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What Should The Gas Tax Pay For?

By Lisa Caruso
March 1, 2010 | 7:44 a.m.
  • 17

Since the Highway Trust Fund was created in 1956, revenues from the fuels tax and other highway user taxes (such as those on tires and truck sales) have been credited to it to fund the construction of the interstate system and other highway projects. The "user pays" principle that the gasoline tax represents has until recently been the foundation of the federal surface transportation program.

But the user pays principle has been weakened as the trust fund has taken on responsibility for funding the nation's mass transit systems and as the surface transportation program has added goals of mitigating the impact of transportation on the environment and now promoting livable communities.

At a time when gas tax revenues can no longer cover the cost of maintaining, much less upgrading, the nation's surface transportation infrastructure, what should a gas tax pay for? And how should we fund the non-vehicle element of our infrastructure that we may increasingly use to move people and goods?

17 Responses

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March 5, 2010 3:10 PM

By Ed Wytkind

President, Transportation Trades Department, AFL-CIO

What should the gas tax pay for? In a word, transportation.

Contrary to The Washington Post’s misguided editorial today, the gas tax must exclusively fund the expansion and maintenance of America’s transit and highway systems. Given our surface transportation network’s current state of disrepair and the puny amount of political will to pay for its needs, funding other priorities from the gas tax would be nothing short of disastrous. The Post might want to take a tour of our decaying transportation system before it serves up half-baked editorials about raising the gas tax to service the federal debt or maybe “rebate” some of the money back to Americans.

We currently have a severe funding gap in transportation. It will take $2.2 trillion to bring our overall infrastructure into a state of “good” repair, according to the American Society of Civil Engineers’ most recent report. And as we watched on television in 2007, America’s bridges can actually fall down. It’s sad to say it, but it often ta...

What should the gas tax pay for? In a word, transportation.

Contrary to The Washington Post’s misguided editorial today, the gas tax must exclusively fund the expansion and maintenance of America’s transit and highway systems. Given our surface transportation network’s current state of disrepair and the puny amount of political will to pay for its needs, funding other priorities from the gas tax would be nothing short of disastrous. The Post might want to take a tour of our decaying transportation system before it serves up half-baked editorials about raising the gas tax to service the federal debt or maybe “rebate” some of the money back to Americans.

We currently have a severe funding gap in transportation. It will take $2.2 trillion to bring our overall infrastructure into a state of “good” repair, according to the American Society of Civil Engineers’ most recent report. And as we watched on television in 2007, America’s bridges can actually fall down. It’s sad to say it, but it often takes a calamity with a body count to bring about change. Sadly, the Minneapolis bridge collapse wasn’t enough to get this nation to act decisively.

Thankfully, we’ve seen a sea-change in Washington after eight long years of a White House that didn’t seem to know we had any transportation challenges in America. The Obama Administration clearly gets it – it understands the central role our transportation system plays in not only our global competitiveness but in job creation. Estimates vary, but most experts agree that with every $1 billion invested, around 35,000 jobs are created. In the current economic environment of high joblessness, transportation investment is a winning strategy: Americans get back to work and the nation rebuilds its decaying infrastructure.

Chairman Oberstar’s surface transportation reauthorization would spend $450 billion (actually half a trillion dollars if you include his vision for a rail program) on mass transit, highways and bridges. It would also put six million Americans to work in six years.

Our crumbling surface transportation system is a problem most Americans understand, because every one of us wastes an average of 36 hours per year stuck in traffic. Mass transit systems, seeing greater ridership every year, face budget crises forcing some to cut service and slash jobs. Washington can do something about this by giving transit systems more funds with greater flexibility to use them. More than 62 percent of rail passenger coaches are beyond their replacement age; about 6 in 10 busses must be replaced within 6 years; and poor road conditions are the number one cause of motor vehicle crash severity at a cost of $12 billion a year.

It would be hard to find a worse idea than raising the federal fuel tax but allocating none of the new funds to solve these and many other problems.

Responsible leadership must prevail here. Anyone who understands what’s at stake agrees that we need to find a way to increase transportation funding and a gas tax increase – among other proposals – must be on the table. We can’t rebuild America’s infrastructure with fairy dust, more hyperbole or fuel tax measures designed to alter Americans’ behavior, as The Washington Post would have us do. If a gas tax increase is to be considered, put the funds to work in rebuilding and repairing our surface transportation system. Leave the behavioral science to the editorial pages.

