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The bill preserves federal highway funds and shields states that keep gas taxes under $0.50 from penalties, but it does so by imposing an 8% federal funding cut on states that raise gas taxes—discouraging state-level revenue increases and risking reduced road and bridge projects in penalized states.
State governments that keep gasoline taxes below $0.50 per gallon avoid an annual 8% reduction in certain federal highway formula apportionments, preserving federal funding for those states' road programs.
The federal highway program conserves or can redirect federal resources by withholding 8% of formula funds from states that adopt higher gas taxes, which could modestly reduce federal outlays or allow reallocation to other priorities.
States that raise gasoline taxes to $0.50 per gallon or higher will lose 8% of certain federal highway formula funds each year, reducing the overall funds available for state transportation programs.
Local governments and drivers in penalized states are likely to face delayed, scaled-back, or postponed road and bridge projects and maintenance because smaller federal grants reduce local project funding.
The prospect of an annual federal funding penalty will deter states from raising gasoline taxes—even when additional revenue is needed for transportation—limiting state policymakers' ability to fund infrastructure and shifting political incentives against tax increases.
Based on analysis of 2 sections of legislative text.
Requires withholding of 8% of certain federal highway apportionment funds from any State in fiscal years after the State's gas tax reaches $0.50 per gallon.
Introduced April 13, 2026 by Kevin Kiley · Last progress April 13, 2026
Directs the Secretary of Transportation to withhold 8% of a State's federal highway apportionment funds each fiscal year once the State's gasoline tax reaches or exceeds $0.50 per gallon. The withholding applies annually for any fiscal year that follows the first full fiscal year after enactment in which the State's gas tax equals or exceeds $0.50/gal, and affects apportioned highway program funds distributed to States.