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Do Roads Payfor Themselves?

Setting the Record Straight

on Transportation Funding



Do Roads Payfor Themselves?

Setting the Record Straight onTransportation Funding

U.S. PIRG Education Fund

Tony Dutzik and Benjamin DavisFrontier Group

Phineas Baxandall, Ph.D.U.S. PIRG Education Fund

January 2011



Acknowledgments

The authors thank Robert Puentes, senior ellow with the Brookings Inst itution’s Metro-politan Policy Program, and Nick Donohue, policy director o Transportation or America,or their thoughtul review o this report. Thanks also to Elizabeth Ridlington and SusanRakov o Frontier Group or their editorial support.

U.S. PIRG Education Fund thanks the Rockeeller Foundation and the Surdna Foundationor making this report possible.

The authors bear responsibility or any actual errors. The recommendations are those o U.S. PIRG Education Fund. The views expressed in this report are those o the authorsand do not necessarily reect the views o our unders or those who provided review.

Copyright 2011 U.S. PIRG Education Fund

With public debate around important issues oten dominated by special interests pursuingtheir own narrow agendas, U.S. PIRG Education Fund oers an independent voice that works on behal o the public interest. U.S. PIRG Education Fund, a 501(c)(3) organiza-tion, works to protect consumers and promote good government. We investigate problems,crat solutions, educate the public, and oer Americans meaningul opportunities or civicparticipation. For more inormation about U.S.PIRG Education Fund or or additionalcopies o this report, please visit www.uspirg.org/edund.

Frontier Group conducts independent research and policy analysis to support a cleaner,

healthier and more democratic society. Our mission is to inject accurate inormation andcompelling ideas into public policy debates at the local, state and ederal levels. For moreinormation about Frontier Group, please visit www.rontiergroup.org.

Cover illustration: geopaul, iStockphoto.comDesign and layout: Harriet Eckstein Graphic Design



Table of Contents

Executive Summary 1

Introduction 4

The Gasoline Tax: Not a User Fee 6What Is a User Fee? And Who Is a User? 6Are Gas Taxes For “Something Extra”? 8

Origins of the Gas Tax: Sorting Historical Fact from Fiction 11

Highways Don’t Pay For Themselves 15Highways Have Not Historically Paid for Themselves 16

Highways Pay for Themselves Less than Ever Today 17Driving Doesn’t Pay its Full Costs 18Will Highways Pay for Themselves in the Future? 20

A Useful Fiction 24

A Smarter Way to Pay for Transportation 28Choosing What to Build 28Deciding How to Pay for Transportation 29Gasoline Taxes Shouldn’t Be Dedicated to Roads 31

Conclusion 32

Notes 34





Executive Summary 1

Executive Summary

Highway advocates oten claim thatroads “pay or themselves,” withgasoline taxes and other charges

to motorists covering—or nearly cover-ing—the ull cost o highway constructionand maintenance.

They are wrong.Highways do not—and, except or brie

periods in our nation’s history—never havepaid or themselves through the taxes that

highway advocates label “user ees.” Yethighway advocates continue to suggest they do in an attempt to secure preerential ac-cess to scarce public resources and to shapehow those resources are spent.

To have a meaningul national debateover transportation policy—particularly ata time o tight public budgets—it is impor-tant to get past the myths and address thereal, difcult choices America must makeor the 21st century.

Gasoline taxes aren’t “user ees.”Highway advocates oten describe gaso-

line taxes as “user ees” in order to arguethat those unds should be used only onhighways. Yet, gasoline taxes are not userees in any meaningul sense o the term.

• “Fees” are not connected to “use” – Theamount o money a particular driverpays in gasoline taxes bears littlerelationship to his or her use o roadsunded by gas taxes—unlike othertrue user ees such as admissionees or state parks or turnpike tolls.Drivers on local streets and roads, orexample, pay gasoline taxes or themiles they drive on those roads, even

though those taxes are typically usedto pay or state and ederal highways.Eorts to ensure that residents o agiven area “get back” what they pay in gasoline taxes—such as the ederalequity bonus program—actually per-petuate wasteul pork-barrel spendingsince they allocate money with noconsideration o need or the beneftsthose investments would deliver tosociety.

• State gas taxes are oten not entirely“extra” ees – Most states exemptgasoline rom the state sales tax. Thesubstitution o the gasoline tax or thesales tax diverts much o the money that would have gone into a state’s



2 Do Roads Pay for Themselves?

general und to a und used oten orthe exclusive beneft o drivers. Insome states, such as New Jersey, thegasoline tax is at times lower thanthe corresponding sales tax wouldbe, meaning that drivers get a net tax

subsidy that encourages the purchaseo gasoline relative to other goods.

• Federal gas taxes have typically not beendevoted exclusively to highways – Theederal gas tax began its lie as adefcit-fghting measure under Presi-dent Herbert Hoover decades beorethe Interstate Highway System. Only during a brie 17-year period begin-ning in 1956 did Congress temporarily dedicate gas tax revenues to constructthe Interstate network, a projectcompleted in the 1990s. Since 1973,the gasoline tax has been used to unda variety o important transportationpriorities and has periodically beenused to reduce the ederal defcit.

• Many states use gas tax revenue or avariety o purposes – While many stateshave historically dedicated their ownstate gasoline taxes to highways, that

decision has not been universal. Ac-cording to Federal Highway Adminis-tration data, roughly 20 cents o every dollar collected in state gas taxes,motor vehicle ees or tolls nationwideis used or public transportation andother governmental purposes. Many o the states that do use gasoline taxessolely or highways do so becausethey remain bound by constitutionalearmarks o gasoline taxes imposed asmuch as three-quarters o a century

ago, regardless o whether those deci-sions still make sense today.

Highways don’t pay or themselves.

• Since 1947, the amount o money spent on highways, roads and streets

has exceeded the amount raisedthrough gasoline taxes and otherso-called “user ees” by $600 billion(2005 dollars), representing a massivetranser o general government undsto highways.

• Highways “pay or themselves” lesstoday than ever. Currently, highway “user ees” pay only about hal thecost o building and maintaining thenation’s network o highways, roadsand streets.

• These fgures ail to include themany costs imposed by highway construction on non-users o thesystem, including damage to the environment and public health and en-couragement o sprawling orms o development that impose major costson the environment and governmentfnances.

• New or expanded highways are evenless likely to pay or themselves inthe uture as changing demographicconditions and consumer choices limitthe growth in vehicle travel and uel

use that would otherwise provide therevenue or a major program o highway expansion.

Highway advocates use the “user ees/highways pay or themselves” myth in an eort to secure access to scarcegovernment revenue or their desiredpublic policy ends—distorting trans-portation decision-making.

• Highway advocates oten argue that

the act that highways come with theirown built-in source o revenue in theorm o gasoline taxes make them afnancially conservative option relativeto other transportation investments,but they typically ail to document whether the new or expanded roads



Executive Summary 3

they propose will raise enough rev-enue to pay or their costs.

• Highway advocates oten use und-ing myths to make public transit andother orms o transportation appear

relatively more expensive—divertingattention rom the ull accounting o costs and benefts that should be thebasis o sound transportation decision-making.

To make the right choices or Amer-ica’s transportation uture, the na-tion should take a smart approach totransportation investments, one that

weighs the ull costs and benefts o those investments and then allocates

the costs o those investments airly across society.




There’s nothing as powerul as a goodstory.For thousands o years, the world’s great

philosophers and spiritual teachers haveused parables or allegories to get theirmessage across. And or hundreds o years,parents have used airy tales to instill morallessons in their children.

For decades, advocates o a highway-cen-tered transportation system have told their

own powerul and compelling story. It isn’tas timeless as the stories o the Old Testa-ment or as entertaining as the BrothersGrimm, but it has been extremely eectiveat shaping how American decision-makersthink about transportation policy.

Let’s call it the Great Myth o Highway Finance.

The Great Myth begins, as so many myths do, with an arduous journey—inthis case, then-Lieutenant Colonel DwightD. Eisenhower’s 62-day cross-country trip

with a military convoy along our nation’srutted roads during the summer o 1919.Conditions like those aced by Eisenhower were all too amiliar to the small but grow-ing number o drivers, who clamored orpublic investment in better roads.

But how to pay or them? In the same

year that Eisenhower made his journey,the state o Oregon hit upon an innovativemethod or raising money or the expensivetask o improving the state’s roads—a taxon gasoline, the revenues o which wereexclusively dedicated to highway improve-ments.

As the years went on and the automobilebecame increasingly popular, more statesollowed Oregon’s lead. And in 1956, under

the leadership o President Eisenhower,the ederal government directed the rev-enues rom the ederal gasoline tax to raisemoney or the largest public works projectin human history: the Interstate Highway System.

In these good old times, the InterstateHighway System brought extraordinary prosperity, mobility and reedom to theland. Moreover, according to the Great Myth, it was paid or by those who usedit—without meaningul subsidies rom

general taxpayers. The highways paid orthemselves! And those who chose not todrive were supposedly none the worse o. According to the Great Myth, drivers notonly endured but actually embraced 1the gastax since they knew they were paying orbetter roads.

Introduction



Introduction 5

Every airy tale needs a villain. Alongthe way, the story goes, politicians beganto view the gas tax as a pot o money thatcould be used or “politically motivated”2 projects (unlike highways, which tran-scended politics). The wicked politicians

began to “divert” money rom the gasolinetax to other purposes—public transit, bikepaths, even public education. As a result,the public that had once been so willing topay the gasoline tax as a user ee or roadsnow lost aith in its appropriate use. Andso the gas tax became one o the least-likedorms o taxation and that is why the na-tion now fnds itsel without the resourcesneeded to fx its aging roads, with littleprospect o raising the gas tax to pay ornew improvements.

Adherents o the Great Myth argue or areturn to the good old days, when gasolinetaxes were only used on highways, and that was that.

But like all myths, the Great Myth o Highway Finance relies as much on fctionas act. I it were a movie, it might best bedescribed as “inspired by a true story.”

That’s because even during the so-calledgood old days gasoline taxes weren’t alwaysused exclusively or roads, they have almost

always ailed to ully pay the cost o highways, and non-drivers have always borneadditional costs rom highways in the orm

o disrupted neighborhoods, accidents, anda polluted environment.

Correcting these myths might seem tobe merely an historical exercise—and inan ideal world, it would be. But the Great Myth carries with it a set o alse presump-

tions and the misreadings can severely distort transportation decision-making.