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March 5, 2010 2:38 PM

By Ed Hamberger

President and CEO, Association of American Railroads

The answer lies not in more concrete, but in more steel. A train can carry the freight of 280 or more trucks. Shifting freight from trucks to rail slows the wear and tear caused by truck traffic on our nation’s federally funded highways. Moving more people and goods by rail helps reduce the pressure to build costly new roads and helps cut the cost of maintaining our existing highways.

Unlike other modes, railroads use private funds to build and maintain the nation’s rail network infrastructure. Even during the economic downturn, railroads have been reinvesting record amounts back into their networks – more than $400 billion since 1980 – creating the best freight transportation system in the world.

To take full advantage of railroads’ unparalleled potential to take trucks off the highway, save fuel, and reduce harmful emissions, even more investment is needed. Legislation like H.R. 1806, which provides federal tax incentives for investments in new track, bridges and tunnels would allow more freight to move by rail.

Many transportation experts, business leaders, policymakers, and rail customers agree: tax incentives for rail capacity revitalization are the way to go. The benefits to our economy and environment are real, measurable, and well worth it.

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March 5, 2010 2:17 PM

By Steve Van Beek

Chief of Policy and Strategy and Director, LeighFisher

Gabriel:

I support fuel taxes and believe they are a good proxy for user fees (although they do not account fully for the costs users impose on the transportation system). I also support public dollars and a surface program rooted in good planning and inclusive alternatives analysis that account for the public benefits we receive from transportation, many of which are external to the market decisions made by users and providers alike.

In metropolitan areas, economic research has shown that public transportation projects are efficient (and would even be more so if subsidized to a greater extent than today) and act as sensible alternatives to road projects. Therefore, using fuel taxes to support these type of projects is reasonable (as is the use of local and state tax monies); after all the user is the passenger who has a choice of alternatives.

Many major freight projects, such as the Alameda Corridor, have concentrated costs and dispersed benefits exactly the kind of projects that economists believe are worthy of public support, whether through funding, user ...

Gabriel:

I support fuel taxes and believe they are a good proxy for user fees (although they do not account fully for the costs users impose on the transportation system). I also support public dollars and a surface program rooted in good planning and inclusive alternatives analysis that account for the public benefits we receive from transportation, many of which are external to the market decisions made by users and providers alike.

In metropolitan areas, economic research has shown that public transportation projects are efficient (and would even be more so if subsidized to a greater extent than today) and act as sensible alternatives to road projects. Therefore, using fuel taxes to support these type of projects is reasonable (as is the use of local and state tax monies); after all the user is the passenger who has a choice of alternatives.

Many major freight projects, such as the Alameda Corridor, have concentrated costs and dispersed benefits exactly the kind of projects that economists believe are worthy of public support, whether through funding, user fees (such as container taxes), and loan guarantees. Without that support, no one private entity will have the financial incentive to build it.

User fees are also routinely used to cross-subsidize transportation networks, whether you are considering airports or highways (use does not correlate with the funding received). That is also something worth supporting and has been a foundation of existing U.S. policy.

In each of the cases, the private sector alone will result in inefficient outcomes. That is why I support both fuel taxes as a proxy and support flexibility in how they are used. It should not be a blank check, however, and the key is real alternatives analysis--something this nation does suboptimally at present.

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March 5, 2010 1:40 PM

By Gabriel Roth

Research Fellow, The Independent Institute

Steve –

It seems to me that our differences are not small, and that the “user pays” principle can be the basis of the strategy you seek that

“documents our needs, designs a program to benefit the passengers and shippers that use our system, and identifies additional revenue sources to support today and tomorrow’s transportation system.”

That strategy is called the free market system, and we rely on it for most of our necessities.

If transportation customers are allowed to pay for what they choose, and get what they choose to pay for, benefits are identified, competing programs are prepared, and revenues sources are found.

Are not the politicized transportation programs and processes you seek to have reauthorized just the ones that lead to the “circular firing squads” you deplore?

Dedicated fuel taxes are an attempt to apply the “user pays” principle. They should be supported, as the alternative of “everyone tries to live at the expense of everyone else” has proven to be unsustainable.

