Yes – Roads are Paid for by Users

COST Commentary: The immediate article below, by Tom Rubin for the ‘American Dream Coalition,’ addresses the frequent allegation by train transit supporters that roads are not financially supported by user fees/taxes. This leads to generalizations that imply transit trains and roads are both subsidized in similar amounts.

The second article by Robert W. Poole, Jr. for the Reason Foundation is commentary on the ‘American Dream Coalition’ article.

While a little different in their analysis, both articles conclude that highways are financially self-supporting.

Both articles note the major diversion of tax/fee dollars intended for roads. In Texas almost one-half of the gas tax dollars are used for other than roads and, at the federal level, a significant portion of the gas tax is used for such items as mass transit and other non-road ear-marks.

The long time federal road funding approach of using gas taxes (user’s fees) has been somewhat watered down by stimulus funding from the US Government’s general fund over the past couple of years.

Notwithstanding an “unclean situation,” it is clear that the subsidies per passenger mile for public transit in the nation are between 50-100 times any subsidies per passenger mile for roadways or air travel.

Yes – Roads are Paid for by Users

by The American Dream Coalition

One of the arguments frequently made by transit boosters is a defensive one in response to criticism that transit is heavily subsidized. They respond by essentially acknowledging this truth but shifting it to, Well, roads are subsidized, too! This is an article of faith among them, and they can usually dig up a study or two by the Sierra Club and other anti-automobile outfits to justify their arguments. The latest is from U.S. PIRG. that involves redefining a lot of terms to suit its pre-determined conclusion.

What if their claims are bogus?

With the help of a generous grant, the American Dream Coalition commissioned a study on road costs and revenues by Tom Rubin, one of the nation’s foremost experts in transportation accounting. The study is found on the ADC main page under “ADC Special Report,” and the first thing you’ll note is its comprehensiveness. He looks at ALL sources of road-related revenue and road-related expenditures. He breaks it down state by state. He details the methodology and provides links to the source data. In other words, it is thorough and verifiable. It’s the real deal!

And what are his conclusions?

“For the nation as a whole, using the most recently available full set of data, chiefly from the Federal Highway Administration’s Highway Statistics series for the 2007 reporting year, the answer is, yes, road users did pay the full cost of roads, with governmental revenues from road users exceeding governmental expenditures $196.7 billion to $179.4 billion, an excess of $17.3 billion, or 9.6% of expenditures.”

There is variation state by state, with 23 states collecting more revenue than they spent on roads and 28 states (including the District of Columbia) where expenditures exceeded revenues. My state – Florida – collects more than it spends. What about yours?
This article was presented at the ADC conference in September 2010. It utilizes data primarily for the 2007 reporting year to FHWA.

Thomas A. Rubin, “Are the Full Costs of Roads Paid by Road Users,” September 2010, commissioned by the American Dream Coalition with funding from Donors Capital Fund.

Yet Again, Do Roads Pay for Themselves?

by Robert W Poole, Jr. Surface Transportation Innovations, Reason Foundation, March 2011

The Public Interest Research Group released a report in January called “Do Roads Pay for Themselves? Setting the Record Straight on Transportation Funding.” As you might expect from this generally anti-highway group, their answer is not just no but “hell, no.” This is an old debate, but PIRG hopes to further undermine the users-pay/users-benefit principle by showing that all modes are subsidized, so the debate should really be about which mode should get more subsidy.

Transportation economist David Levinson pointed out some major flaws with the PIRG report in a posting on the University of Minnesota blog, The Transportationist (Jan. 11th). First, he notes that PIRG is very slippery with its terminology, shifting back and forth between “roads” and “highways” as suits its purposes. As Levinson notes, it is well known that “roads”—meaning every paved surface including neighborhood streets—are not fully paid for by user taxes. Indeed, most local streets and roads are legitimately paid for out of local property taxes, given that paved-road-access makes a property far more valuable than one without, even for those lacking cars. (How else could Fedex, UPS, and the pizza delivery guy get to your door?) So the more relevant question to ask is whether highways are fully supported from user taxes.

PIRG also argues that fuel taxes are not really user charges because at some points in time portions of the federal gas tax, for example, were used for deficit reduction, and since the Reagan administration a dedicated portion of those receipts is devoted to mass transit. But the relevant measure is not how much of the user-tax revenue is being diverted (often at the urging of groups like PIRG) to sidewalks, bike paths, recreational trails, and transit, but rather how much motorists pay in user taxes versus how much governments spend on highways.

The most recent assessment of that question was done about a year ago by transportation consultant Thomas Rubin, CPA. “Are the Full Costs of Roads Paid for by Road Users?” was commissioned by the American Dream Coalition and is available on their website ( In this carefully done assessment, Rubin uses data for 2007, drawn primarily from the FHWA’s Highway Statistics series (especially Table HF-10). Selecting this year for detailed analysis is important, because it is prior to the huge distortion introduced in the last few years by the injection of tens of billions of dollars in general-fund “stimulus” money into the Highway Trust Fund, but it is recent enough to reflect ongoing trends.

His bottom line conclusion is that “road user revenues” at all levels of government in 2007 totaled $198.3 billion compared with $171.8 billion in spending on roads by all levels of government. I have one serious disagreement with what is included in the revenues and that is sales tax revenues on vehicles and parts. To be sure, if autos did not exist, governments would be short by that amount of revenue ($52.8 billion in 2007), but nowhere that I know of is that sales tax considered a highway user tax, in contrast to every other revenue item in Rubin’s table. So if we subtract that from the revenue total, the result is that road user revenues covered 84.7% of all road spending in 2007.

But to be consistent with the reality that local streets and roads are not funded by user-tax revenues, we should really subtract from the spending side the $64.5 billion in local roads spending. That gives a revised “highway” spending total of $107.3 billion, which is far more than covered by the adjusted highway user revenue (after deducting auto sales tax proceeds) total of $145.5 billion. On that basis, highway user-tax revenue yields 136% of highway spending. So yes, highways are self-supporting.

It’s ironic that PIRG and its allies lambaste the current funding system for not making highways self-supporting. After all, it is they and their allies that have systematically expanded the diversions of federal and state highway trust fund monies to non-highway uses, always coming up with clever names such as “Safe Routes to School” and more recently “Complete Streets,” as well as seeking to make ever-larger fractions of highway money “flexible”—i.e., divertible to non-highway uses. The new Congress has a great opportunity to end this nonsense, redirecting the limited amounts of highway user revenues to their original purpose.

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