New forecast shows uptick in Washington transportation revenue as gas tax set to increase

Washington will have $6.8 billion more to spend on roads and other transportation projects over the next four years, thanks to a gas tax increase and other fees.

The new projection, released Wednesday by the Washington State Transportation Economic and Revenue Forecast Council, takes into account $6.5 billion in additional funding resulting from new legislation, account transfers and revenues from the Climate Commitment Act, which are now allocated to transportation purposes.

The state also projects an estimated $280 million increase in revenues since its March forecast due to “economic changes.”

The influx of cash will enable the state to complete a range of previously agreed-upon transportation projects, which were at risk of postponement due to a lack of adequate funding. As lawmakers worked to adopt a transportation budget, legislative leaders warned the North Spokane Corridor could be delayed without additional revenue.

Earlier this month, Gov. Bob Ferguson traveled to Spokane to reaffirm the state’s commitment to completing the project by 2030.

As part of the transportation package adopted by the Legislature, the state gas tax will increase by 6 cents to 55.4 cents per gallon, a change that will take effect Tuesday.

Beginning in July 2026, the state’s gas tax will rise 2% annually to account for inflation. It will be the first time the state’s gas tax has been adjusted since 2016.

The increased gas tax follows a decline in fuel consumption in Washington, in part because of the rise in electric vehicles and increasingly fuel-efficient vehicles.

Since a peak in 2018, gas consumption has declined by more than 2% per year, causing gas tax revenue to also decline, according to the forecast council.

“The data suggests that we’re going to continue to see a continued reduction in consumption over time,” Dave Reich, the state’s chief economist, said Tuesday.

The state’s gas tax brings in more than $1.3 billion per year and makes up more than a third of the state’s transportation revenue.

While the higher gas tax will begin Tuesday, legislators also adopted an array of other taxes and fees that will soon take effect.

Starting Oct. 1, the annual registration fee for hybrid and electric vehicles will rise from $100 to $150. Starting July 1, 2026, electric and hybrid vehicle fees will be increased by 2% each year to account for inflation.

Beginning Jan. 1, the state will impose a new 8% “luxury vehicle tax” on the sale, transfer or lease of vehicles that exceed $100,000. The tax is applicable for vehicles that carry 10 or fewer passengers, including cars, light trucks, limousines, motorcycles, passenger vans and sport utility vehicles.

Next year, the state also will impose a new 10% “luxury noncommercial aircraft tax” on the sale, lease or transfer of a noncommercial aircraft that exceeds $500,000.

Between Jan. 1 and Dec. 31, 2026, the state will temporarily increase the additional rental car sales and use tax from 5.9% to 11.9%. The rate will then be set at 9.9% beginning on Jan. 1, 2027.

While lawmakers opted to increase a number of transportation revenue sources, they opted not to proceed with a new “road usage charge” to address declining gas tax revenue because of decreased use of fuel. The fee, put forth by Rep. Jake Fey, D-Tacoma, chair of the House Transportation Committee, would have charged drivers 2.6 cents per mile driven in the self-reported program.

The positive transportation revenue outlook was reported a day after the revenue council released an updated forecast that showed the state will bring in $720 million less over the next four years than the Legislature assumed in its budget. In a statement Tuesday, Ferguson said that while he does not currently anticipate calling a special legislative session, lawmakers could ultimately be called back to Olympia depending on “developments from the federal government.”