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March 5, 2010 8:08 AM

By Steve Van Beek

Chief of Policy and Strategy and Director, LeighFisher

The latter set of posts this week is an encouraging sign that transportation advocates may be willing to sharpen their focus on getting a long-term authorization rather than demanding that they get 100% of their respective constituencies’ wish lists. This is progress.

If we needed it, the Washington Post editorial this morning ("$7 a gallon?") is a reminder that there are some who do not see any transportation benefits to a fuels tax increase. In a strange twist, the Post, reflecting the views of some misplaced advocates, only sees the non-transportation benefits of a transportation tax. And what does the Washington Post recommend we do with the proceeds from a gas tax increase? The mother of all revenue diversion: "Tax receipts could go to deficit reduction, or they could be rebated directly to households…"

Go ahead and search the editorial for any mention of improving transportation infrastructure (highways, transit, rail, bicycle routes or pedestrian paths): you will not find it. Unfortunately, this editorial is sy...

The latter set of posts this week is an encouraging sign that transportation advocates may be willing to sharpen their focus on getting a long-term authorization rather than demanding that they get 100% of their respective constituencies’ wish lists. This is progress.

If we needed it, the Washington Post editorial this morning ("$7 a gallon?") is a reminder that there are some who do not see any transportation benefits to a fuels tax increase. In a strange twist, the Post, reflecting the views of some misplaced advocates, only sees the non-transportation benefits of a transportation tax. And what does the Washington Post recommend we do with the proceeds from a gas tax increase? The mother of all revenue diversion: "Tax receipts could go to deficit reduction, or they could be rebated directly to households…"

Go ahead and search the editorial for any mention of improving transportation infrastructure (highways, transit, rail, bicycle routes or pedestrian paths): you will not find it. Unfortunately, this editorial is symptomatic of the paper’s lack of substantive attention to our nation's mobility needs and the role that surface transportation provides in addressing them.

Of course, the Post also misses the many benefits that transportation investments provide to users (including the very households to whom the Post would rebate the proceeds), to job creation, and to the larger economy. It is an effective reminder, however, that we should put our smaller differences aside in favor of a strategy that documents our needs, designs a program to benefit the passengers and shippers that use our system, and identifies additional revenue sources to support today and tomorrow’s transportation system. Only by doing that will we get out of this Groundhog Day pattern of short-term extensions and circular firing squads.

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March 4, 2010 6:03 PM

By Greg Cohen

President and CEO, American Highway Users Alliance

Although my post was certainly combative, I must say that I agree with Mort. I suspect very few of the bloggers here want to throw bombs for fun or to maintain the current inertia. As the process moves forward, it will require give and take. We must use every reasonable funding source to invest in a bill that provides vast benefits for all Americans and my hope is that the next bill will be one that we can all be proud of.

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March 4, 2010 5:41 PM

By Patrick D. Jones

Executive Director & CEO, International Bridge, Tunnel and Turnpike Association

No More Verduns

As I read the comments of my colleagues here in this blog, I am filled with the unmistakable and tragic image of the World War I Battle of Verdun in which the French and German armies prosecuted a futile war of attrition for 11 months in 1916 during which the two sides each sustained more than 400,000 casualties, gaining almost no ground in the process. It seems as though we have ground ourselves so deeply into our own separate arguments about the appropriate use of the fuel tax that we cannot even raise our heads above the trenches to see the larger field of battle. The arguments I am reading here in response to this question I have heard dozens of times before by the same people in other venues. Each argument is rigorously and logically consistent within its own narrow view. And each one is argued with religious zeal to the point that no one in the debate can accept the possibility that any other person’s “god” could have anything useful to say. This is a sad state of affairs.

I don’t know what to do with the fuel ...

No More Verduns

As I read the comments of my colleagues here in this blog, I am filled with the unmistakable and tragic image of the World War I Battle of Verdun in which the French and German armies prosecuted a futile war of attrition for 11 months in 1916 during which the two sides each sustained more than 400,000 casualties, gaining almost no ground in the process. It seems as though we have ground ourselves so deeply into our own separate arguments about the appropriate use of the fuel tax that we cannot even raise our heads above the trenches to see the larger field of battle. The arguments I am reading here in response to this question I have heard dozens of times before by the same people in other venues. Each argument is rigorously and logically consistent within its own narrow view. And each one is argued with religious zeal to the point that no one in the debate can accept the possibility that any other person’s “god” could have anything useful to say. This is a sad state of affairs.