In a sensible world, America wouldinvest in transportation projects thatdeliver the greatest benefts to the popu-lation, and pay or those investments in ways that allocate the costs airly acrosssociety—taking into account the many ways that transportation investments canbeneft or harm individuals and businesses.In the world o the Great Myth, however,each transportation mode is presumed tosurvive only on the money its users canprovide—and all o the money its usersprovide should go to that transportationmode, regardless o where the greatestbenefts can be achieved.

In this paper, we aim to dismantle theGreat Myth once and or all … with thehope that by doing so, America can get on with the critical debate about what typeso transportation inrastructure to buildand how to pay or them, ree rom alse

assumptions and the tired slogans o thepast.




Highway advocates oten describegasoline taxes as “user ees”—a termthat suggests direct ees or service

should be used specifcally or highways.But gasoline taxes are not “user ees” inany meaningul sense. The amount o money that drivers pay in gasoline taxesis only loosely related to their use o thehighways supported by these taxes. More-over, in most states, state gas taxes are not

a wholly additional ee paid by drivers, butrather supplant the state sales tax or uelpurchases—thus diverting money that would have gone into states’ general undsinto separate unds that oten exclusively beneft drivers.

What Is a User Fee?

And Who Is a User? There are many competing academic def-nitions o a user ee. One element, however,that clearly separates user ees rom otherkinds o government levies is the act thatusers o a given government service or a-cility pay them, and non-users don’t.

User ees are oten levied or admissionto government acilities or the use o gov-ernment resources—or example, entranceees to state parks or ees or grazing onederal land. User ees are also commonly applied or licensing or permitting, such asthe issuance o a marriage license or pro-cessing o a passport application. Finally,user ees may be levied on industries toderay the cost o government regulation,

such as ees or the testing and approval o prescription drugs or or inspection o meatand poultry processing acilities.

In most o these cases, it is crystal clear who the “user” o the given governmentservice is—the visitor to the state park,the applicant or a permit or license, or theregulated party. In some cases, the user isnot the only benefciary o the service—orexample, the public benefts rom eect ivetesting o prescription drugs—and themethod o setting user ees is designed not

necessarily to maximize revenue, but ratherto maximize the benefts to the public.3

When it comes to highways, though, who, exactly, is a “user”?

I you consider anyone who drives on ahighway anywhere in the country a “user,”then it might be air to call gasoline taxes

The Gasoline Tax: Not a User Fee



The Gasoline Tax: Not a User Fee 7

user ees. Everyone who drives uses a road,and everyone who drives on a road4 pays thegas tax. It sounds simple enough.

Except or this: most o the money thatis spent on local roads and streets—whichaccount or the majority o public road

lane-miles5 and about 13 percent o ve-hicle travel—comes not rom “user ees”but rom other taxes, oten local property taxes. People who drive on these streets androads are “users” in the sense that they pay ederal and state gasoline taxes or theirdriving on those roads, but not when itcomes to reaping the benefts.6 In short,they pay twice or their use o local roads, while users o other highways pay less.

Moreover, drivers who use vehicles with better uel economy pay less into thesystem than those who drive gas guzzlers,since the collection system or gasolinetaxes is based on uel sales, not mileagedriven. There are very good reasons orsetting the system up this way—a gaso-line tax is relatively inexpensive to collectand has the side beneft o encouragingconservation. But it is yet another way in which the ees charged to drivers throughgasoline taxes are unrelated to their use o the system.

The “user ee” argument breaks downin a more undamental way, however. Theunderstanding implied in describing gaso-line taxes as user ees is that the money anindividual motorist pays in gasoline taxes will come back to pay or the roads he orshe uses. In practice, however, this hasnever been the case—the Interstate High- way System, or example, was built largely using gasoline taxes charged to drivers onother roads.

Moreover, the direct linkage between

user ees and user benefts that is a hallmark o true “user ees” is an almost impossiblestandard to meet with regard to highways,or the simple reason that some transporta-tion investments are inherently more costly than others or their beneits are morediuse. Adding a lane to a crowded urban

Interstate, or reconfguring that highway tohave less impact on the surrounding com-munity, may be a reasonable, i expensive,investment, even i the amount o money generated rom gas taxes paid by motor-ists who use that highway cannot possibly

cover the cost.Over the years, however, some public

ofcials have tried to attain a direct linkageby aligning the amount residents o a givenarea pay in gasoline taxes with the amountthey “get back” in road services. The equity bonus program at the ederal level, orexample, ensures that states each get back at least a 92 percent share o the money their drivers pay into the highway accounto the Highway Trust Fund.7 Some statestake this impulse even urther by dividinghighway spending proportionally withingeographic districts o their states.

In their eorts to create a more accuratelink between user ees and user benefts,however, these public ofcials have cre-ated another problem: wasteul allocationo public resources. There is a term ordoling out government money with littleconsideration o the benefts to the public:pork-barrel spending. Treating gasolinetaxes as user ees encourages unnecessary

spending in some areas, while starvingother areas o needed resources or projectsthat could deliver ar greater benefts to so-ciety as a whole. This includes the prospecto spending money to build new highwaysin one region while ignoring the need torebuild or repair decaying inrastructurein another area.8

In short, rom the perspective o theindividual motorist, there is not a clearconnection between the “ees” he or shepays in gasoline taxes and his or her use o

the gas-tax supported highway system. Andthere is very little connection between theamount o money a person pays in gasolinetaxes and the resulting impacts on the roadsthey use. Because the relationship betweenthe taxes drivers pay and their use o theacilities that beneft rom those ees is so




tenuous, intellectually honest observers o-ten have a hard time calling gasoline taxes“user ees.” In a recent study o governmentuser ee policies, or example, the ederalGovernment Accountability Ofce (GAO)reerred to gasoline taxes as “excise taxes

with a ‘user pays’ element.”9

Are Gas Taxes For“Something Extra”? That ascinating GAO study also statesthat: “In general, a user ee is related tosome voluntary transaction or request orgovernment goods or services above and

beyond what is normally available to thepublic.”10 Visitors to a park might enterree, or instance, but pay extra to enterthe zoo. In the earlier examples, personsseeking to get married, win Food andDrug Administration approval or a new

prescription drug, graze their cattle ongovernment land, or camp in a nationalpark obtain special services rom the gov-ernment. In most cases, “users” pay a eeto the government or these services that isover and above their normal tax burden.11 With a true “user ee,” in other words,users pay something extra to get somethingextra.

But are gasoline taxes really an extrapayment that drivers make or the extra

Figure 1. States that Dedicate Gas Tax Revenue to Highways and Those That ExemptGasoline Sales from Sales Taxes13




State

Alabama $0.09 $0.09

Arizona $0.13 $0.05

Arkansas $0.13 $0.09

Colorado $0.06 $0.16

Connecticut $0.13 $0.29

Idaho $0.14 $0.11

Iowa $0.13 $0.08

Kansas $0.11 $0.13

Kentucky $0.14 $0.08

Louisiana $0.09 $0.11

Maine $0.12 $0.18

Maryland $0.13 $0.10

Massachusetts $0.14 $0.07

Minnesota $0.15 $0.12

Mississippi $0.15 $0.03

Missouri $0.09 $0.08

Nebraska $0.12 $0.15

Nevada $0.16 $0.07

NewJersey $0.15 ($0.01)

NewMexico $0.11 $0.06

NorthCarolina $0.12 $0.20

NorthDakota $0.12 $0.11

Ohio $0.12 $0.16

Oklahoma $0.10 $0.06

Pennsylvania $0.13 $0.19

RhodeIsland $0.16 $0.16

SouthCarolina $0.13 $0.03

SouthDakota $0.09 $0.13

Tennessee $0.15 $0.05

Texas $0.14 $0.06

Utah $0.11 $0.13

Vermont $0.14 $0.05

Virginia $0.11 $0.07

Washington $0.15 $0.22

WestVirginia $0.14 $0.19

Wisconsin $0.11 $0.20

Wyoming $0.09 $0.04

Table 1. Value of the Sales Tax Exemption on Gasoline vs. “Extra” Amount Driv-ers Pay in Gasoline Taxes Over and Above the Amount Exempted from Sales Tax14 (Table Includes States that Both Assess a State Sales Tax and Exempt Gasoline fromIt. Italicized States Dedicate Gas Tax to Highways)

Value of the sales tax

exemption on gasoline,per gallon.

“Extra” amount paid by driv-ers per gallon over and above

what they would have paid ifthe sales tax were in force.




privilege o using highways? To answer that question, one needs to

look at taxes together. I people who pay more in user ees simultaneously get abreak on another tax, they can hardly bedescribed as paying “extra” or the addi-

tional privileges they receive. Yet, that is exactly the situation in many

states that charge drivers gasoline taxes butsimultaneously exempt the sale o gasolinerom the state sales tax. In 37 states andthe District o Columbia, drivers do notpay state sales taxes on their purchases o gasoline.12 Instead, they pay a gasoline tax which, in 24 o these states, is statutorily or constitutionally designated to be usedon highways.

In other words, by dedicating money raised through the gasoline tax to highways, many states are actually divertingmoney that could otherwise ow into the

state’s general und to instead be used orthe exclusive beneft o drivers. (See Table1.) In most o these states, the amount o money that is diverted rom the generalund (as a result o the sales tax exemptionon gasoline) exceeds the “extra” amount

that drivers pay over and above the amountthey would pay under a sales tax.

Seen in this context, the idea o divert-ing sales tax revenue to improve highwaysbecause these taxes were paid during thecourse o using highways is an odd one. It would be akin to devoting the tax revenuerom the sale o televisions solely to pay or improved network programming, orusing revenues rom the sale o clothing toprovide scholarships or budding ashiondesigners.

Two important points arise rom thisdiscussion. First, the notion that driverspay “extra” into the system through state

What About Tolls?

There are, o course, real “user ees” assessed on some American roads: tolls. Un-like gasoline taxes, tolls are true user ees—users pay them, non-users don’t, and

users generally pay in proportion to the amount o the service they consume.17

The problem with tolling, however, is that only a small portion o the nation’shighways could truly “pay or themselves” in this way. In other words, i the true costo building, say, Boston’s Big Dig or a rural highway in Idaho were to be charged toits users, the tolls would be so high that they would deter some or all drivers romusing them—deeating the purpose o building the highway in the frst place.

