Eno: Stop Obsessing Over the Gas Tax and Change How We Fund Transpo

U.S. drivers pay far lower gas taxes than in peer countries. They also get less national transportation investment. Image: Eno
Of these six peer nations, America has the lowest gas tax and is also the only one that uses the gas tax exclusively for transportation spending. Table: Eno Center

Twenty years ago, Japan’s electoral reform redistributed power, giving urban constituencies a greater voice. One result: Japan eliminated its version of the Highway Trust Fund, which urban voters saw as satisfying the interests of the construction lobby, not their own.

If city-dwellers had a greater voice in the United States, would the same thing happen?

The Highway Trust Fund has more problems than just its 1950s-era name. Funded by the federal gas tax, the trust fund is becoming obsolete over time, as efficiency gains and declining miles-traveled sap its size. The Eno Center for Transportation says it’s time to rethink the entire system.

In a new report [PDF], Eno compares the U.S. method of funding transportation to that of five peer countries. Ours is the only one that still pretends to rely on a “user-pay” system. (Yes, pretends: The last six years of constant last-ditch infusions from the general fund, totaling $65 billion, have exposed that particular myth.)

It’s important to note that in all five of the countries examined — Australia, Canada, Germany, Japan, and the UK — drivers and truck companies actually pay far more for the use of the roads than they do in the United States. The idea of making people pay to use infrastructure is not the problem — the problem is assuming that those user fees will go to nothing but infrastructure, and that infrastructure will be funded by nothing but user fees.

As the chart above demonstrates, all the countries Eno looked at charged far higher national gas tax rates than the U.S. does. This graphic from The Economist in 2011 shows that a broader cross-section of countries makes the point even more strongly:


But in the countries studied for the report, the revenues from gas taxes don’t become an exclusive fund for the transportation sector. They go into the country’s treasury.

Though Germany’s $3.43/gallon gas tax isn’t earmarked for transportation, its substantial tolling system does dedicate its revenues exclusively to roads. Meanwhile, Japan has replaced its gas tax with a carbon tax, with revenues going to the treasury. Japan spends $288 per capita on surface transportation at the national level, compared to just $165 here.

Eno acknowledges that a user-pays system “discourages over-consumption [of roads] and helps minimize externalities, such as congestion and emissions.” But abolishing the Highway Trust Fund and getting rid of the user-pays system once and for all can be done without letting drivers off the hook. What it could do is restore sanity to transportation funding.

Eno argues that the Highway Trust Fund skews funding decisions by introducing petty conflicts over whether states are getting back what they paid in gas taxes (the donor-donee drama) and by exacerbating divisions between modes, since projects must fall under either the Highway Trust Fund’s “highway” account or its “transit” account. “These challenges have historically overshadowed substantive arguments over policy and hindered the tying of federal funds to national goals or performance measures,” according to the report.

While efforts to bring revenues in line with planned or desired expenditures have largely focused on raising the gas tax — Rep. Earl Blumenauer (D-OR) and retiring Rep. Tom Petri (R-WI) just yesterday made a push to raise it by 15 cents a gallon — Eno calls for funding transportation through general funds.

This is something transit and active transportation advocates have long feared, since general-funded programs are subject every year to the whims of the appropriations committees, which are forever under pressure to cut budgets. The last few rounds of fiscal cliffs and sequesters largely spared transportation because it’s protected in the trust fund. Eno suggests that there could still be dedicated pots of money for transportation — they just wouldn’t necessarily come from transportation-related sources.

Instead of constantly taking the Highway Trust Fund to the brink of collapse, assuming that some future cohort will have the courage to raise revenues, Congress could do away with the Highway Trust Fund, let gas taxes flow into the treasury, and fund transportation at whatever level it deems appropriate. The pressure to raise revenues government-wide would still exist, but the paralysis over raising gas taxes would likely ease.

In other countries, general funding of transportation programs seems to have led to — or at least, developed alongside — better mechanisms for prioritizing projects that meet national goals. Australia keeps a National Priority List of important projects to fund. The New Building Canada Fund is a 10-year, $13 billion program that distributes funding to provinces for projects of regional and national importance. Germany has a Federal Transport Infrastructure Plan that helps guide funding toward projects of national significance. The UK has a mode-neutral, discretionary program for “Major Schemes” of national significance, and those “schemes” must be proven to have a high return on investment.