I don’t know what to do with the fuel tax money. But it’s clear to me that in every nook and cranny of government and public service, there is not enough money to do all of the things that we wish to do. Let’s start there. Before we start building barricades around fuel taxes and accusing one another that you just don’t understand what “user pays” really means, let’s think about coming to the table to address what’s happening in the big field of battle. Right now we seem to be stuck in the false dichotomy that fuel taxes may only be used for this or they may only be used for that. While we’re having that argument, the entire world is crumbling around us. We need to have bigger and more important conversations about the future of transportation in this country that go beyond the addictively Facebook-like conversations around such a trivial source of money as the fuel tax. Let’s stop repeating the same tired arguments that perpetuate the ideological Verdun’s and start having a conversation about how we can improve transportation within the context of all the other challenges (health care, education, jobs, etc.) that we must confront.

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March 4, 2010 4:35 PM

By Mortimer L. Downey

Senior Advisor, Parsons Brinckerhoff

Not much time to respond on this one, but I think the question is too narrowly focused--although answering the question that should be asked would be a very long task.

I think that asking "what the gas tax should pay for" looks through the wrong end of the telescope. What we should be looking at is the transportation system as a whole and how best to finance it, whether through gas taxes, carbon taxes, other use related fees or through the general fund, with due consideration of the implications of each method. (Of course, this is what several commissions and major studies have done, but we're not much closer to an answer.)

Fighting over the gas tax resources when they are clearly too small to meet any reasonable proportion of the system needs--probably not enough to even meet the appropriate highway needs, is dooming us to failure. It's a battle that raged for a number of years a few decades ago, and it was reminiscent of the trench warfare of World War I. A lot of damage, a lot of pain and suffering, and no one gained much territory in the end.

Let's take the broader view and see what consensus can be reached, what coalitions can be builgt and even what makes sense analytically. Let's not just shoot at each other.

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March 4, 2010 4:19 PM

By Greg Cohen

President and CEO, American Highway Users Alliance

I’m always amused when advocates of non-highway modes and other direct beneficiaries of motorist fees, earnestly and seriously sit before Congressional committees, declaring their support for increased user fees on motorists and truckers. Even more amusing is the common response, “How big an increase do you want?”

Without skipping a beat, the next suggestion is that we need to “balance” transportation programs– meaning an increasing share of the user fee funds should be diverted to non-highway programs. Rarely does anyone challenge this interpretation or point out that a “balanced” program should be spent on the transportation investments people are going to use or that good government requires a consideration of costs per passenger mile. And never, (ever!) have I heard these advocates offer to pay their own federal user fees to support their programs.

Among the most radical of highway opponents, there are growing calls for the federal government to establish policies to reduce vehicle travel and get people out of thei...

I’m always amused when advocates of non-highway modes and other direct beneficiaries of motorist fees, earnestly and seriously sit before Congressional committees, declaring their support for increased user fees on motorists and truckers. Even more amusing is the common response, “How big an increase do you want?”

Without skipping a beat, the next suggestion is that we need to “balance” transportation programs– meaning an increasing share of the user fee funds should be diverted to non-highway programs. Rarely does anyone challenge this interpretation or point out that a “balanced” program should be spent on the transportation investments people are going to use or that good government requires a consideration of costs per passenger mile. And never, (ever!) have I heard these advocates offer to pay their own federal user fees to support their programs.

Among the most radical of highway opponents, there are growing calls for the federal government to establish policies to reduce vehicle travel and get people out of their cars. Very little thought is given to the fact that these highway users, supposedly in need of behavior modification, are the very ones subsidizing non-highway programs.

Ground transportation is overwhelmingly on roads, regardless of the type of vehicle, private or public. According to USDOT, between 98 to 99% of all Passenger Miles Traveled and Vehicle Miles Traveled occur on our roads -- not on trolleys, light rail, subways, commuter rail, or Amtrak. And it certainly makes sense that the user fees collected from those who use the roads should be invested on better and safer roads. These projects benefit motorists, truckers, bus riders, motorcyclists and bicyclists, and RVers.

Highway users who stand to pay more user fees per gallon in a surface transportation bill have been supportive, to an unprecedented scale, of increased highway user fees to improve system performance, increase safety, combat congestion, and strengthen our aging structures and pavements. We recognize that we need to pay more, just to maintain our current system, and we have been completely willing to do so.