The recent track record o privately fnanced toll roads in the United States— which includes the fnancial struggles o roads such as Caliornia’s SR-91 expresslanes and Texas’ Camino Columbia toll road—underscores just how i y a proposi-tion it can be to sel-fnance modern highways with toll revenue—especially sincethe private companies have relatively high capital costs and must skim o a proftshare to investors.18

The inadequacy o tolling or building a truly national system o highways wasrecognized by the architects o the Interstate Highway System. A 1938 ederal reportound that the amount o expected long-distance trafc was insufcient to supporttoll highways.19 In the 1950s, experts estimated that no more than 9,000 miles o highway (compared with the more than 3 million miles o highway in existence atthat time) could support themselves with tolls.20




gasoline taxes is vastly overstated. Second,the shuing that allows drivers to shita part o their tax burden to a und thatlargely benefts themselves is somethingextremely rare in our tax system. It is anexception—not the realization o some

universally accepted principle o publicfnance.15

To be air, in a ew states drivers pay both the gasoline tax and the sales tax, anddrivers generally wind up paying somewhatmore in gasoline excise taxes than they would i the state sales tax were imposedon gasoline instead. But even this isn’tuniversally true. Had New Jersey, or ex-ample, charged its 7 percent state sales taxon motor gasoline purchases in June 2010,it would have generated approximately 15.4cents per gallon in general revenue orthe state, compared to the 14.5 cents pergallon the state actually took in throughits gasoline tax.16 In other words, the taxsystem in New Jersey actually encourages the consumption o gasoline vis-à-vis otherconsumer goods by charging a lower taxrate or gasoline sales. I gas prices con-tinue to rise aster than ination whilegas taxes lag behind ination, then thisnet tax subsidy or gasoline will become

more common.

Origins of the Gas Tax:Sorting Historical Factfrom FictionEven i gasoline taxes are only loosely re-lated to drivers’ use o the gas tax-undedhighway system and even though the sales

tax exemptions oten divert money romgeneral unds into unds or the benefto drivers, highway advocates nonethelessoten portray the dedication o gas tax rev-enues to highways as part o an historicalgrand bargain made between governmentand highway users.

To some highway advocates, the grandbargain through which highway usersagreed to pay gasoline taxes in exchange orusing those unds solely to improve roadstakes on the aura o great societal compactslike the Magna Carta or the Declaration

o Independence. But is it true? Was therea “grand bargain” or ounding principleor uture generations, in which citizensagreed to taxation o gasoline only i therevenues were spent on roads?

The answers to these questions are a lit-tle dierent depending on which gasolinetax you are talking about. I one is talkingabout state gasoline taxes the answer inmany states is “sort o.” For the ederal gastax, the answer is a clear “no.” Just askingthis question, however, raises another: why should any bargain about highway fnancemade as much as 80 years ago dictate how America invests in transportation under very dierent circumstances today?

The Federal Gas Tax

Highway advocates oten begin their his-tory o the ederal gasoline tax in 1956. That is the year that Congress enacted theFederal Aid Highway Act o 1956, whichcreated the Interstate Highway System, and

the Highway Revenue Act o 1956, whichunded it.

Robert Poole and Adrian Moore o theReason Foundation, or example, advocatethat the ederal gasoline tax should bedevoted to the Interstate system “as wasintended when the ederal gas tax wascreated.”21

There is just one problem with thishistory o the ederal gas tax—it starts aquarter-century too late.

It was President Herbert Hoover who,

in 1932, proposed a ederal gas tax—notto raise money or roads, but to pay downthe ederal defcit. For the next 24 years,ederal gasoline taxes were deposited intothe general und. According to the FederalHighway Administration, “Although taxeson motor uels and automobile products




were in existence, they were not linked tounding or highways. At the time, fnanc-ing or the highway program and revenuesrom automobile and related products wereincluded under the public fnance principleo ‘spend where you must, and get themoney where you can.’”22

The 1956 laws diverted the two-cent gastax that had previously unded general gov-ernment operations to the new Highway Trust Fund and added an additional penny that was also deposited in the und. Suchbegan an exceptional 17-year period dur-ing which revenues were used exclusively

or highways, a period that lasted until1973, when states were frst permitted toreallocate money rom discontinued urbanhighway projects to transit.

The highways-only era was a mere blipin the 78-year history o the ederal gas tax. The last two major increases in the ederal

gasoline tax—in 1990 and 1993—werededicated in whole or in part toward def-cit reduction, the original purpose o theederal gasoline tax when it was adoptedin 1932.23

There are good reasons to believe thatCongress, in passing the 1956 law, did not

Did Congress Establish a Gas Tax/User Fee “Policy”?

Highway advocates sometimes point to the text o a 1934 law to claim that the U.S.Congress intended or gasoline taxes to be strictly devoted to highways. The text

o the Hayden-Cartwright Act seems plain enough, stating: “Since it is unair andunjust to tax motor vehicle transportation unless the proceeds o such taxation areapplied to the construction, improvement or maintenance o highways, ater June 30,1935, Federal aid or highway construction shall be extended only to those States thatuse at least the amounts now provided by law . . . or the construction, improvementand maintenance o highways and administrative expenses in connection therewith. . . and or no other purpose.”25

The American Highway Users Alliance—a highway advocacy trade group—claimsthat the law “declared congressional policy against diversion o highway unds ornon-highway purposes.”26 However, this distorts the historical record. It is unlikely that Congress meant or the law to establish this “policy” or two reasons:

First, establishing a policy against “diversion” o gas tax revenue was not theHayden-Cartwright Act’s primary purpose. Rather, it was to und a massive ed-eral investment in highways as a response to the Great Depression. Policy-makersunderstandably wanted to ensure that states would not meet this increase in ederalinvestment with reductions in highway spending rom their own revenue sources.Hence the requirement that states spend the amounts “now provided by law” onhighways—allowing states that were already using gasoline taxes or non-highway purposes to continue to do so without penalty.27 Thus, the measure was not meantto change how new revenues were allocated; it was intended to prevent a reductionin existing state spending in the ace o those new revenues.

Second, the ederal government was, at the very moment the Hayden-Cartwright Act was enacted , using taxes on gasoline or non-highway purposes, namely, reducing the

ederal defcit. Congress could hardly have intended the law as a general statemento principle when it was in the midst o violating that very principle itsel.




intend to link the gas tax and highway ex-penditures on a permanent basis.

Indeed, the 1956 Highway Revenue Act dedicated the ederal gasoline tax tothe Highway Trust Fund explicitly only until 1972, by which time the Interstate

Highway System would presumably becomplete. Beyond that point, the 1956 lawlet the gasoline tax to revert to one-and-a-hal cents and again be deposited againinto the general und.24

In short, unding roads was not the“original purpose” o the ederal gas tax when it was created in 1932. Nor did Con-gress ever promise that all ederal gasolinetaxes would orever ater be dedicated toroads. Nor has dedicating ederal gas taxesexclusively to roads even been the histori-cal norm.

State Gas Taxes

Where highway advocates stand on some- what sturdier historical ground is in theassertion that state gasoline taxes have beenpromised to highways. Indeed, the need toraise money or highway expansion was thestated rationale or the creation o moststate gasoline taxes.

In 1919, Oregon adopted the frst stategasoline tax, which was legislatively dedi-cated to highway improvements.28 By thetime the ederal gasoline tax was adoptedin 1932, every state had adopted a gasolinetax.29

Many states ollowed Oregon’s exampleand adopted statutory or constitutionallimitations requiring gas tax revenue tobe spent on highways—as o 2003, 22states had constitutional provisions thatearmark vehicle ees to highway construc-

tion, while eight states had similar statutory earmarks.30 (See Figure 1 on page 8.)

Even so, there remain many statesthat do not promise gas tax revenue tohighways. In some o these states— suchas Maryland, New York and Wisconsin—gasoline taxes can be used or a variety o

transportation purposes. In other states,gasoline tax revenue is deposited into thegeneral und. Texas even dedicates part o its gas tax to a non-transportation purpose:public education.31

The larger question with regard to

these dedications o tax revenue is whetherdecisions made by legislators in a very di-erent era should still hold sway today. Inmany states, constitutional earmarkingo gasoline tax revenues dates back morethan three-quarters o a century—a con-stitutional limitation was adopted in Min-nesota in 1923, in Colorado in 1934, in NewHampshire in 1938, and in Washingtonstate in 1944, or example.32

These decisions to dedicate gas taxrevenues to highways came at a time when America was a undamentally dierentcountry. Between 1910 and 2000, the shareo Americans living in metropolitan areasballooned rom 28 percent to 80 percent.33 As late as the mid-1960s, America still pro-duced the majority o our oil domestically and dependence on oreign oil was not amajor worry.34 As late as the post-War years,most streetcar and other urban mass transitsystems remained privately owned. Mostimportantly, America had not yet invested

trillions o dollars in its highways, at theexpense o other, long-neglected modes o transportation.

In rapidly urbanizing or suburbanizingstates, the existence o these difcult-to-undo constitutional provisions straitjacketsgovernment as it considers the most e-ective means o providing transportationor its citizens. In New Hampshire, orexample, a 2004 court decision preventedthe state rom using gasoline tax reve-nue—which is constitutionally dedicated to

highways—to extend a Boston-area com-muter rail line to the southern portion o the state, a move that would have benefteddrivers by reducing congestion on a grid-locked highway used largely by commutersto Boston.35 The state o Washington nowaces a lawsuit seeking to prevent the state




rom building a light rail line in the mediano Interstate 90, despite the act that theinterstate was specifcally designed to allowor uture light rail, no state gas tax money is being used or the rail line, and the lightrail project was approved by the region’s

voters. The case hinges on whether the useo a small share o state gas tax revenue orthe original construction o Interstate 90decades ago precludes the construction o light rail using other unds now.36

These restraints on lawmakers’ ability to dedicate tax revenue to the most im-portant public priorities—or even, in the Washington case, to build transit systemsusing other sources o revenue—are oten

opposed by public policy experts. The Na-tional Conerence o State Legislatures, orexample, rowns on earmarking unds orparticular uses, noting that it “oten impos-es rigidities into the budgeting system thatdo not permit exible allocations o general

revenue among competing uses.”37 In truth, negotiation with regard to the

allocation o societal resources and respon-sibilities is an ongoing process. While someprinciples are eternal—including reedomo speech, reedom o religion, and equalrights under the law—the dedication o gas tax revenue to highways isn’t one o them.



Highways Don’t Pay for Themselves 15

“By any measure, highways areone o the most successul govern-ment programs in America. They are heavily used or very valuablepurposes and they pretty muchpay or themselves.”38

– American Dream Coalition

“Because most o the costs o highways are paid out o gas taxes,

subsidies to driving are very lowand mainly by local governmentsor local roads.”39

– Randal O’Toole,Cato Institute

“[H]ighways and aviation … areessentially sel-supporting. You’retalking about using general taxrevenue to create a new mode(high-speed rail) to compete withuser-ee-supported modes whose

inrastructure is 100 percent paidor by user ees.”

