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Posts from the Gas Tax Category

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Is Raising the Gas Tax Really the Answer?

Cross-posted from the Frontier Group

In the 1920s, Great Britain debated the future of its Road Fund – a pot of money raised from vehicle excise taxes and devoted exclusively to road repair. Then-Chancellor of the Exchequer Winston Churchill opposed the fund, arguing that, if drivers paid taxes dedicated solely to roads, “It will be only a step from this for them to claim in a few years the moral ownership of the roads their contributions have created.”¹

Who pays and who "owns" the roads? Photo: Richard Masoner

Who pays and who “owns” the roads? Photo: Richard Masoner

Here in the United States, we have long been under the misimpression that the taxes paid by drivers – most notably the gas tax – cover the cost of building and keeping up our roads. And is there any doubt that those contributions have come with a claim of moral ownership? For decades, transportation policy has been shaped by the idea that drivers do their “fair share” to maintain the infrastructure they use, while other transportation users – those who ride transit, ride bicycles or walk – are little better than freeloaders.

If you’ve ever wondered why some people get enraged at the so-called “diversion” of small amounts of gas tax revenue to transit, or are apoplectic over the dedication of a small amount of roadway space to bike lanes, or perceive efforts to make communities more walkable as a “war on cars,” it all comes down to the deeply ingrained belief that roads have been built solely by and for the exclusive benefit of motorists.

A new report we at Frontier Group have co-authored with U.S. PIRG Education Fund, Who Pays for Roads?, explodes the “users pay” myth. Nearly half of the money now used to build, maintain and operate highways now comes from ordinary taxpayers – you and me – regardless of how much we drive.

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American Roads Depend on Handouts From Bus Riders, Cyclists, Pedestrians

Paying for roads costs everyone, whether they drive or not. Chart: US PIRG

Paying for roads costs everyone, not just people who drive. Graphic: U.S. PIRG

Once upon a time in America, the road system was largely funded by the gas tax. But that was many Highway Trust Fund bailouts ago.

User fees have made up a declining share or road funding as general taxes have increased. Graph: US PIRG

Gas taxes, tolls, and other fees on driving account for a rapidly declining share of road spending. Graph: US PIRG

Today, only about half the money spent on the U.S. road system comes from fuel taxes, tolls, or other fees paid by drivers, according to a new report [PDF] by the U.S. Public Interest Research Group. Taxes with no relation to the amount people drive — property taxes and sales taxes, for instance — account for about 42 percent of road and highway spending, PIRG reports. Another 10 percent comes from bonding, and given elected officials’ deep reluctance to raise gas taxes, a lot of those bonds won’t be paid off by drivers.

Between 1947 and 2012, the total subsidy for American roads amounted to about $1 trillion, according to PIRG’s analysis of data from the Federal Highway Administration. On an annual basis, the road subsidy has only been getting larger recently, as inflation eats away at gas tax revenues and cars become increasingly fuel efficient. Today, drivers cover roughly 50 percent of spending on roads, compared to 70 percent in the 1970s.

The average American household now supports the U.S. road system to the tune of between $1,100 and $1,848 per year in sales taxes, property taxes, and other indirect subsidies, such as the cost of traffic collisions to government agencies, according to PIRG.

“Our transportation finance system resembles a ‘users pay’ model less than at any time in modern history,” write authors Tony Dutzik, Gideon Weissman, and Phineas Baxandall. “The conclusion is inescapable: all of us, regardless of how much we drive, now bear the cost of our roads.”

In fact, federal, state, and local governments spend more money subsidizing roads than they spend on transit, biking, and walking combined, PIRG finds.

So, keep this research handy the next time someone tells you that America’s transportation system is paid for by drivers whose money gets diverted to other priorities like transit and biking. The truth is that we all pay for roads, whether we drive or not.

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Study: Most Roads Don’t Pay for Themselves

Most American roads — even the most highly trafficked — are financial losers. That’s a major finding from a new study by the Center for American Progress [PDF].

