reject new fees that include raising the state’s fuel tax by 6 cents per gallon. The voter referendum comes as the war in Iran has pushed gas prices nationally to the highest point in four years, and as several states and members of Congress float gas tax holidays to help motorists.
The question on Oregon’s primary ballot underscores the quandary for state officials across the US: How to make up for the broad decline in gas tax revenue on a per-mile basis brought on by improved vehicle efficiency and the proliferation of electric vehicles—a dynamic compounded by persistent inflation that’s significantly raised labor, materials, and other infrastructure costs.
That cocktail of pressures has left Oregon—which in 2015 pioneered a voluntary program that charges drivers for each mile driven within its borders—racing to find additional sources of funding. Other states have adopted similar mileage programs to bring in new revenue or have tried, for example, instating registration fees for EVs and hybrids.
“This is not a one state problem or two state problem,” said Trish Hendren, executive director of the Eastern Transportation Coalition. “This is a national problem that we’re facing and why so many states are exploring alternatives to the fuel tax.”
The Democratic-controlled Oregon legislature passed the gas-tax increase as part of a broader transportation package last fall, but Republicans easily secured the needed signatures to put the question before voters. On Sept. 29, 2025, when the bill passed the legislature, gas prices were more than a dollar lower in the state than they are today, according to AAA. The increase has been on hold awaiting the referendum results.
While states are heavily reliant on fuel taxes to build and maintain roads and bridges, any effort to raise such levies is especially tricky in a climate where affordability has become a key policy focus and political talking point. The US Consumer Price Index hit a three-year high in April, largely on the back of higher gas prices.
Hybrids and EVs, meanwhile, now make up 22% of US light-duty vehicle sales, according to 2025 data from the US Energy Information Administration. That compares with less than 5% a decade ago. Meanwhile, fuel efficiency is up across the board: The average 2024 model year vehicle got 27.2 mpg, more than twice the 13.1 mpg on a 1975 model, according to the Environmental Protection Agency.
Those numbers help explain the decline in Oregon’s per-mile cut of fuel tax revenue and adoption of a mileage program. A few other states now have similar programs, which typically charge vehicle owners pennies for every mile logged on state roads. And flat fees on EV and hybrid vehicle registrations deliver revenue in at least 41 states, according to the National Conference of State Legislatures.
At least 24 states reported a collective $86 billion shortfall in their transportation budgets over the next decade, as construction costs for roads and bridges have risen faster than available revenue, according to a Pew report.
“Nobody has an elegant option right now” to recover fuel taxes, said Patrick DeHaan, head of petroleum analysis for GasBuddy, a gasoline research firm that helps people save money at the pump.
“I would expect in the years ahead that states are going to have to look at that harder if EV adoption continues to rise,” DeHaan said.
A National Problem
Congress, which is weighing a new $500 billion surface transportation funding bill this year, has left the federal gas tax at around 18 cents a gallon since 1993. Adjusted for inflation, it’s worth less than half that, the Tax Foundation estimated.
The federal government disburses some of that revenue to the states through the US Department of Transportation’s Highway Trust Fund. That fund, however, has been in the red for around two decades as gas tax revenue has declined. Congress has approved one-off infusions totaling $275 billion, primarily from the general fund, over the years to boost its coffers.
Meanwhile, elected officials often raise the idea of pausing gas taxes when prices soar. As average gasoline prices surpassed $4 a gallon this spring amid Iran’s blockade of oil cargoes, several states approved temporary gas tax holidays, and Congress is considering a similar move.
Many states have gradually raised fuel taxes over the years and begun implementing alternatives.
Oregon launched the nation’s first mileage fee program to help make up for lower gas tax revenue on a per-mile basis. The voluntary program, with around 750 people, doesn’t currently bring in net revenue, according to Anna Howe, a spokeswoman for the Oregon Department of Transportation. Still, the idea caught on and Utah, Virginia, and Hawaii have launched similar programs.
Oregon’s mileage program will become mandatory for drivers of EVs and hybrids starting in 2027, while Hawaii’s program will be required for EVs in 2028 and for all light-duty vehicles by 2033.
More than a dozen states have enacted legislation to study mileage fee programs, according to the National Conference of State Legislatures. California is considering legislation this year (AB 1421) that would direct state officials to produce a report by January on potential implementation of a mileage-based fee.