– Robert Poole,Reason Institute, on proposed

ederal high-speed railinvestments40

The notion that highways “pay orthemselves” through gas taxes and vehiclecharges is a key part o the transportationunding mythology crated by highway advocates. Most intellectually honest advocates o this point o view add caveatsto this conclusion—highways, they say,“mostly,” “almost always” or “pretty much”pay or themselves. But the implicationso the argument are the same: highways

come with their own source o revenue thatderays most, i not all, o the cost o theirconstruction and continued operations.

Highways, however, have never ully “paid or themselves” through user revenueand are more dependent today on subsidiesrom general taxpayers than at any time inrecent history. The ees drivers pay alsodon’t even begin to pay or the many coststhat highways impose on non-drivers, andare unlikely to be sufcient in the utureto uel the increase in highway capacity

avored by highway advocates.

Highways Don’t Pay For Themselves




Highways Have NotHistorically “Paid forThemselves”Gasoline taxes and other charges on drivers

have not come anywhere close to paying orthe cost o constructing and maintaining America’s roads. And, with a ew historicalexceptions, they never have.

The case most oten cited o highways“paying or themselves” is the InterstateHighway System. Robert Poole o theReason Institute, or example, states that“the Interstate system was paid or 100percent by its users.”41 The constructiono the Interstate system was more or lessentirely paid or by ederal gasoline taxesand vehicle charges. But it was not—asPoole asserts—paid or by users o theInterstate system, which, ater all, did not

yet exist when the gas taxes that paid orits construction were created. Instead,the Interstate system was paid or largely by drivers using other roads under theassumption that they (or perhaps theirchildren) would someday beneft rom the

uture Interstate system. The Interstate Highway System cur-

rently constitutes only 2.5 percent o thenation’s total roadway lane-miles.42 Asa result, touting the Interstate highway system as exempliying the larger systemis highly misleading. What happens i welook at the system as a whole?

I one compares all spending on highways by all levels o government with totalrevenue rom so-called user ees, it quickly becomes apparent that America’s highwaysdo not now—and, except or brie periods,never have—“paid or themselves” in theaggregate. Since 1947, America’s spending

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Figure 2. Cumulative Net Difference Between Spending on Highways and Highway“User Revenues”44




on highways at all levels (ederal, stateand local) has exceeded the amount o

money collected in gasoline and vehicletaxes and tolls by more than $600 billion(2005 dollars).43

Historically, much o this net subsidy o highways has come in the orm o localspending on streets and secondary roads, which are largely paid or rom property tax or general tax revenue.45 In 2008, localgovernments spent more than $31 billionon highways raised rom property taxes,assessments, and general und revenues.46

There have been ew studies o whether

individual highways “pay or themselves.” A 2008 study conducted or the state o Texas evaluated seven sample highways,fnding that none o them would likely pay or their ull costs, with the percentage o costs paid or by user revenue ranging rom13 percent to 93 percent.47

Highways Pay forThemselves Less thanEver TodayIn recent years, state and ederal govern-ments have diverted even more resourcesrom general orms o taxation towardroadways. In 2007, so-called “user ees”paid or a smaller share o the cost o highways than at any time since the launch o the Highway Trust Fund in 1956. Accord-ing to the Pew Charitable Trusts’ Subsi-dyScope project, user ees paid or only 51percent o highway costs, down 10 percent

over the course o a single decade.48 Even i all “user ee” revenues were

devoted to highways, they would still pay less than two-thirds o the nation’s highway bill.49

General und subsidies o highway spending have become even larger in the

Figure 3. Percentage of Highway Spending from Various Sources, All Levels ofGovernment53

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last ew years. The SubsidyScope analysis was conducted with the most current data, which at the time extended to 2007. In2009 the ederal Highway Trust Fund waspoised to go into defcit or the frst time inits history—triggering a series o ongoing

bailouts rom the general und. To ad-dress this looming shortall, in September2008, the ederal government transerredan emergency $8 billion rom the generalund to the Highway Trust Fund.50 There were urther inusions o money rom thegeneral und o $7 billion in July 2009 and$19.5 billion in March 2010.51 In addition,the American Recovery and Reinvestment Act allocated $27 billion to highway inra-structure investment.52

The reasons or the decline in the shareo highway costs covered by gas taxes andother “user ees” are not mysterious. Theederal gasoline tax and most state gasolinetaxes are not indexed or ination, and theederal gasoline tax has not been increasedsince 1993. In 1999, ederal gasoline anddiesel taxes collected $29.8 billion or highways, and in 2008, the same taxes collected$30.6 billion or highways. 54 Adjusted orination, the yearly taxes collected between1999 and 2008 shrank 32 percent, even

though we continued to build more newroads and bridges.55 At the same time, vehicle travel—which

increased at a more or less steady rate ordecades—began to level o in the mid-2000s, and has actually declined romthe all-time peak in 2007.56 As Americansdrive ewer miles, they pay ewer gasolinetaxes, even as the number o lane-miles o highway that require maintenance remainsthe same or increases. Meanwhile, vehicleuel economy—which had been stagnant

or declining since the late 1980s—beganto increase in the late 2000s in responseto rising gasoline prices and tighter ederaluel economy requirements, reducing theamount o gasoline taxes Americans pay or every mile they travel. Vehicles sold inmodel year 2009 were the most uel-ef-

cient o any model year in U.S. history.57 In short, American drivers are paying

lower gas taxes (in terms o purchasingpower) on relatively ewer gallons o gaso-line. Whereas at one time gasoline taxesand other ees on drivers raised much o

the money needed to build and maintainhighways, these sources o revenue pres-ently barely pay or even hal o highway costs.

How high would gasoline taxes need tobe to cover the gap? A 2007 study estimatedthat “user ee” payments to governmentsall short o government expenditures re-lated to highways by the equivalent o 20to 70 cents per gallon.58 That estimate isoverly conservative because since that timegas taxes have remained stagnant and thenumber o gallons taxed has allen. Thefgure also omits the additional unpaid-orcosts that drivers impose on each other andnon-drivers.

Driving Doesn’t Pay itsFull Costs The reason the accounting o road costs

and taxes is so politically charged and con-sequential is because the issue nests withinbroader questions about air taxation. Tosome extent, judgments about whetherthe highway system or gas taxes should beexpanded hinge on whether highways are viewed as net contributors to society at cur-rent tax levels. The issue isn’t just whethertaxes and ees levied on driving cover thecosts o construction and maintenance. It’s whether the contributions paid throughhighway system cover the costs imposed

on society. The user ee/highways pay or them-selves argument is rooted in the idea thatthose who beneft rom a given govern-ment investment should be responsible orpaying or it through taxes—a ramework economists call the benefts principle o




taxation (as in “those who reap the beneftsshould pay”).

Highway advocates conclude that i drivers were paying or the ull cost o highway construction and maintenance with gasoline taxes, they would be “paying

their own way.” Nothing could be urtherrom the truth.

Indeed, or the benefts principle o taxa-tion to apply, the amount that people pay or highways (or other orms o transporta-tion inrastructure) would have to matchtheir net beneft rom the inrastructure. This would mean compensating those whoare harmed by construction and operationo the inrastructure.

Interestingly, during the 1940s (a time when the ederal gas tax was still depositedin the general und) the highway lobby argued that ederal aid to support statehighway networks should not come romuser ees, but rather rom general revenue,given the tremendous perceived nationalbeneits o those investments, even tonon-users. As the head o the NationalHighway Users Conerence (the orerun-ner to today’s American Highway Users Alliance) argued:

The Federal Government shouldpay or such aid rom sourceso general taxation, because thebenefts o that spending—to thenational deense, to interstatecommerce, to mail delivery andto the general welare—are notlimited to any special taxpayinggroup.59

The cost o building and maintaininghighways has long been recognized, there-

ore, as just one cost o driving. “Users”are not the only people who beneft or areharmed by transportation investments. There are many ways in which the decisionto build transportation inrastructure—orthe decision o an individual driver to usethat inrastructure—can impose costs or

deliver benefts to people other than us-ers. Among the other potential costs andbenefts are:

• Impacts on the efciency o othertransportation modes—or example,

the degree to which a new highway lane speeds up bus trips, or makespedestrian crossings more difcult.

• Changes in the risk o accidents,including injuries to non-drivers anddamages to property.

• Air pollution impacts, including emis-sions o pollutants that contribute tothe ormation o health-threateningsmog and soot as well as greenhousegases.

• Other environmental impacts, includ-ing water pollution rom highway runo, impacts on wildlie (habitatdisruption, road kill, etc.), and impactsto recreational enjoyment o the out-doors.

• Energy policy impacts, including theeconomic impacts o changes in ossil

uel demand as well as the nationalsecurity implications o protecting ac-cess to imported ossil uels.

• Impacts on development, recognizingthat dierent transportation invest-ments contribute to dierent develop-ment patterns. Highway constructionmight support more spread-outorms o development with higherinrastructure costs or water, sewer,electricity and ood control, as well

as impacts on community cohesion,public health and aesthetic values.

• Costs and benefts to businesses, in-cluding changes in land value and ac-cessibility, as well as the costs imposedon businesses to provide access to the




new inrastructure (such as the cost o providing parking spaces, bike racks,or shuttle buses to transit stations).

• Costs o maintenance and operationsthat will be incurred in the uture.

• Impacts on specifc sub-populations,including those who may not havedirect access to the inrastructure. Forhighways, this includes populationsthat cannot drive, including some o the elderly, the severely disabled, chil-dren, and those who cannot aord anautomobile. Inrastructure decisionscan also impact the efciency and e-ectiveness o government programsdesigned to assist these populations,such as the ability o the inrastruc-ture to provide access to jobs or tosupport the ability o the elderly toremain in amiliar surroundings asthey age.

• Impacts on private investment intransportation vehicles—e.g., the needor residents o a given community toown and maintain a private vehicle inorder to live their daily lives, and the

impact o inrastructure investmentson the wear and tear on those vehicles.

• Broader economic benefts, includingagglomeration economies, expandedaccess to jobs and markets, and tour-ism.

• Quality o lie, including the impacto the investment on the potential oractive transportation, such as walk-ing and biking, which provides health

benefts, as well as access to commu-nity institutions, aesthetic values, andother, difcult-to-quantiy benefts.