Four out of 10 American highways don't generate enough revenue to pay for maintenance. Photo: Wikipedia

Four out of 10 American highways don’t generate enough revenue to pay for maintenance. Photo: Wikipedia

A financial analysis by the think tank found that about four out of 10 U.S. highways don’t carry enough traffic to generate sufficient revenue to pay for their maintenance — let alone construction.

CAP analyzed individual road segments from around the National Highway System. Using publicly available traffic data, researchers were able to estimate how much revenue each segment generated in terms of user fees paid by drivers, namely state and federal gas taxes. Those totals were then compared to average maintenance costs, assumed to be two resurfacings and one major reconstruction over the course of 30 years.

That just six in 10 highways passed such a low test should be a wake-up call, CAP authors say. For one, the cost analysis did not include initial construction costs or inflation. Including a modest annual 1 percent inflation adjustment on the cost of construction would have increased the share of roads that failed to cover costs by 9 percent.

CAP’s study only examined national highways, which host far more traffic than the average road. Roads on the National Highway System represent only about 5 percent of America’s total road network, but carry 55 percent of all vehicle traffic. Meaning the financial returns on local roads, which generate fewer trips and less fuel use than highways, are much worse.

The study should help dispel the false notion that roads pay for themselves, write authors Kevin Degood and Andrew Schwartz. It should also inspire us to rethink the way we disperse funding for roads versus transit, they say. (At the federal level, the split is about 80-20.) In most cases, the argument that roads are self-sustaining is a myth.

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Chris Christie Keeps Trying to Balance NJ’s Books on Backs of Transit Riders

Graph: Tri-State Transportation Campaign

That blue line is about to take another steep jump, but not the green one. Graph: Tri-State Transportation Campaign

Governor Chris Christie has really made a mess of New Jersey’s transportation finances. Since 2011, the governor’s “flipping the couch cushions” strategy has resulted in the state amassing an additional $5.2 billion in debt.

New Jersey’s gas tax has not increased since the 1980s and is the second lowest in the nation. Without new revenue, predictably enough the state can’t balance the books. This budget session, New Jersey Transit is facing a $60 million shortfall, and transit riders will soon be paying more for less. The state has proposed a 9 percent fare increase on top of service reductions.

The refusal to raise the gas tax is a hallmark of Christie’s political strategy. A 2012 report from the federal Government Accountability Office concluded that Christie killed the ARC transit tunnel across the Hudson because he wanted to siphon the money off for highways without hiking the state’s gas tax.

While the gas tax hasn’t budged since 1988, New Jersey transit riders got stuck with a 25 percent bus fare hike and a 10 percent rail fare hike in 2010.

A recent poll of New Jersey voters found 50 percent favor raising the gas tax. But that hasn’t convinced Christie to face reality.

Without new revenue, the state may be forced to cancel previously authorized projects, the Tri-State Transportation Campaign warns. And soon, New Jersey won’t even be able to pay the bill on existing debts. Something’s got to give — raising fares and cutting service can’t paper over Christie’s transportation budget mistakes much longer.

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Ranking the Sad Parade of Federal Transpo Funding Ideas From Worst to Best

The Highway Trust Fund is on a losing trajectory. But no one can agree on how to fix it. Image: Congressional Budget Office via America 2050

America’s transportation funding system is broken, and no one in charge has good ideas about how to fix it.

The problem seems simple enough: The federal transportation program is going broke because Washington has allowed the gas tax to be eroded by inflation for more than 20 years.

As obvious as raising the gas tax may be, America’s political leaders won’t touch it. Yesterday, The Hill reported that Congressman Bill Shuster, chair of the Transportation and Infrastructure Committee, is ruling out a gas tax increase or any additional fees on driving to fund transportation.

Apparently, anything that might make driving a little more expensive is no longer politically palatable. Instead, President Obama and members of Congress have trotted out a series of proposals that range from one-off gimmicks to total fantasies that wouldn’t solve anything.