The consequences can be felt on the ground. Utah was forced to defer some road maintenance in the mid-2010s after holding gas tax rates steady for two decades. Since 2020, the state has allowed EV owners to pay 1.25 cents per mile road usage charge in place of an annual fee.
“We need to be thinking smart on how we preserve that tax base and align the costs of the use with those paying for the use,” said Utah Republican Rep. Cal Roberts, who sponsored a bill enacted this year (HB 575) to temporarily reduce the gasoline tax.
Winning Public Support
Researchers say polling data doesn’t support the conventional wisdom that raising gas taxes is politically dangerous.
A 2025 survey by San Jose State University’s Mineta Transportation Institute found 75% of respondents were in favor of raising the gas tax by 10 cents if the revenue went toward road maintenance. It also showed that 54% of respondents viewed mileage fees as being fairer than gas taxes.
“Americans don’t see all gas tax increases the same,” said Asha Weinstein Agrawal, director for the MTI National Transportation Finance Center at SJSU. “They want to know that the money is going to be going to a more specified purpose that they think is important.”
In Oregon, the Democrat-controlled legislature and Democratic Gov. Tina Kotek signed off on a bill last year that raised the state gas tax by 15%, to 46 cents, and boosted a spate of vehicle fees. Some Republicans and a group called the Oregon Freedom Coalition responded with a petition and an eventual ballot measure to put those changes to voters, arguing that residents are already overtaxed and that ODOT needs to be more financially prudent.
The state already is home to some of the nation’s highest fuel prices; as of May 15, the average stood at $5.34 per gallon, according to AAA.
Oregon last raised its gas tax in 2017, boosting it to 40 cents per gallon over several years, according to ODOT’s Howe. The state levy is currently the 12th highest in the country, according to the Tax Foundation. The state brought in $694.4 million from its gas tax in fiscal 2025, up from $507.5 million in fiscal 2015, according to ODOT, but the agency says revenue has declined on a per-mile basis.
“We’ve been sounding the alarm for a while about our transportation funding,” Howe said. “Our costs just continue to go up just like everybody else.”
A state gas tax increase would help ODOT—which faced a roughly $350 million budget shortfall heading into the 2025 legislative session before lawmakers stepped in to fill the hole—bring in longer-term revenue for the department, Howe said. ODOT has curbed its spending by $500 million since 2019 “to stay within available funding,” it says on its website.
Meanwhile, ODOT expects net revenue from the state’s mileage fee program—which will become mandatory for anyone driving a vehicle that gets at least 40 mpg or is electric—to be around $67 million for its 2027-29 budget cycle, according to Howe. Once the program is fully mandatory, ODOT expects that number to hit $207 million, she said.
“It definitely is not going to solve that whole budget picture,” Howe said.
Despite the funding conundrum, improved fuel efficiency reduces vehicle emissions, which in turn helps lower pollution. Howe pointed out that the state does have climate targets and ODOT encourages the driving of EVs and curbing gas emissions—the mileage-fee program helps recover that revenue, she said.
Oregon State Rep. Ed Diehl (R), one of the people who pushed for the ballot measure, said Republicans in the statehouse didn’t feel they were allowed “a seat at the table” to discuss solutions for ODOT’s funding concerns.
Diehl, who’s running for governor, also questioned the agency’s current spending and said some of ODOT’s projects aren’t “focused on the core mission of ODOT, which is to safely move commerce and traffic from point A to point B safely.”
As for how to make up for declining gas tax revenue, Diehl said he’s not against raising the gas tax but that the state could utilize other revenue sources, like its general fund.
“There is a general feeling that Oregon is taxed enough,” he said.
While Oregon doesn’t have a sales tax, the rest of its tax structure makes the state generally not competitive compared to other US states, according to the Tax Foundation’s rankings.
The agency’s recent budget shortfalls are indicative of a broader problem weighing on states reliant on gas tax revenue.
The Eastern Transportation Coalition’s Hendren said even if programs like mileage fees work, they still won’t be enough to fill the gaps because of inflationary pressures.
She says the country is in “transition” when it comes to transportation and that the industry needs to decide if it should utilize the users-pay approach, tap into general tax revenue, or even implement a different sales tax to fill the void.
“That’s a really hard and important question that we need to answer as a country,” Hendren said.