The list goes on and on. The point is that highways (as well as oth-

er orms o transportation inrastructure)

impose signifcant external costs—that is,costs to non-users—or deliver signifcantexternal benefts. These costs and beneftsare not accounted or in gas taxes or otheruser ees.

The costs o driving begin to add up

quickly. A 2009 study by the Victoria Transport Policy Institute (VTPI) es-timates that 35 percent o the cost o driving consists o external costs. VTPIestimates that the ull cost o a mile o driving—including uel, ownership andexternal costs—ranges rom 94 cents per vehicle mile or rural driving to as muchas $1.64 per mile or urban rush hour driv-ing.60 Another 2007 study, by researchersat Resources or the Future, estimatedthat the external costs imposed by driv-ing amounted to approximately $2.10 pergallon.61

We do not suggest here that uel taxesought to rise to cover the entire externalcosts o driving. What is important is that when highway advocates claim or suggestthat highways “pay or themselves,” they are not only actually wrong rom the nar-row perspective o users paying or the costo building and maintaining highways, butthey also miss a large part o the picture:

the costs imposed by drivers on others.

Will Highways Pay forThemselves in the Future?Highway advocates requently hearkenback to the experiences o yesteryear insuggesting that highways can or should

pay or themselves in the uture. Yet, the America o the early 21st century is not the America o the 1950s, and the assump-tions that led to the gasoline tax beingconsidered a stable source o income orhighway expansion at that time likely donot apply today.




The question o whether new or ex-panded highways can be expected to pay or themselves creates a Catch-22 orhighway advocates. On one hand, or a newor expanded highway to “pay or itsel,” itmust result in a signifcant overall increase

in miles driven and uel consumption.On the other hand, however, increasingthe number o miles driven on a highway undercuts the most common rationale orhighway construction: reducing conges-tion. Indeed, i a highway expansion projecttruly succeeds in reducing congestion,motorists will sit less in trafc and burn lessuel—reducing gasoline tax revenue.

Historically, however, highway expan-sion has been shown to increase the amounto driving by inducing new trips andchanging land-use patterns in ways thatlead to more driving.62 I those historicaltrends remain in orce, new or expanded

highways would pay or at least some o thecosts o their construction through newgasoline tax revenue. But those increasesin revenue would also come with substan-tial additional costs—more cars on theroad, increases in air pollution and global

warming emissions, increased congestionon other roads, and increased dependenceon ossil uels. How those costs and ben-efts would balance out or any particularproposed highway is anyone’s guess.

The problem is exacerbated when itcomes to the cost o repairing or recon-structing existing highways. As Interstatehighways reach the end o their useullives, along with countless other roadsand bridges built rom the Great Depres-sion to the post-War years, America acesa large bill or highway maintenance andreconstruction. These maintenance andrebuilding projects are unlikely to “pay

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or themselves” through gas tax revenuecreated rom increased driving—indeed,to the extent that drivers switch to otherorms o travel during lengthy construc-tion periods, they may result in decreasedrevenue, at least or a time. These mainte-

nance and rebuilding projects will come tomake a growing claim on existing sourceso gasoline tax revenue, leaving less money or expansion projects that raise additionalrevenue by increasing driving. In other words, i so-called “user ees” aren’t raisingenough revenue to pay or adequate main-tenance o these highways now—beorethe hety bill or reconstruction comesdue—they are highly unlikely to do so inthe uture.

Moreover, in recent years researchershave begun to question a central assump-tion o the “user ee” model: the belie that the number o vehicle-miles traveled(VMT) per capita will continue to risesteadily over time. A 2008 Brookings In-stitution study ound that national vehiclemiles traveled hit a plateau in 2004 andbegan a decline in 2007 that was unprec-edented since World War II.63 While VMThas bounced back slightly in recent months,it remains well below 2006 levels.64

Much o the growth in VMT over thepast hal century has been connected tothe increasing availability o cars; evidenceshows that once someone owns a car, heor she is likely to use it.66 Today, however,there are ew American households withouta car, so there are ew prospects to increase vehicle penetration. Per-capita vehicleownership hit a plateau in 2000 ater de-cades o consistent growth.67 In 2009, thenumber o motor vehicles in the UnitedStates actually dropped as more existing

vehicles were scrapped than new ones pur-chased.68 So increased vehicle ownership islikely out as a potential trigger or utureincreases in driving.

So, too, are massive increases in the driv-ing-age population. According to the U.S.Census Bureau, between 1969 and 2010,

the number o Americans between 25 and64 years o age—the period o maximumper-capita VMT—nearly doubled rom 89million to 164 million.69 However, over thenext 40 years, the number o prime driv-ing-age Americans is projected to increase

by only another 21 percent.70 Meanwhile,the population o older Americans—whodrive ewer miles per year than younger Americans—is projected to explode incoming decades, more than doubling by 2050, suggesting that stagnation in per-capita VMT is likely to continue or yearsto come.71

Finally, there are indications thattoday’s younger Americans are less likely to drive than their counterparts in earliergenerations. The percentage o teenagers with driver’s licenses—which peaked at71 percent in 1983—has since declined to56 percent in 2007.72 The proportion o vehicle-miles driven by people aged 21-30has also declined in recent years.73 Whilemany o these changes are likely due toeconomic and demographic shits, there isalso evidence that young people are seekingout less car-dependent liestyles. Demandhas increased or housing in walkablecommunities with access to transit and a

variety o amenities and the potential orshorter commutes.74 Some analysts suggestthat changing liestyles—particularly theincreased importance o digital technology in the lives o young people—make drivinglong distances less appealing. According toa recent analysis o real-estate trends by aCanadian consulting frm:

There is also growing researchthat younger generations donot relate to the automobile as

enabling “reedom.” Instead,their electronic and social mediadevices—whether a smart phone,small lap top computer, musicplayer, etc.—provide an alternatemeans or sel expression andbeing ree to do what they want.




… Younger generations seem tohave less interest in automotiveuse, making apartment living indense, walkable and transit-ori-ented urban areas a more naturalft or their liestyles.75

In short, highways have never ully “paid

or themselves” through gasoline taxes andother user ees, are doing so less than evertoday, and there is good reason to believethat they will be unable to do so in theuture, at least in the absence o a dramaticincrease in user ees that will make alterna-

tive modes o travel even more attractivethan they are today.




I gasoline taxes are not truly “user ees”and i those ees ail to pay much morethan hal the cost o highway inrastruc-

ture—never mind compensate society orthe many external costs o driving—just why do these myths continue to arise inthe transportation debate?

The myths are extremely useul to back-ers o a highway-oriented transportationsystem in the struggle to obtain a large

share o a scarce resource (tax revenue) ortheir preerred public policy ends.

The user ee myth is oten invoked tomake investments in alternative orms o transportation appear more “expensive”than investments in highways. Highway advocates oten contrast the share o costspaid by highway users with the share paidby users o other orms o transportation tomake highways appear to be a less expen-sive solution to transportation problems.

Here is the Cato Institute’s Randal

O’Toole, discussing ederal transporta-tion spending: “House TransportationCommittee Chairman James Oberstar, Minnesota Democrat, wants to increasetransit’s share o ederal surace transporta-tion unding rom 15 to nearly 30 percent.But transit riders pay only a third o the

operating costs and none o the capitalcosts o transit, while highway users pay 80to 90 percent o highway costs.”76 (emphasisadded)

And here is a report rom the ReasonInstitute: “Since transit is unable to gener-ate signicant user revenues the way highways can, it is a ar more appropriate candidatethan highways or general-und support.”77 (emphasis added)

The contrast between the supposed abil-ity o highways to generate user revenueand the inability o transit to do so—nevermind non-motorized orms o transporta-tion such as bicycling and walking—israised again and again in arguments overtransportation policy. From the perspectiveo deciding which projects to build, suchdistinctions are (or should be) meaning-less—America should invest in transpor-tation projects that bring the greatest netbenefts to the greatest number o people,

regardless o how they are paid or.Highway advocates also employ the

user-ee argument to preserve privilegedaccess or highways to unding rom thegasoline tax, which, despite recent de-creases in purchasing power, remains apotent generator o revenue. Advocates o

A Useful Fiction



A Useful Fiction 25

highway-centered transportation policy deploy the user-ee argument to ensurecontinued frst dibs on a dedicated revenuesource. Dedicated unding is immensely valuable to advocates o any social agendabecause it ensures access to (at least) a

steady stream o unding without requiringrepeated pleading to elected representativesin the annual appropriations process.

Ken Orski, author o the Innovation NewsBries newsletter, recently wrote, orexample: “Those who urge restoring the Trust Fund to its original purpose are notnecessarily against streetcars, bicycles or‘walkable communities.’ … But let thoseamenities be unded by state and local gov-ernments, they say, or by general revenues,as are a host o other social programs thatare deemed worthy o ederal support.”78

Orski knows, as do all highway advo-cates, that unding rom a dedicated sourceis ar easier to secure than unding in an an-nual appropriations process—particularly in difcult budgetary times. By grantingdedicated unding to a particular socialaim, government prioritizes that activity over and above other social aims. Those who would advocate or dedicating allgasoline tax revenue to highways are, in

essence, arguing that highways are moreimportant than investments in other alter-natives—especially since these advocatesare rarely to be ound arguing or similarlevels o general ederal spending on othertransportation modes.

The “user ee” argument becomes, inother words, an argument about the pre-erred direction o transportation policy by other means.

Highway advocates also tend to maketwo other arguments or dedicating ederal

gas taxes to highways.(1) Interstate highways are cast as

national priorities—worthy o ederalsupport—while transit and other alter-natives are declared to be merely localissues.

The Reason Foundation, or example,

recently argued that unds rom the ederalgasoline tax should be dedicated only toInterstate highways—eliminating und-ing both or transit and or aid to statesor their own highway systems. The as-sumption at the core o this argument is

that there is something special about theInterstate Highway System that makesit—and it alone—worthy o dedicatedederal support rom the gasoline tax. Theidea is that the Interstate system is, at itscore, about the movement o people andgoods across state lines—a truly ederalunction—while transit and other trans-portation alternatives are about movingpeople around metropolitan areas, whichrepresents a state or local unction.

For example, the Reason Foundationargues that “Trafc calming in Tampa orBoise, or bike paths in Bualo or Phoenix,do not provide national benefts and shouldnot be ederally unded.”79

This line o argument is a throwback tothe original vision o the Interstate High- way System as providing long-distancehighway connections. But it is consistentneither with how the Interstate system was actually built out, nor with how thesystem it is used today. Indeed, Interstates

play as signifcant a role in metropolitan-level transportation as they do or theinterstate movement o people and goods. Two out o every three vehicle-miles trav-eled on the Interstate system are on urbanInterstates, which presumably serve localor metropolitan mobility needs—just asdo transit systems.80 While urban Inter-states certainly play an important role inthe interstate movement o goods, theirprimary unction—as evidenced by themassive trafc jams on urban Interstates

any weekday morning—is to get people toand rom their homes, jobs, schools, andplaces o recreation.