It can be hard to keep them all straight, so here’s our ranking of ideas to fix federal transportation funding, from worst to best.

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Michigan Gas Tax Hike Could Provide Some Relief for Detroit Transit Riders

Michigan state senators voted last week to approve a gas tax hike expected to net more than $1 billion annually to fix the state’s notoriously potholed roads, reports the Free Press. The measure, if it passes the House intact, could also be good news for Detroit’s woefully inadequate transit system.

A provision of the bill would allow Detroit to spend 20 percent of its portion of the proceeds on transit. Detroit has been funding transit only through its general fund — with no dedicated revenue stream — and it has arguably the worst transit system of any major city in the nation. With the city in bankruptcy, general fund revenues for transit have been in short supply. Riders report two-and-a-half-hour one-way commutes, or buses that never show, making it nearly impossible to hold down a job without a car.

Although the region is in the process of merging Detroit’s transit system with SMART, the suburban transit provider, establishing a seamless system has been fraught with political challenges. Regional planners, for instance, recently shifted millions of dollars in transit funding from Detroit to the suburbs. A new funding source would be huge.

Under the plan approved by the State Senate, Michigan’s gas tax would incrementally rise 17 cents per gallon over the next few years. Raising the tax to fix the state’s roads has been a top priority of Governor Rick Snyder, and Republican lawmakers apparently felt comfortable advancing it following the election.

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Lesson From the States: Index Your Gas Tax to Something, Anything

By tying its gas tax to gas prices, Kentucky has seen its revenues rise while Massachusetts -- whose attempt at indexing to inflation failed last week -- has lost ground. Image: Tax Policy Center, using U.S. Census data.

By tying its gas tax to gas prices, Kentucky has seen revenues rise, while Massachusetts — where voters rejected indexing the gas tax to inflation last week — has lost ground. Image: Tax Policy Center, using U.S. Census data.

Amid all the hand-wringing in Congress about transportation funding is one simple fact: The federal gas tax has been unchanged at 18.4 cents per gallon for 21 years. During that time, rising fuel efficiency and inflation have chipped away at how much the tax brings in and eroded the value of what remains.

To make up for the federal paralysis, states have increased revenues on their own. Since 1993, 42 states and the District of Columbia have raised gas taxes.

That shows real courage on the part of state and local lawmakers — a courage that’s been conspicuously absent on Capitol Hill. And that courage has been vindicated: Even where voters have beaten back attempts to raise the gas tax — most recently in Massachusetts, where an Election Day ballot measure repealed the state’s new practice of automatically indexing the gas tax to inflation — they haven’t punished lawmakers who voted for them.

Still, only half of the states that raised the gas tax have done so by more than 5 cents a gallon. And the vote in Massachusetts could have a chilling effect on other states that would like enact a mechanism to keep the gas tax in line with costs without having to take frequent, politically difficult votes to raise the rate.

In a report released just after Election Day, Richard Auxier of the Tax Policy Center — a joint project of the Brookings Institution and the Urban Institute — makes the case for state-level gas tax reform.

Making the gas tax a simple sales tax seemed like an appealing option when gas prices were rising steadily, but over the past few months it’s seemed like a less wise choice. Still, over time, it would have made a big difference: Combined federal and state gas taxes have dropped from 28 percent of the total cost of gas in 2000 to just 12 percent in 2013 as the price of gas jumped 136 percent.

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Talking Headways Podcast: Uber and the Case of the Hidden Gas Tax

podcast icon logoUber is celebrating. DC passed an Uber-legalization law that Uber thinks cities the world over should follow. The problem is, most cities have much more tightly regulated taxi industries than DC, with a far higher cost of entry. In those cases, letting Uber get away with providing taxi services while complying with none of the rules is unfair. The taxi companies have been screaming about this for a while now. Uber’s response is something like, “Catch me if you can, old geezer.” DC’s contribution to that conversation strengthens Uber’s position.

