In the past three years, many states have increased or introduced new taxes in order to 
boost roadway funding. Tennessee, however, has made no policy changes and will 
increasingly confront challenges to its ability to fund roads, according to a new paper by 
researchers at UT’s Howard H. Baker Jr. Center for Public Policy, Center for Transportation 
Research and the Boyd Center for Business & Economic Research.
The report, "Tax Policies and Alternative Revenue Sources: State Responses to Declining 
Purchasing Power of Roadway Funding," examines roadway funding alternatives being 
adopted by other states.
“A primary goal is to inform the public and policymakers on how other states have tried 
to enhance roadway funding,” said Matt Murray, director of the Baker Center and 
associate director of the Boyd Center for Business and Economic Research in UT’s Haslam 
College of Business. “If the governor and legislature choose to explore funding 
opportunities, a first place to look is at other states.” Tennessee’s Department of 
Transportation had roughly $2 billion to use toward roadway funding in 2014, 
approximately $314 per person in the state. Half of those funds came from the Federal 
Highway Administration and the rest from state revenue sources.
As in other states, fuel taxes are Tennessee’s primary revenue source for roadway 
funding, but the state has the 11th lowest gasoline tax rate in the country.
Tennessee’s current gasoline tax is a fixed excise tax of 21.4 cents per gallon. If, as 
expected, growth in gasoline consumption slows and construction costs continue to rise, 
this tax system will not produce needed revenue growth. “Stagnant tax rates continue to 
threaten transportation funding, as well as decreases in fuel consumption due to 
increases in fuel economy,” said Murray.
Since 2013, 18 states have either increased their fuel taxes or restructured how their gas 
tax rates are determined. But several states, including Tennessee, have not made 
changes to their fuel tax rates in decades. Tennessee’s last increase in its gas tax—four 
cents per gallon—was in 1989. Funding challenges will continue to worsen as states try to 
use deflated transportation funds to meet increases in demand arising from ongoing 
population growth. Tennessee’s population is expected to grow by 9.9 percent between 
2016 and 2025. Twenty states are currently making transportation funding changes. 
Tennessee is one of several that will likely look for a solution to its roadway funding 
problem in 2017.
“States should choose their own policy path based on their unique circumstances,” said 
Murray. “Policymakers and the public need to evaluate potential funding solutions 
carefully since each will offer specific strengths and weaknesses.”
The full report is attached. 
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