As an organization representing a broad array of highway users, we do not demand that 100% of the user fee should be used for highways -- certainly there are occasions when a non-highway investment can provide an ancillary benefit to motorists. We simply ask for proportional funding increases for the various modes funded under SAFETEA-LU and an increased percentage of general funding of non-highway purposes.

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March 4, 2010 10:53 AM

By Patrick J. Natale, P.E.

P.E., Executive Director, American Society of Civil Engineers

It’s obvious that the current system, funded by motor fuels taxes, is unsustainable. Just this week we all got to experience the reality of a shutdown of those programs, if only for less than 72 hours.

Does that broken system, combined with our current state of political paralysis, mean we should stop planning for the way things ought to be and instead fall back on a “patch and pray” mentality? Of course not. If anything, it means that as the advocates for improving the funding structure and developing a more productive and healthier transportation infrastructure we have to be ready to respond.

We all agree there’s not enough money going into the system, period. Not to mention the fact that the pie we’re trying to carve a piece of is already too small. Arguing amongst ourselves about what percentage of revenues goes to which program is counterproductive and will just empower our opponents.

The user pays principle is widely accepted and should still be the foundation of our funding method. And, once we overcome ou...

It’s obvious that the current system, funded by motor fuels taxes, is unsustainable. Just this week we all got to experience the reality of a shutdown of those programs, if only for less than 72 hours.

Does that broken system, combined with our current state of political paralysis, mean we should stop planning for the way things ought to be and instead fall back on a “patch and pray” mentality? Of course not. If anything, it means that as the advocates for improving the funding structure and developing a more productive and healthier transportation infrastructure we have to be ready to respond.

We all agree there’s not enough money going into the system, period. Not to mention the fact that the pie we’re trying to carve a piece of is already too small. Arguing amongst ourselves about what percentage of revenues goes to which program is counterproductive and will just empower our opponents.

The user pays principle is widely accepted and should still be the foundation of our funding method. And, once we overcome our short-term setbacks, system preservation has to be the first priority. But, as we move forward we cannot forget that highway users are also benefitting from increased use of transit and enhanced livability, through quicker commutes, cleaner air and better economic opportunities.

To be successful, we need to step back and set clear goals. Increased safety, improved sustainability and livability, and reduced congestion would be good places to start. Then, keeping those goals in mind, we can develop solutions to unique local and regional problems. Suddenly the question of who pays for what becomes less of an issue.

A VTM and mode-neutral planning are significant changes that won’t happen overnight. But, by articulating clear goals and communicating how they will be addressed, we can give users the confidence to see their contributions as investments, rather than taxes.

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March 4, 2010 10:17 AM

By Bill Graves

President and CEO, American Trucking Associations

The tax on gasoline and diesel should pay for highway maintenance and increasing highway capacity at our nation’s worst traffic bottlenecks. Diverting these tax dollars away from highway construction is contrary to the original intent of the Highway Trust Fund. The “user pay” principle that is represented in federal fuel taxes has effectively funded our nation’s infrastructure for over 50 years.

Fuel taxes are equitable because the more fuel you use, the more you pay. Also, the fuel tax has the lowest collection costs, making it the most efficient source of funding available today.

The trust fund’s insolvency stems from fuel taxes not being adjusted since 1993 and from diverting funds to other modes of transportation. A recent Rand Corp. study concluded that the current fuel tax rate has not kept pace with inflation because elected officials “have grown increasingly reluctant to take on this politically unpopular task.” The tax must be adjusted to meet current needs and Congress should do a better job of prioritiz...

The tax on gasoline and diesel should pay for highway maintenance and increasing highway capacity at our nation’s worst traffic bottlenecks. Diverting these tax dollars away from highway construction is contrary to the original intent of the Highway Trust Fund. The “user pay” principle that is represented in federal fuel taxes has effectively funded our nation’s infrastructure for over 50 years.

Fuel taxes are equitable because the more fuel you use, the more you pay. Also, the fuel tax has the lowest collection costs, making it the most efficient source of funding available today.