In other news, a front group for the oil industry is trying to cause panic among California drivers about a “hidden gas tax” that’s going to hit come January. What they’re really talking about is California’s landmark cap-and-trade law to limit greenhouse gas emissions, which will start including transportation fuels at the beginning of the year. Jeff and I called up Melanie Curry of Streetsblog LA to explain to us a campaign that didn’t seem to really make any sense and she assured us that we’re not crazy; it really doesn’t make any sense.

Stay tuned; our election recap edition will be coming out shortly.

You can find this podcast on iTunesStitcher, and the RSS feed, or wherever cool kids gather.

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Building Cloverleafs Won’t Inspire Americans to Pay More for Transportation

This post by Ben Ross was originally posted at Dissent.

The federal transportation fund is running out of money, threatening the country with potholes, stopped construction, and economic downturn. Congress, which has kept the program solvent with short-term patches for years, now finds itself unable to do more than buy a few months’ time.

Mainstream opinion pins the blame for this state of affairs on partisanship and anti-tax extremism. But the crisis has a deeper cause. In transportation, as in so many areas of American politics, the terms of debate are controlled by an elite that has lost touch with the rest of the country.

Voters on both the Tea Party right and the urban left have lost the desire to pay higher taxes for new roads. Yet powerful highway bureaucracies and their political allies insist that added revenues must go toward ever more cloverleafs and interstates. They keep searching for money to build what voters don’t want to pay for, a quest doomed to end in futility.

The roots of the congressional deadlock are best seen far from Washington.

When Texas Governor Rick Perry took office in 2000, he found himself caught between campaign contributors’ yearning to build expressways and conservative hostility to tax increases. He sought a way out with an aggressive program of toll-road building.

But when the highways opened, drivers rebelled against the stiff fees. Revenue fell far below forecasts, and grassroots activists launched an anti-toll campaign. At last month’s state Republican convention, the insurgents triumphed. The state party platform now calls for no new tolls (as well as no new taxes).

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With No Transport Funding Fix, USDOT to Cut Payments to States Next Month

Click to enlarge. Next month, the Highway Trust Fund -- the funding mechanism for the nation's transportation system -- will become insolvent next month without Congressional action. Chart: FHWA

Click to enlarge. Next month, the Highway Trust Fund — the funding mechanism for the nation’s transportation system — will become insolvent unless Congress acts. Chart: FHWA

State transportation departments could see the federal funding they receive pared back as early as a few weeks from now if Congress doesn’t come up with a transportation funding solution.

A “cash management plan” to deal with the impending shortfall in the Highway Trust Fund — which actually pays for transit, biking, and walking projects in addition to roads — was outlined in a letter from U.S. DOT to state transportation officials yesterday [PDF]. U.S. Transportation Secretary Anthony Foxx wrote that “as we approach insolvency, the Department will be forced to limit payments to manage the reduced levels of cash.”

Federal transportation revenues have been faltering for a long time, primarily because inflation has eaten away at the gas tax, which hasn’t increased in more than 20 years. Congress and the White House have floated many possible solutions of varying merit — a gas tax increase, an excise tax on oil, “business tax reform,” even canceling Saturday mail service. Lacking an agreed-upon revenue source, the Highway Trust Fund has been propped up with general revenues over the last few years. It is unclear whether Congress will extend that stopgap before funding starts to run dry in the next few months.

In his letter, Foxx indicated that if the issue isn’t resolved by August 1, around the time when revenues are expected to dip below current spending levels, U.S. DOT will dole out the available money based on existing funding formulas. In other words, the funding cuts will be shared among all the states, based on population and other factors.

In a speech yesterday in Washington, President Obama urged Congressional action to ward off funding problems, saying inaction would put 700,000 jobs at risk — or about as many people as live in Denver or Boston. He blamed Congressional Republicans for failing to act to resolve the issue.