Moreover, it is legitimate to ask why thelong-distance movement o cars or reightshould be any more o a national priority than providing efcient transit and inter-




city rail access to the core o our majorfnancial, political and cultural capitals;reducing America’s crushing dependenceon oil; acilitating transportation in met-ropolitan areas, which are the engines o our national economy; alleviating highway

congestion through other means (such asinvestments in transit or car-pooling); oreven, or that matter, promoting improvedhealth and mobility through investments inbicycling and pedestrian inrastructure.

The ederal government could havechosen to ulfll its “interstate commerce”role under the Constitution by simply paying or the construction o small seg-ments o highway that cross state borders. Itdidn’t. Instead, the ederal government hashistorically taken a more expansive view,demonstrating an understanding o theimportance o transportation links withinmetropolitan areas and the need to link various transportation modes eectively.

(2) Highway investments are toutedas “transportation” investments; every-thing else is “social policy.” Highway advocates oten argue that highway expen-ditures represent investments in transpor-tation, as opposed to investments in othertransportation alternatives and programs,

which are pigeonholed as “social policy.” For example, the recent Reason Foundationreport asserts that:

[A]sking ederal highway users to pay substantially more in order to undexpanded programs or sidewalks,bikeways, recreational trails andmore transit is unlikely to succeed,since the large majority o highway users do not use, and would notbeneft rom, these mostly local-

ized urban projects. Principles o ederalism suggest that these kindso projects are more appropriately unded at state or local levels o government. But i Congress seesft to continue them at the ederallevel, they should be supported by

all taxpayers, as the kind o socialinrastructure unded by ederalagencies concerned with urbanamenities (HUD) and outdoor rec-reation (Interior).81

Leaving aside both the act that ederalgasoline taxes are paid by all drivers (not just users o ederal highways), and theederalism argument, Reason’s argument—mimicked by other highway advocates—isthat highways are essentially the only reasonable “transportation” investmentsgovernment can make. Any other invest-ments—rom transit to sidewalks—areorms o “social policy.”

This inherent bias against non-automo-tive orms o transportation as legitimatetransportation options sometimes emergesin the orm o condescension and some-times in the orm o virulent rhetoric, suchas this post rom Randal O’Toole’s Anti- planner blog: “Supporters o more subsidiesto transit, cycling, and other programsbristle when opponents use terms like ‘so-cialism’ and ‘social engineering.’ But it ispure socialism when government agenciescan spend billions o dollars without any worries about whether user ees will cover

those costs.”82

The highway advocates’ argument isrooted in their obsessive ocus on theabstract notion o “mobility,” which otensuraces in their desire to compare thenumber o passenger miles traveled on vari-ous transportation modes as the measure o their value. Observers such as Wendell Coxand Ronald Utt o the Heritage Foundationmake much o comparing the ederal dol-lars spent on transportation per passengermile, arguing that riders o transit and

other modes are more subsidized.83 Yet, what most individuals strive or

is not to maximize their “mobility” asmeasured by the number o miles traveledeach year. People value the simple ability to get where they need to go, whether thatdestination is around the block, on the



A Useful Fiction 27

other side o a metropolitan area, or acrossthe country. An urban dweller who ridesa light rail line a single stop to a avoriterestaurant gains the same utility rom thattrip as a suburban resident who drives 10miles to his or her avorite eatery. Side-

walks, bikeways and transit are not simply “urban amenities,” but are also legitimateorms o transportation.

The decision to pursue policies thatmaximize the volume o distances trav-elled—without the consideration o othersocial contexts and imperatives—is itsel

an exercise in social policy. No reasonableobserver would argue that the decisionto build the Interstate Highway Network did not have major ramifcations or socialpolicy—ueling the growth o suburbancommunities, bringing opportunities or

jobs and recreation closer to many Ameri-cans, and imposing massive changes on theenvironment and America’s urban abric. There is simply no way to separate trans-portation policy rom social policy—they are intertwined.




So ar, we’ve established that gasolinetaxes are not true “user ees,” thatthey have historically unded purposes

other than highways, that they have neverpaid the ull reight or nation’s roads, andthat they represent a shrinking share o the transportation unding pie. We havealso examined some o the uses to whichthe highway fnancing myths have been

put in decisions regarding transportationpolicy.But i highway users aren’t currently

paying the ull cost o roads, shouldn’tthey?

It is tempting to resort to simple maximssuch as “drivers should pay or the roadsthey use” in describing the ideal policy ortransportation unding. But to even ask thequestion this way is to put the cart beorethe horse.

Sound transportation decision-making

begins by understanding that the issueso what we should build and who shouldpay or it are separate—i intimately re-lated—questions. When we let the ability o a transportation mode to “pay or itsel”shape what types o inrastructure webuild, then we miss opportunities to build

transportation systems that provide thegreatest beneft to society as a whole.

Choosing What to Build The frst step towards developing a sensible

system o transportation fnance is to develop a sensible system or deciding whichtransportation projects to build. Thesedecisions must be made independently o the question o the mix o revenues thatpay or those projects.

To understand why, consider the situ-ation states currently fnd themselves in when choosing between investments in various transportation modes. I a state wishes to expand a highway, it receives an80 percent ederal match and can use ed-

eral transportation unds or that purpose with virtually no questions asked. The re-maining 20 percent o the unds can comerom state gasoline taxes.

On the other hand, a state seekingederal support or a new transit line mustcompete against projects rom other states

A Smarter Way to Payfor Transportation



A Smarter Way to Pay for Transportation 29

through the New Starts process. Whiletransit projects technically can receive an80 percent ederal match, in practice thematch is typical ly around 50 percent, sincethe New Starts process avors applicationin which state and local governments

provide a greater share o the unds.84 Inmany states, fnding those local unds is ex-tremely difcult since gasoline tax revenueis o-limits or transit projects.

It is not hard to see how this systemskews transportation decision-making—making it ar easier or states to expandhighways than to invest in transit, even when the transit investment will delivergreater benefts.

The United States should invest intransportation inrastructure that deliv-ers the greatest possible net benefts orsociety, regardless o how the money topay or those investments is raised. It may be, or example, that particular types o transportation investments cannot—orshould not—be counted upon to “pay theirown way” through user ees, but that theseinvestments should be pursued because o the broad benefts they deliver to society.

To make the proper investments or America’s uture—and to protect taxpayers

rom the temptation to spend money onboondoggle projects while other urgentneeds remain unaddressed—the nationshould compare potential transportationinrastructure projects based on their costsand benefts both within and across modes.In so doing, we must do cost-beneft analy-sis the right way. That means incorporatingall o the many costs and benefts (see page19) that result rom transportation invest-ments and evaluating those investmentsor their impacts during the lietime o

the investment. Projects should be assessedacross the long-term; not just as short-termbudget choices.

Some states have taken important stepsin the right direction. Washington state,or example, requires regional trans-portation planning agencies to develop

transportation plans based on least-costprinciples. The state deines least-costplanning as “[a] planning analysis thatidentifes the most cost-eective, multimodal project and program investment strategies, while taking into account supply and de-

mand , ull lie cycle costs and project and pro-gram externalities .”85 (emphasis in original)Importantly, Washington’s approach doesnot value “mobility or mobility’s sake” butrather requires the consideration o bothprograms to increase transportation supply and those that reduce demand as legitimatesolutions to transportation challenges.

Tying transportation investments to theavailability o so-called “user ee” revenuedistorts transportation decision-making,ignoring the broader and indirect beneftsand costs rom dierent transportationinvestments, and asserting the primacy o only one consideration: the ability toraise money or the project through user-related ees.

Deciding How to Pay for

Transportation Transportation investments should ideally be fnanced based on a broad assessment o the costs and benefts o the investment.Gasoline taxes, transit ares, license eesand tolls, among other “user ees,” are parto the picture. So too, however, are generalgovernment revenues, parking ees, impactees on developers, value-capture mecha-nisms that reap some o the increased valueo land near transportation inrastructure,and revenues rom programs that put a

price on greenhouse gas pollutants.But divvying up the bill or transporta-

tion investments solely on the basis o thebenefts received by various constituen-cies is not likely to be a perect solution.Government may choose, or example, tosubsidize some orms o transportation in-




How Best to Price Transportation

The questions o how to pay or transportation and what price to put on trans-portation services are usually linked in the minds o the public and decision-

makers. They shouldn’t be. When setting prices on transportation services, theprimary concern must be getting the best possible use out o the public’s investmentin inrastructure, not necessarily maximizing revenue rom users.

Economic principles suggest that in a competitive market, the price o a goodor service will align with its “marginal cost”—that is the cost o producing oneadditional unit o the good or service. Transit service provides a good example o

how this works in practice. For a transit service that is operating near its capacity on a busy weekday morning, the costs o serving an additional passenger may be very high—the transit agency may need to run more buses and hire more driversor even invest in a new rail line to serve the additional demand. The price that theagency charges or these trips should ideally be higher than the price charged ortrips in the middle o a weekday aternoon, where there may be idle capacity just waiting to be used and where the cost o accommodating an additional passengeron a hal-empty bus is close to zero.

In addition, prices should reect the total costs imposed by additional users—in-cluding costs on the rest o society. A weekday aternoon bus rider may imposelittle in the way o external costs, but a weekday aternoon driver will, in the ormo air pollution, oil consumption, and a range o other impacts. In this situation, it

is societally benefcial to encourage people to use transit in the orm o lower aresor o-peak transit riders—even i doing so violates common notions o chargingpeople or their “air share” o the cost o the inrastructure.

In the case o automobile travel, an optimal pricing system might include con-gestion pricing, ees or emissions o greenhouse gases and other air pollutants,an end to ree or subsidized parking, and the shiting o some costs (such as autoinsurance) rom lump-sum charges to charges that vary based on the number o miles driven. For many transit systems, it might make sense to move in the op-posite direction—toward pricing systems that encourage ridership through lowerares and that recognize the benefts that transit riders deliver to drivers and theremainder o society through a shiting o motor vehicle charges to transit. Undersuch a system, the burden o paying or transit might shit toward “lump sum”

charges—tax revenue, revenues rom pass sales, and subscription ees rom majorinstitutions, or example. Meanwhile, transit systems without spare capacity mightraise ares on crowded lines or during rush hours.