The trust fund’s insolvency stems from fuel taxes not being adjusted since 1993 and from diverting funds to other modes of transportation. A recent Rand Corp. study concluded that the current fuel tax rate has not kept pace with inflation because elected officials “have grown increasingly reluctant to take on this politically unpopular task.” The tax must be adjusted to meet current needs and Congress should do a better job of prioritizing how federal funds are invested. In addition, transit should create its own viable long-term self funding solution instead of relying on fund diversion from Highway Trust Fund.

As we have documented on this blog, our nation’s freight demands coupled with a growing population require commitment to a national transportation strategy that focuses on mitigating traffic congestion and improving the flow of freight. U.S. freight tonnage alone is expected to increase more than 25 percent over the next 10 years and the majority of this freight will be transported by trucks on the Federal Highway System. Passing a long-term transportation bill that focuses on increasing capacity at our nation’s worst bottlenecks will improve transit times for everyone, and help reverse the negative impacts that congestion has on the economy, safety, and the environment.

The Texas Transportation Institute's 2009 Urban Mobility Report indicates that congestion creates an $87.2 billion annual drain on the U.S. economy in the form of 4.2 billion “lost hours” stuck in traffic and 2.8 billion gallons of wasted fuel. Reducing congestion will improve supply chain efficiencies and reduce transportation sector pollution caused by unnecessary idling.

We cannot ignore our real transportation needs. Adjusting the fuel tax to fund investment in new highway infrastructure will spur economic growth and put people directly back to work. While raising fuel taxes is politically unpopular, ATA estimates the average passenger vehicle driver would pay $5.57 per year for each penny increase in the gas tax. Dedicating these funds to highway construction projects ensures “user” taxpayers receive the maximum return on investment.

Alternatives to fuel tax such as assessing the number of vehicle miles traveled is currently inefficient because it attempts to collect taxes from millions of people, as opposed to a couple hundred wholesalers.

The trucking industry supports raising the fuel tax to provide funding for highway projects that reduce congestion across the country. Last week’s failure to pass another short-term extension of the surface transportation highlights again the need for Congress to take up a long-term highway bill. ATA urges Congress to consider raising the fuel tax to fund much needed highway projects across the country and restore reliability to the Highway Trust Fund.

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March 3, 2010 6:38 PM

By William Millar

President, American Public Transportation Association

The federal gas tax and the Highway Trust Fund have been extremely successful in providing resources to build a national highway system and fund state highway programs. Over time the federal Highway Trust Fund has gone through a steady and healthy evolution to a program that has allowed local decision-making. This has made the program more aligned to its full potential. Investments in programs such as public transportation and pedestrian safety make the overall transportation system function better. Such a holistic view results in a multi-modal, energy efficient, and environmentally sustainable transportation system that will power the American economy in the years ahead.

Transportation is, and always has been, a prime force in enabling commerce, and providing the infrastructure around which communities are shaped. The benefits and consequences of transportation investments go far beyond mobility alone. Transportation investments should be connected to outcomes vital to the prosperity of the community and the nation. Creating a vibrant community, providing transportation choices, and helping to lessen traffic congestion, are just a few examples. It is imperative that we have a transportation system that can unleash economic growth possibilities in ways that are energy efficient, environmentally friendly, and reduce our dependence on foreign oil.

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March 3, 2010 9:59 AM

By Robert Puentes

Senior Fellow and Director, Metropolitan Infrastructure Initiative

The user fee principle is certainly weakening but blaming it on the fact that gas tax receipts support transit, environmental mitigation, or livable communities strikes me as bit of a red herring.

The latest available federal highway data shows that all levels of government are becoming more and more reliant on sources other than user fees for their highway network. In 2007, 51 percent of the funding for highways came from user fees including motor fuel, vehicle taxes, and tolls. This is down from 64 percent of the funding in 1996.

Now on the federal level almost all of the revenue used for highways comes from user fees. In addition to the fuel tax is a range of other fees such as the tire tax, the heavy vehicle use tax, and the truck and trailer sales tax—those flow solely into the highway account of the trust fund.

However, in the last ...

The user fee principle is certainly weakening but blaming it on the fact that gas tax receipts support transit, environmental mitigation, or livable communities strikes me as bit of a red herring.

The latest available federal highway data shows that all levels of government are becoming more and more reliant on sources other than user fees for their highway network. In 2007, 51 percent of the funding for highways came from user fees including motor fuel, vehicle taxes, and tolls. This is down from 64 percent of the funding in 1996.

