$0.10 Gas Tax Freakonomics

Austin Gas Tax Freakonomics

Austin Gas Tax Freakonomics

A 2007 U.S. Census estimate places Austin’s population at 743,074 people.   We’ll use 0.85 as the multiplier to approximate the number of vehicles per capita in the State of Texas.  Assume the average car owner drives 12,000 miles a year and gets 24mpg.   That person will purchase 500 gallons of gas each year.  By employing a $0.10 gas tax per gallon, for the driver this equates to $50.00 per year, or only $4.17 per month.  But, the City could collect over $31.6MM in a single year. (The City could realistically expect much more from drivers passing through.)

$31.6MM is more than half the cost of Portland’s, Tampa’s, or Seattle’s budget for their street car system (article, pdf).  A real world case study in streetcar economics yielded enhanced property values, connectivity, 400 new businesses (90% locally owned), the majority of these businesses are owned by women and minorities.

Even I, an economic conservative, can identify with the social value generated by $4.17 per month towards paying for an Austin streetcar.  Food for thought for our next City Council.


About Jude Galligan

Jude Galligan, REALTOR, Principal of TOWERS Realty and publisher of Downtown Austin Blog (aka. "DAB"), spends his time matching remarkable people with remarkable properties in Austin’s urban core. A resident owner in downtown Austin, Jude has served on the Board of the Downtown Austin Alliance (DAA) and the City of Austin Downtown Commission. Contact Jude.


  1. vanderlei, you state that you found the central routes to be useful and full, but not so much in the outskirts of town. This phenomenon is precisely what you would expect from a transit system in a sprawled environment. And guess what one of the primary causes of sprawl is: the subsidization of automobile use. The very phenomenon about which you are complaining is caused by the failure to tax automobile use to the extent it is subsidized.

  2. avatar vanderlei says:

    to be clear i very much like the congress and campus routes i found them to be very useful and full. i just havent seen much use elsewhere.

    also employment going up in central austin only matters if ridership increases at the same time, i think you share my scepticism when cap metro makes its rosy claims year to year but still asks for more money.

  3. I think you’ve convinced this thread, vanderlei, that you don’t agree. Which is cool. Though, the merits of mass-transit are well documented. Did you watch the case study video I included?

    The point of my post was to highlight a proven and practical method of financing mass-transit.

  4. Umm, if you assumed that you’d be leaving out a massive number of people who take transit. A large amount of the transit use is coming from south of IH-71 and east of IH-35. Not to mention the express buses bringing in suburbanites from Oak Hill and Leander. Heck, the #1L/M goes almost all the way up to Round Rock and that’s one of the most used buses in Austin.

  5. avatar vanderlei says:

    If you look at the dispersion i would make the argument that the central area that is best served by our transit system is south of 183, above the river (maybe even down to 360) and between mopac and 35.

    looking at the map thats not much over a quarter of the densely populated areas?

    Im only wrong if you dont consider north of 183, and south of 360 to have an adequate transit system that is used and to not be suburbs.

  6. vanderlei, you have asserted several counterfactuals. Employment in the urban core has gone up, not down, and is very substantial (far more people working in downtown, UT, and Capitol than at all the major high-tech employers combined); and the routes near campus are usually very full (the #5 goes through my neighborhood and was always SRO the few times I took it in the morning).

  7. I don’t know if you’ve noticed, but in the past 2 years gas prices went up substantially (they’re back down now, but probably temporarily). We’ve also have tens of thousands of people moving to Austin yearly now. So just because the UT shuttles weren’t full when you were in school, doesn’t mean things haven’t changed (not to mention the fact that UT shuttles aren’t working on the same pool of money).

    I lived in the suburbs and took the #3 to work. Plenty of Austin’s buses go to the suburbs. It’s actually a sore point how nice those buses from the suburbs are.

    I know that if you go look at the #3 at Slaughter and Manchaca it looks like only 3 people ride the bus. But I can tell you that as someone who rode that bus regularly I never was on there when there were fewer than 40 boardings per trip, and generally there were hundreds.

    The Dove Springs bus (#7) near me now pretty much always has people standing regardless of time of day.

  8. vanderlei, the data suggests otherwise. The map below shows how Austin’s population density increases towards the center.


  9. avatar vanderlei says:

    i rode the bus for a number of years when i was close to campus and you arent going to convince me that the cities buses are crowded. The only decent route structure i have ever used is the congress run and the west campus loop. Austin’s workforce lives in the suburbs, until the city can figure out some sort of idea for mixed use policy it will stay like that.

    i agree that those fees probably dont get close to covering road expenses, but the argument should be moved to increasing those fees rather than making them a punitive sin tax for buses that dont serve most of austin effectively.

  10. vanderlei, the buses aren’t empty, and gas taxes and vehicle registrations don’t even come close to paying for our total road system – massive subsidies from urban drivers and urban non-drivers make up the difference (suburban drivers are highly subsidized).

  11. avatar vanderlei says:

    transit doesnt have to be profitable but it shouldnt be a black hole as it is now. New roads in austin are now being done by toll which is paid for by use. Gas tax is applied to roads which is by the user. Registration of a car has fees for usage of the road.

    And i would disagree that every bus is an improvement. They are emtpy, subsidized, and that penny could have been better used on bike routes. I would much rather see an HOV lane in austin.

  12. Why don’t we fund roads with a usage tax? Why don’t car drivers pay what the roads actually cost? Why is it only transit is supposed to be profitable, but roads are an acceptable black hole that we pour money down?

    Don’t forget, every bus you see is actually an improvement to the transportation system. Depending on how full it is you’re seeing between about 1 and 100 cars taken off the road. Transit makes drivers live significantly better.

  13. avatar vanderlei says:

    we already give cap-metro a penny on every dollar we spend in this town, why would you increase the amount of money non-users of transit are spending. Our transportation system is terrible with no good fix planned (check out m1ek’s blog).

    Until a solution comes about that is half workable for even a quarter of the population i think that additional gas-tax is purely punitive against the supposed evils of cars.

    why dont we raise the cost of buses and trains to equal what they actually cost?

  14. And if you drive a car that gets good fuel economy it would be more like $2-$3/month. Good to get it in now when prices are low and people won’t even notice it when prices start spiking again in a few months.

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