The point in this discussion is that the notion that simply divvying up the costo transportation inrastructure evenly among the users o that inrastructure islikely to lead to less-than-ideal results.

rastructure to achieve other public policy ends. These subsidies may take the orm o ree transit passes or students, dial-a-rideservice or the disabled, the improvement

o a road that provides access to an iso-lated rural community, or improvementsin transportation inrastructure designedto attract job-creating industries. In other



A Smarter Way to Pay for Transportation 31

words, government may legitimately decidethat the capacity o a particular subset o the public to pay their “air share” o thecosts o a given investment should not standin the way o the broader benefts o thatinvestment to the rest o society—or the

realization o simple airness in ensuringthat the broadest possible cross-section o Americans is able to beneft rom invest-ments in the transportation system.

Gasoline Taxes Shouldn’tBe Dedicated to RoadsIn virtually any vision o the nation’s trans-

portation uture, highways will continueto play a critical role in getting Americans where they need to go. With many o thenation’s highways and bridges aging—and inthe wake o years o deerred maintenance—there will be no shortage o worthwhilehighway projects or the nation to investin, even i the goal is simply to maintain theinrastructure we already have.

What is the harm, then, in simply dedicating revenue rom gasoline taxes to

highways? The harm is that dedication o gasoline

tax revenue to highway projects inherently prejudices transportation decision-makingin avor o highways. In the current atmo-sphere o massive state budget shortallsand ederal budget defcits, there is simply no way to ensure that other transporta-

tion priorities receive adequate investmenti highways get irst dibs on dedicatedunding. I the choice acing local deci-sion-makers, or example, is to build orexpand a highway with ederal unding ordo nothing at all, those decision-makers arelikely to build the highway, even i other,harder-to-und transportation solutions would provide greater overall benefts.

I gasoline tax revenues are to be dedi-cated to transportation, all transportationmodes must have the ability to compete orthat unding on a level playing feld withconsideration o long-term benefts. Just asthere are ample opportunities or meaning-ul investment in highway repair, so too arethere many opportunities or worthwhileinvestments in transit, high-speed rail, andactive transportation projects such as bikelanes and pedestrian acilities, as well asinvestment in technologies and practices—such as sound barriers and trafc calm-ing—that ensure that our transportation

inrastructure melds itsel eectively intoour communities.




To develop sensible transportationpolicy in the United States or theuture, we need to ace a ew impor-

tant truths. The frst truth is that the “user ee/

highways pay or themselves” story thathighway advocates promote to achieve theirdesired policy outcomes is a myth. Gaso-line taxes aren’t “user ees.” And gas taxesand other vehicle charges have rarely paid

the ull cost o building and maintaininghighways—and have never paid or the ullcosts o highway construction and drivingto the rest o society.

The second truth is that the “user ee/highways pay or themselves” model is evenless likely to work in the uture—at leastat the levels o gasoline taxation that havebecome amiliar to Americans. Americansare driving less than they did a ew yearsago and are doing so in more uel-efcient vehicles. There is little reason to believe

that the steady growth in vehicle travelthat characterized the post-War period willcontinue in the 21st century, due to chang-ing demographics and shiting consumerpreerences, not to mention the prospecto higher oil prices. Finally, whereas in thepost-War period America increasingly built

new highways that spurred more drivingand created more gas tax revenue, the mostcostly challenge acing the nation now is inrepairing and reconstructing our existinghighway network. The increasing taxpayerbailouts o the Highway Trust Fund inrecent years are just a harbinger o theproblems to come—the “user ee/highwayspay or themselves” model, to the extent itever worked at all, is irretrievably broken.

The fnal truth is that, in many ways,the “user ee/highways pay or themselves”model is a bad model or transportationpolicy. It does a poor job o approximatingthe costs imposed by and benefts gainedrom various transportation investments.It ensures that transportation projects ingeneral, and highway projects in particular,receive a guaranteed source o unding,regardless o whether more pressing pri-orities exist elsewhere. And it creates thepresumption that transportation invest-

ments will be made based on geography and other actors that have nothing to do with the benefts the project will deliver orsociety—a recipe or wasteul, pork-barrelspending.

I America is to make the right trans-portation choices or the 21st century, we

Conclusion



Conclusion 33

need to rely less on myths and outdated as-sumptions and instead make clear-headeddecisions about which transportation investments will deliver the greatest beneftsor the nation in the years ahead.

Dierent transportation advocates, pun-

dits and lobbyists will oer very dierent visions o what America’s uture transpor-tation system should look like—and thedebate among those points o view is one very much worth having. How important,or example, is creation o a high-speed railnetwork? Should we engage in a major pro-gram o highway expansion at a time o in-creasing concern about oil supplies and theenvironment? How should transportationand questions about the uture structure o our communities intersect? These are the

types o questions Americans should beasking—particularly as the nation attemptsto meet its transportation needs duringeconomically troubled times.

We also need to have a debate about how America should und uture transportation

investments, particularly given public reti-cence to increase the gasoline tax.

A real debate about America’s trans-portation uture is not aided, however, by outdated—and oten misleading—storiesabout how America’s transportation und-ing system has worked historically and works today.

The time has come to put these mythsto rest, once and or all, so that the nationcan have a meaningul and well-groundeddebate about where to go next.




1 This argument is made by analysts suchas the Tax Foundation’s Jonathan Williams(see: Jonathan Williams, Tax Foundation,Paying at the Pump: Gasoline Taxes in America,October 2007). Evidence o public opinionrom the early days o the gasoline taxis, o course, anecdotal, though there arealternative explanations or why the gasolinetax engendered little resistance at the time. According to John J. Jakle and Keith A. Scullein their book, Motoring , “The gasoline tax,

in several ways, proved too low to engenderresistance. Social classes benefting rom thetax in the orm o good roads were prosperousin the 1920s, when the tax began to be levied;thus, vehicle owners elt able to pay the newtax. … But, most importantly … gasolineprices declined simultaneously with theonset o the gasoline tax as the result o newgasoline-processing technologies.” See: John A. Jakle and Keith A. Sculle, Motoring: The Highway Experience in America, University o Georgia Press, 2008.

2 Highway advocates oten conate—eitherdeliberately or accidentally—true “pork bar-rel” transportation spending (i.e., earmarks) with investments o gasoline tax revenue intransit and other transportation alternatives. As described on page 28, when earmarkedprojects (which are just as likely to behighways as transit lines) are excluded, the

ederal unding process or new or expandedhighways is signifcantly less rigorous, lessact-based, and more open to political med-dling than the unding process or newtransit lines. For examples o how the “pork barrel” spending and “diversion” o undingto transit arguments get conated, see Jona-than Williams, Tax Foundation, Paying at the Pump: Gasoline Taxes in America, October2007; and Robert W. Poole, Jr., and Adrian T. Moore, Reason Foundation, Restoring Trust

in the Highway Trust Fund , August 2010.

3 See U.S. Government Accountabil ity Ofce, Federal User Fees: A Design Guide, May 2008.

4 Except or a ew drivers o non-gasolinepowered vehicles.

5 U.S. Department o Transportation,Federal Highway Administration, HighwayStatistics 2008, Table HM-260, January 2010.

6 Highway advocates sometimes make a

distinction between local roads—which aresaid to provide access to properties—andlarger highways. This is the rationale givenor the use o property taxes to pay or localroads and streets and gasoline taxes to pay or other highways. It does not account orthe act that users o these local roads oten“double pay” or the privilege in the orm

Notes






perspective because they provide a system o road unding by simply charging road users when they fll up their tanks.” (Jonathan Williams, Tax Foundation, Paying at thePump: Gasoline Taxes in America, October2007.) As noted at various points throughout

this paper, the user ee model as applied tothe gasoline tax and the usage o gas taxrevenues in the United States actually violatescommonly held principles o public fnance,including the aversion to earmarking o revenues or specifc purposes and—throughits ailure to incorporate the ull benefts andcosts o highways—the benefts principle o taxation itsel.

16 See note 14.

17 Even so, tolls do not cover the externalcosts o driving, and toll roads oten beneft

rom low-cost public inancing, whichreduces the cost o toll roads versus privateinvestment (though not other orms o publicinrastructure).

18 See Kari Wohlschegel and Tony Dutzik,Frontier Group, and Phineas Baxandall, U.S.PIRG Education Fund, Private Roads, Public Costs: The Facts About Toll Road Privatizationand How to Protect the Public , Spring 2009.

19 Richard F. Weingro, “Federal AidHighway Act o 1956: Creating the InterstateSystem,” Public Roads , Summer 1996.

20 “Business: Private Toll Roads Show the Way,” TIME , 28 February 1955.

21 Robert W. Poole, Jr., and Adrian T. Moore, Reason Foundation, Restoring Trust in the Highway Trust Fund , August 2010.

22 U.S. Department o Transportation,Federal Highway Administration, The Highway Trust Fund , downloaded rom www.hwa.dot.gov/reports/fnancingederalaid/und.htm, 3 December 2010.

23 Louis Alan Talley, CongressionalResearch Service, The Federal Excise Tax onGasoline and the Highway Trust Fund: A Short History, 29 March 2000.

24 See: Federal Aid Highway Act o 1956, Title II, Sec. 209 (c)(1), which reads: “Thereis hereby appropriated to the Trust Fund, outo any money in the Treasury not otherwiseappropriated, amounts equivalent to the

ollowing percentages o the taxes receivedin the Treasury beore July 1, 1972, under theollowing provisions o the Internal RevenueCode o 1954 (or under the correspondingprovisions o prior revenue laws) — (A) 100percent o the taxes received ater June 30,

1956, under sections 4041 (taxes on dieseluel and special motor uels), 4071 (a) (4)(tax on tread rubber), and 4081 (tax ongasoline).” (emphasis added) See also: U.S.Department o Transportation, FederalHighway Administration, The Highway Trust Fund , downloaded rom www.hwa.dot.gov/reports/fnancingederalaid/und.htm,3 December 2010.

25 Jonathan Williams, Tax Foundation,Paying at the Pump: Gasoline Taxes in America,October 2007.

26 American Highway Users All iance, Historical Milestones: Celebrating 75 Years o Advocacy, August 2007.

27 The penalty or reducing expenditureson highways was a loss o one-third o ederal highway money. Source: U.S.Department o Transportation, FederalHighway Administration, “Clearly Vicious as a Matter o Policy”: The Fight Against Federal-Aid , downloaded rom www.hwa.dot.gov/inrastructure/hwyhist02.cm, 3December 2010.