Now on the federal level almost all of the revenue used for highways comes from user fees. In addition to the fuel tax is a range of other fees such as the tire tax, the heavy vehicle use tax, and the truck and trailer sales tax—those flow solely into the highway account of the trust fund.

However, in the last 18 months about $50 billion in general funds has gone to support the federal surface transportation program (and this does not include the $20 billion proposed in the latest jobs bill.) Yet this is not just an issue on the federal level. The percent of revenues for highways coming from general fund appropriations stood at 13 percent in 1996 and was up to 19 percent in 2007.

Without debating the merits of those necessary infusions it is clear we have a larger problem here this is more reflective of a long term structural shift.

(One quick point needs to be clarified: the federal government does not provide operating assistance to metropolitan transit systems in urban areas over 200,000 people like Washington’s. In DC about 58 percent of the operating budget is paid for by users, advertising, and business revenues apart from the state and local contributions.)

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March 2, 2010 7:48 PM

By Gabriel Roth

Research Fellow, The Independent Institute

If the US Congress were really interested in the efficient development of transport infrastructure, it would get out of the business of trying to finance it. It would decline to re-authorize the federal Highway Trust Fund, and it would abolish the fuel taxes that feed it. Then, the individual states would be fully responsible for financing their roads, and would raise transportation funds in accordance with the wishes of their voters. Some states might even invite private providers to finance the facilities that travelers wish to pay for.

Unfortunately, Congress is likely to prefer to retain its powers, rather than to increase transport efficiency, and will reauthorize something like the present system. In that case I am convinced by Bob’s statement that the “user pays” principle should prevail, and that monies paid into a highway trust fund should be dedicated to highways. Efficient planning would also apply the rule to individual roads.

Robin’s response seems less convincing, especially at a time when Congress has “run out of other peo...

If the US Congress were really interested in the efficient development of transport infrastructure, it would get out of the business of trying to finance it. It would decline to re-authorize the federal Highway Trust Fund, and it would abolish the fuel taxes that feed it. Then, the individual states would be fully responsible for financing their roads, and would raise transportation funds in accordance with the wishes of their voters. Some states might even invite private providers to finance the facilities that travelers wish to pay for.

Unfortunately, Congress is likely to prefer to retain its powers, rather than to increase transport efficiency, and will reauthorize something like the present system. In that case I am convinced by Bob’s statement that the “user pays” principle should prevail, and that monies paid into a highway trust fund should be dedicated to highways. Efficient planning would also apply the rule to individual roads.

Robin’s response seems less convincing, especially at a time when Congress has “run out of other people’s money to spend”. She is of course correct that “we don't have enough money for education, or welfare, or parks”, but do not these shortages arise directly from abandoning the “user pays” principle where it can be readily applied, as in transport?

Why should not users of mass transit systems pay for what they use? If they do not, the responsibility for meeting deficits should be with the states or local authorities concerned, and not with the federal government. Why should farmers in Texas be forced to pay (via fuel taxes) for Washington DC’s Metro losses?

Lisa asks how we should fund the “non-vehicle element of our infrastructure”. Local footways, bikeways, recreational trails and safety measures are, like street lighting, part of the urban environment. Common sense suggests that they, too, should be paid for by the local people concerned, and that federal taxpayers should not be forced to shoulder such burdens by means of fuel taxes.

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March 2, 2010 6:45 PM

By Emil H. Frankel

Visiting Scholar, Bipartisan Policy Center

Given Congress’ seeming inability to adopt a multi-year surface transportation authorization bill and the means to fund adequately these programs, there are some who believe that we have moved permanently away from a system of infrastructure capital investment funded entirely by motor fuels taxes (serving as proxies for user fees). Under this scenario, General Funds will remain a growing and important part of the surface transportation funding framework.

In its report in June 2009 the Bipartisan Policy Center’s National Transportation Policy Project (NTPP) called for a reformed federal surface transportation programmatic structure under which the preponderance of federal surface transportation funds – 75 percent, to be specific – should continue to flow through formula programs. However, NTPP recommended that restructured formula programs should be directed to the preservation and restoration of existing transportation facilities and systems and that, consistent with that purpose, the criteria for allocating funds should be based on the condition o...