The common thread here is that these countries, through general-funded transportation programs, have been able to place a far greater priority on projects of national significance — and projects with a sound financial rationale — than the United States. We might be able to achieve that too — while at the same time breaking out of tired debates over how to solve our transportation funding crisis.

  • I might say something like “Thanks for stating the obvious, Eno” but the truth is that very few recognize that the King has no clothes. Thus, someone has to say it — over and over, again; thanks, Eno, for putting pen to paper on the topic.

    Yes, the Highway Trust Fund has *already* become obsolete. It is insolvent and sucking lifeblood from other funds to extend its miserable life, all the while weakening its parasitic hosts (cities, states, and regions).

    Yes, we have arbitrary formulas at the state and federal levels that result in severe mis-alignment of resources with the goals they are intended to advance.

    Yes, so-called user pays is nothing but smoke and mirrors — a scam of massive proportion that makes Madoff look like a petty thief.

    Yes, our existing funding mechanisms and constraints mimic insanity by requiring the same actions be repeated over and over despite expectations of different outcomes. If you keep doin’ what you’ve been doin’, you’ll keep gettin’ what you’ve been gettin’, which is OK when you’re getting good things, but insane when you’re you’re getting bad ones.

    “Prioritizing projects? Goal alignment? Focusing on accountability for outcomes? Using gas tax to fund non-drivers? The audacity of those ant-car, anti-highway, 20-something, fixie-riding hipsters that have no idea how important our road network is.

    Let’s just keep the cash flowing to the road industry while we argue some more about it. What’s that? It’s more than hipsters calling for change? Well, I don’t hear them – my campaign account audibly dings every time someone makes a contribution, so I would know if anyone was calling for change in the way things work ’round here.

    Follow the money? Why, that would be like watching a dog chase its tail.”

  • Wilmer Cook

    The highway trust fund has expenses for various purposes. Meanwhile it is largely funded with a fixed per gallon fuel tax in the face of irresponsible monetary policy.

    The system should be reformed by going towards a user based system, not away from it. Each mode’s customers paying for it. This serves to hold people accountable. Only customers can hold people accountable. The best way is through spending. Someone who is vaguely taxed for a variety of services cannot control where his money goes. The political class then decides. By going further away from a user based system, the politicial system becomes less accountable to people. They may divide the plunder as they see fit and take from those with the least organized political power, or the most numerous who will not see a reason to fight back against what is individually only a small increase in tribute.

    Some may think greater political control may benefit them. It may, until it does not.

  • ahwr

    Taxing me for driving on a local road to pay for a commuter rail project in Utah is no worse than using the money to widen a highway on the same corridor. Breaking funding up by ‘mode’ is illogical and no better than what exists today. There is no good user based system now, and there never was. Tolls were infeasible when the interstate system was born. They aren’t anymore. In addition they can greatly increase capacity of each lane mile of highway by varying tolls over the course of the day to smooth out the demand curve.

  • I’m not sure the “customer” analogy works. If I don’t like a restaurant’s food, I can stop going to that restaurant. But if I don’t like a highway project planned for the other side of the state, it’s not like I’m going to stop driving to boycott it. Like it or not, these decisions are made through the political process, not the free market.

  • allisondan

    I think the most intriguing idea is that there be national priorities for federal tax dollars, as in other “advanced” countries. In the current system, most of the funds are simply passed to the states to do with as they will. One need look no further than Wisconsin to see what a disaster that can be, and other states are not much better. If it is federal money, then there needs to be a national voice, and true accountability to the taxpayers. The TIGER program is much closer to a priorities model, and at least as a start, all federal transportation money should be allocated through the TIGER program.

  • Matt F

    I’m all for higher gas taxes, but I think comparing america to Europe is not apples to apples. The fact is transportation is more elastic in Europe — the geography is smaller and there are more non-car options to get around.

    IIRC Texas is roughly the same size as Germany, geographically. And I literally rode my bike across the Netherlands in two days. So it makes sense to place a premium of gasoline when there are more options to get around. You could basically take regional trains to any part of Europe, somewhere where America is considerably behind.

