This is the fifth and final post in a five-part series on “The Hidden Tax: New Mexico’s Energy Crisis & Path Forward.” Read Part 1 on household budgets, Part 2 on seniors and local businesses, Part 3 on oil money dependence, and Part 4 on the energy transition.
Driving across I-25, drivers are often confronted with miles of construction; orange barrels squeezing traffic down to single lanes. While this can be frustrating, it is generally a sign of our governmental agencies utilizing our shared resources to improve shared infrastructure. But while the seemingly endless highway construction on major roadways is something of a joke for travelers around the state, many areas are struggling with failing infrastructure needs in their communities, and the current political climate puts those needed fixes at increased risks.
As gas prices continue to hover around $4 per gallon, politicians in Washington and Santa Fe quickly reached for a familiar political tool: suspending the gas tax. The promise is simple and politically attractive: instant relief at the pump, with savings of 18.3 cents per gallon for gasoline and 24.3 cents per gallon for diesel.
But transportation economists, infrastructure advocates, and state budget officials warn that gas tax holidays are a classic case of robbing Peter to pay Paul—and in New Mexico’s case, Paul is already bankrupt.
The Federal Picture: Highway Trust Fund on Life Support
The federal gas tax isn’t just revenue, it’s the backbone of America’s transportation funding system. Since 1956, it has fed the Highway Trust Fund (HTF), which operates on a “user-pay, user-benefit” principle: drivers pay the tax, and that money builds and maintains the roads they drive on.
But the HTF is in crisis:
- The fund has run annual deficits since FY2008, requiring periodic transfers from the Treasury’s General Fund to remain solvent
- In FY2024 alone, the HTF ran a $13 billion deficit
- The Mass Transit Account will be depleted by FY2027, with the Highway Account following in FY2028
- A five-month gas tax suspension would reduce HTF revenue by approximately $17 billion, increasing federal deficits by roughly $12 billion even after accounting for offsetting income and payroll tax increases
The Bipartisan Policy Center is blunt: “A suspension would provide modest, temporary relief to consumers at the pump, but in doing so, would blow another hole in the federal deficit and further strain the user-pay, user-benefit system of the HTF.“
How much relief are we talking about? Studies of state gas tax suspensions in 2022 found that only 58% to 87% of the savings get passed on to consumers, with gasoline suppliers pocketing the rest.
For New Mexico drivers, a federal suspension would mean prices falling by just 10 to 16 cents per gallon: This would equate to a one-week reprieve that costs billions in long-term infrastructure funding.
New Mexico’s Infrastructure Crisis: Already Underfunded, Now Facing Cuts
For New Mexico, the gas tax suspension debate hits especially hard because the state’s transportation system is already chronically underfunded. The numbers tell a devastating story:
New Mexico’s Road Funding Disadvantage:
- New Mexico has the 4th lowest gasoline tax rate in the nation (17 cents per gallon, unchanged since 1996)
- New Mexico has the 9th lowest diesel tax rate in the nation (21 cents per gallon, unchanged since 2004)
- Every 1-cent increase in the gasoline tax would generate only $6.8 million annually, a drop in the bucket compared to needs
- The state ranks 6th lowest in the nation for gasoline revenue per lane mile and 2nd lowest among neighboring states for diesel revenue per lane mile
The Backlog Is Massive:
- $5.6 billion in needed but unfunded transportation projects
- The percentage of roads in acceptable condition has dropped from 75% in 2011 to 69% in 2023
- Deteriorated roads cost New Mexicans $3.6 billion annually:
- $1.6 billion in vehicle operating costs (repairs, tire wear, reduced fuel efficiency)
- $829 million in safety costs (accidents, injuries, fatalities)
- $1.2 billion in congestion costs (delays, lost productivity)
The Average Cost to Families:
- Albuquerque: $1,083 vehicle operating costs + $670 safety costs + $1,249 congestion costs = $3,002 total annual cost
- Las Cruces: $1,160 vehicle operating costs + $402 safety costs + $467 congestion costs = $2,029 total annual cost
- Santa Fe: $909 vehicle operating costs + $596 safety costs + $782 congestion costs = $2,287 total annual cost
- All of New Mexico Average: $914 vehicle operating costs + $474 safety costs + $686 congestion costs = $2,074 total annual cost
That’s right: the average New Mexican family pays $2,074 per year in hidden costs from deteriorated roads, far more than they’d ever save from a gas tax holiday.
The Shipping Cost Multiplier: Bad Roads + High Fuel Prices = Economic Strangulation
When fuel prices rise AND roads deteriorate, shipping costs don’t just add—they multiply.
