Highway Trust Fund: Gas Taxes (User Fees) Need Updated Approach
COST Commentary: The following article addresses potential approaches to a need, which many support, to develop new methods of collecting funding/user fees for highways at both the federal and state levels. The current system of paying for highways with a trust fund, which is created by ‘gas taxes,’ has been used for more than 50 years. This gas tax (user fee) has developed a number of issues including:
1. Gas taxes provide a reducing relationship to miles traveled due to alternative power sources and wide variances in gas miles per gallon; 2. There is not a close relationship between gas taxes paid and the specific highways/roads being used by vehicles; and 3. A significant portion of gas taxes are being siphoned to fund public transit and other programs at the federal and state levels.
Today, technology offers the possibility to revise the current system of collecting highway user fees and greatly minimize the problems described above while not creating huge added administrative and collection costs. There are numerous issues and implementation approaches/procedures which need to be addressed satisfactorily including:
1. Choosing/developing an approach to better relate user fees to miles driven on highways such as odometer readings or GPS systems to record specific highway usage; 2. Developing charging approaches for different kinds of vehicles to establish a closer relationship between user fees and the use of highway asset, such as by heavier and lighter vehicles; and, 3. Preventing the diversion of highway user fees to other uses.
The Washington Times Gets It Wrong
By Randal O’Toole, March 28, 2011 in The Antiplanner.
The Antiplanner generally appreciates the efforts of the Times, a fiscally conservative paper that tries to watchdog government agencies that waste tax dollars. But an editorial last Friday about highway user fees missed the point.
The article was written in response to Congressional Budget Office (CBO) report on highway user fees. “The claim is that driver’s aren’t paying their fair share because the $35 billion collected in federal gasoline taxes doesn’t cover highway spending,” the Times charged. That, however, is a misrepresentation of the CBO report.
“Some policymakers and transportation analysts have expressed interest in developing new sources of funding,” the report noted, partly because, “over fiscal years 2008 to 2010, federal spending on highways exceeded the revenues available in the trust fund, and the government supplemented the fund with about $30 billion from the Treasury’s general revenues.” Note that the CBO didn’t say this was a reason to reexamine sources of funding; only that “some policymakers” thought so.
The Times correctly points out that lots of money has been siphoned from highway user fees into transit and other programs. It is also true that the reason spending in 2008 and 2009 exceeded revenues was Congressional mismanagement, not a true shortfall in highway funds. But that doesn’t mean that gas taxes are working perfectly or that we can rely on them for future highway funding.
“Bureaucrats and rent-seeking corporate allies have teamed up to advocate a solution to a problem that doesn’t exist,” the Times insists. “They want continuous tracking of everyone’s driving so that every mile can be taxed.”
The Times editorial writers should have read the report in a little more detail. The CBO’s main point was that the costs of highways are more proportional to miles driven than to gallons of fuel burned, so a vehicle-mile fee is more fair. Also, as cars become more fuel-efficient, gas taxes are less effective at paying for roads. “As scheduled increases in federal standards for average vehicle fuel efficiency take effect, dedicated revenues may fall further below spending,” the CBO notes. (Actually, the failure of gas taxes to keep up with the cost of providing roads is one of the main reasons congestion is many times worse today than it was thirty years.)
“Some policymakers and transportation analysts have expressed interest in developing new sources of funding, for two main reasons. One is that, over fiscal years 2008 to 2010, federal spending on highways exceeded the revenues available in the trust fund, and the government supplemented the fund with about $30 billion from the Treasury’s general revenues. As scheduled increases in federal standards for average vehicle fuel efficiency take effect, dedicated revenues may fall further below spending. The other main reason is that the current taxes do not give highway users an incentive to consider all of the costs their use of roads imposes on others.”
“The CBO insists we need to pay more because, ‘Any given driver’s highway use also imposes costs on other users,’” charges the Times. Actually, the CBO doesn’t insist on anything; the report specifically notes that, “In keeping with CBO’s mandate to provide objective, impartial analysis, this study does not make any recommendations.”
The truth is that gas taxes don’t work anymore and really haven’t worked very well for several decades. The only reason we use gas taxes to pay for roads is because collection costs were low compared with tolls. Now that we have the technologies to collect tolls or vehicle-mile fees at a reasonably low cost (and without necessarily invading people’s privacy), we should make the switch.
The purpose of vehicle-mile fees is not to impose higher taxes on people; it is to provide better signals for road users and road providers. Such fees will let road users know the true cost of using the roads while they let road providers know where transportation investments are most needed. While there is no guarantee that voracious transit agencies won’t try to leech off of vehicle-mile fees–as they have gas taxes at the federal level and tolls and vehicle registration fees in some states–that’s not an argument against such fees; it is only an argument for the people who pay the fees to be more vigilant in protecting their investments.