28 N. Kent Bramlett, Federal Highway Administration, The Evolution o the Highway-User Charge Principle, December 1982.

29 See note 25.

30 Robert Puentes and Ryan Prince,Brookings Institution, Center on Urban and Metropolitan Policy, Fueling Transportation Finance: A Primer on the Gas Tax, March2003.

31 See note 30.

32 Minnesota: Jerey Brown, “Reconsiderthe Gas Tax: Paying or What You Get,” Access, Fall 2001; Colorado: State o Colo-rado, Colorado Ballot History, 1912 to Present ,downloaded rom www.colorado.gov, 3December 2010; New Hampshire: SupremeCourt o New Hampshire, Opinion in New Hampshire Motor Transport Association v. TheState o New Hampshire, 19 April 2004; Wash-



Notes 37

ington: BallotPedia, Washington Vehicle Taxes or Road Fund, Amendment 18 (1944), down-loaded rom ballotpedia.org/wiki/index.php/Washington_Vehicle_Taxes_or_Road_Fund,_Amendment_18_%281944%29, 3December 2010.

33 Frank Hobbs and Nicole Stoops, U.S.Census Bureau, Demographic Trends in the20th Century, November 2002.

34 U.S. petroleum imports roughly doubledbetween 1969 and 1973: U.S. Department o Energy, Energy Inormation Administration, Annual Energy Review 2009, 19 August2010.

35 Supreme Court o New Hampshire,Opinion in New Hampshire Motor Transport Association v. The State o New Hampshire, 19 April 2004.

36 Jenny Manning, “Gas Tax Lawsuit toHigh Court,” Mercer Island Reporter , 29September 2010.

37 National Conerence o State Legislatures,Principles o a High-Quality State RevenueSystem, updated June 2007.

38 American Dream Coalition, Congestion Myths , downloaded rom americandreamco-alition.org/highways/congestionmyths.html,3 December 2010.

39 Randal O’Toole, Cato Instit ute,

The Citizens’ Guide to Transportation Reauthorization, 10 December 2009.

40 Lisa Caruso, “Is Obama on the Right Track?” National Journal , 15 May 2010.

41 Reason Foundation, “High-Speed RailHitting Obstacles,” Surace Transportation Innovations , November 2010.

42 U.S. Department o Transportation,Federal Highway Administration, HighwayStatistics 2008, Table HM-60, October2009.

43 This estimate is extremely conservativeand is based on the ollowing sources andcalculations. All data on user ee revenue andspending on highways were obtained romU.S. Department o Transportation, FederalHighway Administration, Highway Statistics series o reports. The net subsidy to highwaysin any given year was obtained by subtracting

the sum o user ees and investment revenuerom total disbursements or highways. Thismethod excludes both bond issue proceedsand bond retirements. It also does not includethe inherent subsidy involved in exemptinggasoline sales rom state general sales taxes

(see page 8). Adjustments or ination werebased on the gross domestic product implicitprice deator, obtained rom the FederalReserve Bank o St. Louis, 14 October2010.

44 Ibid.

45 Some argue that these local roads providean “access unction” and should be paidor rom property tax revenue rather thangasoline taxes. However, drivers using theseroads still pay gasoline taxes, which beneftusers o other highway inrastructure.

46 U.S. Department o Transportation,Federal Highway Administration, HighwayStatistics 2008, Table HF-10, February 2010.

47 Cambridge Systematics , The HighwayConstruction Equity Gap: Final Report , preparedor the Texas Department o Transportation,February 2008.

48 Pew Charitable Trusts, SubsidyScope: Analysis Finds Shiting Trends in Highway Funding: User Fees Make Up Decreasing Share, updated 25 November 2009. Pew’s

methodology raises the question o how todescribe bond revenue in assessing the degreeto which highways “pay or themselves.”On one hand, because bonds may havebeen retired with “user ee” revenue in thepast, and may be retired with “user ee”revenue in the uture, one can argue thatbond revenue should be excluded rom thecalculation or incorporated with the “userrevenue” category. We took the ormer, very conservative approach in our calculation o the net subsidy to highways over time onpage 16, excluding both bond revenues andretirements rom our calculation o the netsubsidy to highways. However, there are alsogood reasons to treat bond revenue separately.First, the Interstate highway program—described by many highway advocates asthe ideal o the “user ee/highways pay orthemselves” model—was initially envisioned




54 Note: In 1999, $29.8 bill ion went tohighways because the total tax collected was $35.3 billion, and $5.5 billion went topublic transit. In 2008, $30.6 billion went tohighways because the total tax collected was$35.9 billion, and $5.2 billion went to public

transit. Federal Highway Administration, Highway Statistics 2008, Table FE-210,September 2009.

55 US Bureau o Labor Statistics, InfationCalculator, downloaded rom data.bls.gov/cgi-bin/cpicalc.pl, 4 October 2010.

56 U.S. Department o Transportation,Federal Highway Administration, Traic Volume Trends , August 2010.

57 U.S. Environmental Protection Agency, Light-Duty Automotive Technology, CarbonDioxide Emissions and Fuel Economy Trends:

1975 through 2010, November 2010.58 Mark A. Delucchi, “Do Motor-VehicleUsers in the U.S. Pay Their Own Way?”Transportation Research Part A, 41: 982-1003,2007.

59 Richard Weingro, Federal Highway Administration, Ask the Rambler: When Did the Federal Government Begin Collecting theGas Tax? downloaded rom www.hwa.dot.gov/inrastructure/gastax.cm, 3 December2010.

60 Todd Alexander Litman, Victoria Transport Policy Institute, TransportationCost and Benet Analysis: Techniques, Estimates and Implications , Second Edition, 2009.

61 Ian W.H. Parr y, Marga ret Wallsand Winston Harrington, “AutomobileExternalities and Policies,” Journal o Economic Literature, 45: 373-399, June 2007.

62 See Brad Heavner, MaryPIRG Foundation,Paving the Way: How Highway Construction Has Contributed to Sprawl in Maryland ,November 2000.

63 Robert Puentes and Adie Tomer,Brookings Institution Metropolitan Policy Program, The Road … Less Traveled: An Analysis o Vehicle Miles Traveled Trends in theU.S., December 2008.

64 See note 56.

65 Ibid.

as a pay-as-you-go system that would notbe reliant on bonds. The reliance on bondsby state and local governments is, in some ways, a deviation rom this “ideal” systemand deserves separate treatment. Second,there is no guarantee that user ee revenue

will continue to be sufcient to repay existingbonds over time (due to actors describedbeginning on page 20), leaving open thepossibility o diversion o general undrevenues to the task.

49 Ibid.

50 Robert Puentes and Adie Tomer, BrookingsInstitution, Untangling Transportation Funding, 26 February 2009.

51 See note 21.

52 United States Government, Recovery. gov, Agency Reported Data or Departmento Transportation, downloaded rom www.recovery.gov/Transparency/Agency/reporting/agency_reporting3.aspx?agency_code=69, 3 December 2010. Incredibly,highway advocates claim that the inusion o general und revenues into the highway trustunds does not represent a subsidy but rather a“repayment” o “diversions” previously made. An entry in Randal O’Toole’s Antiplanner blog states: “These supplements do notrepresent subsidies to highways. Congressdiverts roughly 20 to 30 percent o highway

user ees, or about $8 to $12 billion a year, totransit and other programs. Without thosediversions, highways would be in better shapeand no supplements rom general unds wouldbe needed.” (Antiplanner, Federal Highway Funds Frozen, 3 March 2010.) As describedin this paper, even i all gasoline taxes andother “user ees” were used on highways,they would still ail to cover the ull cost o highways. In addition, it is unlikely that an ex post acto reckoning o the costs o highways would be advantageous to highway advocates’cause, as it would require not only the

reunding o ederal gas tax revenue collectedrom drivers on local streets and roads thatare not eligible or ederal aid, but would alsoinclude compensation or environmental,health and other damages caused by highway construction and driving.

53 See note 48.



Notes 39

66 Jeery Memmott, U.S. Department o Transportation, Bureau o TransportationStatistics, Trends in Personal Income and Passenger Vehicle Miles , October 2007.

67 Todd Litman, Victoria Transport Policy Institute, The Future Isn’t What it Used to Be:

Changing Trends and Their Implications or Transport Planning , 12 November 2010.

68 Lester R. Brown, Earth Policy Institute,U.S. Car Fleet Shrunk by Four Million in2009—Ater a Century o Growth, U.S. Fleet Entering an Era o Decline, 6 January 2010.

69 1969 data rom: U.S. Census Bureau,Statistical Abstract o the United States 1970, July 1970; 2010 data rom U.S. CensusBureau, Projections o the Population by Selected Age Groups and Sex or the United States: 2010to 2050, downloaded rom www.census.gov,

29 November 2010.70 U.S. Census Bureau, Projections o thePopulation by Selected Age Groups and Sex or the United States: 2010 to 2050, downloadedrom www.census.gov, 29 November 2010.

71 See note 67.

72 See note 68.

73 Jack Ne, “Is Digital Revolution DrivingDecline in U.S. Car Culture?” Advertising Age, 31 May 2010.

74 See note 67.

75 GWL Realty Advisors, Drivers o Apartment Living in Canada or the 21 st Century, September 2010.

76 Randal O’Toole, “Rules or InrastructureStimulus,” The Washington Times, 16 February

2009.

77 See note 21.

78 Ken Orski, “Two Promising NewProposals or Solving the Fiscal Shortall,” Innovation NewsBries , 5 August 2010.

79 See note 21.80 U.S. Department o Transportation,Federal Highway Administration, HighwayStatistics 2008, Table VM-202, December2009.

81 See note 21.

82 By this logic, any orm o taxationor publicly unded inrastructure otherthan that unded by “user ees” is “puresocialism”—an extreme position even or alibertarian. Source: The Antiplanner, Federal Highway Funds Frozen, 3 March 2010.

83 Wendell Cox and Ronald Utt, HeritageFoundation, Federal Transportation Programs Shortchange Motorists: Update o a US DOT Study, 8 June 2009.

84 See, or example, Phineas Baxandall,U.S. PIRG Education Fund, Tony Dutzik and Joshua Hoen, Frontier Group, A Better Way to Go: Meeting America’s 21 st CenturyTransportation Challenges with Modern Public Transit , March 2008.

85 Washington State Department o

Transportation, Least Cost Planning Guidance,28 October 2009.



Documents

Do Roads Pay for Themselves USPIRG