Consider a trucking company moving goods from Albuquerque to Farmington:
- Higher fuel costs: Diesel prices up 75% since the Hormuz crisis began
- Poor road conditions: Increased vehicle wear, more frequent repairs, slower speeds
- Longer routes: Some roads become impassable for heavy trucks, requiring detours
- Reduced capacity: Trucks must carry lighter loads to avoid damaging fragile road surfaces
For New Mexico, this hits particularly hard because:
- Vast distances: Rural communities are spread across 121,590 square miles, requiring extensive road networks with limited tax base to support them
- Limited alternatives: No major rail networks in many areas, no water transport options—trucks are the only option
- Agricultural dependency: Farmers and ranchers rely on roads to get products to market; every bump in the road reduces profit margins
- Tourism economy: Visitors driving to Santa Fe, Taos, Carlsbad Caverns, and other destinations face rough roads, reducing repeat visits
The False Economy of Tax Holidays
When states suspend gas taxes, they create a false economy that hurts everyone except oil companies:
Short-term “winners”:
- Drivers save 10-16 cents per gallon (if stations pass on the full savings)
- Politicians get to claim they’re “doing something” about gas prices
Long-term losers:
- State DOTs face revenue shortfalls, forcing project delays and maintenance deferrals
- Local governments that rely on gas tax distributions for road repairs
- Drivers who pay more in vehicle repairs than they saved at the pump
- Future generations who inherit crumbling infrastructure with no dedicated funding to fix it
New Mexico’s Specific Vulnerability:
The New Mexico Department of Transportation’s 2025 report highlights the precarious position:
- State Road Fund revenues are expected to decline 13% by 2050 (in nominal dollars)
- Real State Road Fund recurring revenue is expected to shrink 50% by 2050 (adjusted for inflation)
- 5.5% average annual growth rate in construction costs outpaces revenue growth
- The transition to fuel-efficient and electric vehicles will further erode gas tax revenues
As NMDOT Secretary Ricky Serna testified: “There is no magic bullet.” The state needs a combination of funding options to address the $5.6 billion backlog.
What Would Actually Help?
Transportation advocates and economists suggest alternatives that would provide real relief without sacrificing infrastructure:
- Targeted assistance for low-income drivers: Direct rebates or transit subsidies that don’t erode the HTF
- Accelerated infrastructure investment: Creating jobs while improving long-term economic efficiency
- Strategic Petroleum Reserve releases: Addressing the supply shock directly rather than defunding roads
- Windfall profits taxes on oil companies: Capturing some of the $2,967-per-second in profits to offset consumer costs
- Accelerated transition to electric vehicles: Reducing long-term exposure to oil price volatility
Series Conclusion: The Path Forward
Over these five parts, we’ve explored how the global oil crisis functions as a hidden tax on New Mexico families:
- Part 1 showed households choosing between gas and groceries
- Part 2 revealed seniors rationing medication and breweries facing bankruptcy
- Part 3 exposed how oil profits flow to Wall Street while costs stay local
- Part 4 examined the paradox of funding a post-oil future with oil money
- Part 5 demonstrates why gas tax holidays make the infrastructure problem worse
The common thread is clear: short-term fixes create long-term vulnerabilities. Whether it’s gas tax holidays, boom-bust budget cycles, or delayed energy transition, kicking the can down the road costs more in the end.
For New Mexico, the path forward requires more than waiting for oil prices to drop. It demands:
- Building resilient local food systems
- Protecting healthcare access for seniors
- Supporting small businesses facing supply chain shocks
- Ensuring extraction wealth actually benefits the communities bearing its costs
- Investing in infrastructure that can support economic diversification
- Accelerating the energy transition while protecting workers
Because when the next crisis comes—and there will be a next crisis—those investments in resilience will be the difference between weathering the storm and being swept away by it.
What You Can Do
- Oppose gas tax holidays: Contact your representatives and tell them to invest in infrastructure instead of defunding roads
- Support targeted relief: Advocate for direct assistance to low-income families rather than blanket tax cuts
- Demand infrastructure investment: Push for accelerated road and bridge repairs that create jobs and improve safety
- Share this series: Help others understand the full scope of the crisis and the policies that would actually help
- Stay engaged: Follow this issue beyond the headlines—real solutions require sustained pressure
Bottom Line: A gas tax holiday might save a family $15-20 on a tank of gas today. But it will cost them $2,074 per year in vehicle repairs, safety risks, and congestion delays from deteriorating roads. It will cost their community millions in lost federal matching funds. And it will cost their children a transportation system that can’t support economic growth. As one transportation advocate put it: “If your house has a leaky roof, you fix that before remodeling your kitchen.” The federal transportation program, and New Mexico’s, should do the same.