    ITT you should compare America to Canada and perhaps Australia. Both countries are similar to America in that you have to move across large, empty spaces to get from one urban area to the next, and lack the infrastructure to do it in a non-car way (Amtrak is a joke).

    First we should emphasize alternative transportation, THEN you should incentivise it (by taxing car transportation). But I think increasing the gas tax to somewhere near European standards without providing alternatives is putting the cart before the horse.

    I think we should also consider that increasing the gas tax will adversly affect commercial drivers the most (shipping goods and taxiing people), and the increase costs of transportation will translate to higher prices in the economy as a whole.

    Then again, you minimize societal loss by taxing inelastic goods, so there’s that to be said,

  • tooter turtle

    If funds collected from one mode cannot be used for another mode’s expenses, then changing the mix of mode use is not possible. That’s OK if you want what we have now until the end of time. I don’t.

  • Wilmer Cook

    If you want to force people to switch, you must take choice away from them. You must manage them. Pooling funds under political power does work towards those ends. Maybe today you agree with what political power wants, what about tomorrow?

  • Wilmer Cook

    There is always the option of getting rid of this institution of government. But that is beyond comprehension for most. That would give us the most power. But since it is beyond comprehension, we must compromise. Choose what is least bad within the framework we have for now.

    You don’t like a highway project on the other side of town but won’t stop driving. But if all taxes are pooled and you don’t like a highway project can you stop living? A person who does not like cars can choose not drive. A person who does not like buses can choose not to take them. We have choice, maybe not as fine of a choice as we desire, choosing to not use road A but use road B, but we still have choice on a more macro level. Generalize all taxes and we have no choice at all. No matter what choice we make government decides the way it wants.Our choice becomes irrelevant.

    Centralized, pooled, and unaccountable. This way those in government can do as they please. Run society as they please. Reshape society as they please. That is why they want that. Maybe they agree with you today, but tomorrow, maybe not. You have no say that matters. Money matters. That is the real vote. Government can always find people who do not pay to out vote you at the ballot box or cheat.

    Are fuel taxes perfect user fees? No. But if we are to have government control roads, we must choose the methods to best hold it accountable. Fuel taxes have done better to hold government accountable than general taxation. Government fears the people on fuel taxes. Government must fight to use fuel taxes elsewhere. Better for a user fee would be tax per mile, but that gives government too much power, to track people. The fuel tax is a middle ground that works. It is intentionally being broken so government can be unaccountable or gain tracking powers or both.

    If transportation funds are made general then transportation will have more competition from stronger political forces, welfare, warfare, corporate welfare, wall street, government employees, and more. They were separated to give people better control. In Europe government grants people, in the USA people grant government. Or at least that is how it is supposed to be.

  • Wilmer Cook

    Federal vs. local is another way government makes itself unaccountable. Government always seeks to become centralized and less accountable to those paying. A far away overseeing government is a way to do both.

    The political process is also about living at the expense of other people. So when funds are centralized, they will be sought after by those who did not pay.

  • Bolwerk

    Tthis isn’t a question of cutting people a break with a breakeven price. Creating a low gas tax requires actively coming up with road funding money elsewhere (e.g., taking it from cities or another state).

  • I think a major point is missing in the discussion as well as the report’s recommendation of funding transportation from the general fund as is done in Europe.

    First, as Tanya wrote, those European nations have high gas taxes – the difference is the revenue goes to the general fund, just like state sales taxes do. Eno would keep the gas tax the same, I believe, and fund the remainder from the general fund, as has in fact been the case since 2008.

    In the 1994 book, “Getting There: The Epic Struggle Between Road and Rail in the American Century” by Stephen Goddard, there’s a quote from Winston Churchill, I believe, that expresses amazement at hypothecating gas taxes. “Should entertainment taxes be only used for entertainment?” he asks.
    http://press.uchicago.edu/ucp/books/book/chicago/G/bo3626177.html

    Eliminating the HTF makes sense only if you have high gas taxes to begin with. The only reason for their report is the inability to raise the gas tax, and to paraphrase Obama on Cuba, if you’ve been unable to raise the gas tax for two decades, it’s time to do something differently . [Of course, Obama’s opposition to raising the gas tax makes him part of the problem]

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