Given Congress’ seeming inability to adopt a multi-year surface transportation authorization bill and the means to fund adequately these programs, there are some who believe that we have moved permanently away from a system of infrastructure capital investment funded entirely by motor fuels taxes (serving as proxies for user fees). Under this scenario, General Funds will remain a growing and important part of the surface transportation funding framework.

In its report in June 2009 the Bipartisan Policy Center’s National Transportation Policy Project (NTPP) called for a reformed federal surface transportation programmatic structure under which the preponderance of federal surface transportation funds – 75 percent, to be specific – should continue to flow through formula programs. However, NTPP recommended that restructured formula programs should be directed to the preservation and restoration of existing transportation facilities and systems and that, consistent with that purpose, the criteria for allocating funds should be based on the condition of these assets, as well as on their performance and on state and local effort.

Under this scenario it is possible to imagine that existing (and perhaps augmented) federal gasoline taxes would be directed to system and asset preservation through the formula programs. NTPP also recommended that new programs for system expansion and improvements (across modes), should be funded by new sources, whether General Funds, specific freight fees, or other new fees and charges.

Whatever the form of funding that is adopted to support this programmatic framework, it should be seen, as transitional. Over a reasonable period of time, the federal gasoline tax should be replaced by more direct and effective user fees, such as a Vehicle Miles Traveled (VMT) charge. This transition is critical, because how the transportation system performs and how it is used are directly related to how people pay for it.

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March 1, 2010 7:46 AM

By Bob Poole

Director of Transportation Studies, Reason Foundation

Spend Highway Users’ Funds On Highways

Let me preface these comments by noting that as a member of the TRB committee that produced Special Report 285 on the long-term non-viability of the fuel tax for highway funding, I am on record favoring a transition to VMT fees. But that transition is likely to take a couple of decades. Meanwhile, this country has very serious highway problems to contend with, so the fuel tax remains central to highway finance.

I favor spending motor fuel taxes on highways for several reasons. To begin with, the users-pay/users-benefit principle which underpins the fuel tax has many virtues. It’s fair (those who pay benefit; those who benefit pay), it’s proportional to use, it’s somewhat self-limiting (in contrast to Europe’s fuel taxes, which are a general revenue source), it produces a predictable revenue stream, and (at least in the form of tolls) it lets users indicate how much highway infrastructure there should be via their willingness to pay higher rates. The users-pay/users-benefit principle is used in all our ot...

Spend Highway Users’ Funds On Highways

Let me preface these comments by noting that as a member of the TRB committee that produced Special Report 285 on the long-term non-viability of the fuel tax for highway funding, I am on record favoring a transition to VMT fees. But that transition is likely to take a couple of decades. Meanwhile, this country has very serious highway problems to contend with, so the fuel tax remains central to highway finance.

I favor spending motor fuel taxes on highways for several reasons. To begin with, the users-pay/users-benefit principle which underpins the fuel tax has many virtues. It’s fair (those who pay benefit; those who benefit pay), it’s proportional to use, it’s somewhat self-limiting (in contrast to Europe’s fuel taxes, which are a general revenue source), it produces a predictable revenue stream, and (at least in the form of tolls) it lets users indicate how much highway infrastructure there should be via their willingness to pay higher rates. The users-pay/users-benefit principle is used in all our other network utilities (electricity, gas water, etc.). It should remain the basis for how people pay for highway infrastructure, as well.

As we contemplate the next reauthorization of the federal program, we face nothing less than a crisis in highway funding. Much of the system is gradually wearing out and in need of major reconstruction, and its performance in urban areas (congestion) gets worse every year, temporary recession-induced blips notwithstanding. Two national commissions have documented the extent of the investment shortfall, as has the biennial Conditions & Performance Report from FHWA. The Financing Commission put the annual highway capital investment shortfall (federal, state, and local) at $55 billion under the “maintain” scenario—and $89 billion under the “improve” scenario.

Those projections are based on realistic projections of traffic, both truck and auto, that reflect continued growth in population and GDP, as well as the current conditions and performance of the highway system. And they do not explicitly take into account the need to rebuild and modernize the entire Interstate system over the next several decades, as its components reach the end of their initial 50-year design life. (That’s because no definitive cost estimate for doing this exists, yet.)

Faced with these facts, to be spending any of the Highway Trust Fund’s money on non-highway programs, let alone the current 25%, strikes me irresponsible. Refocusing federal policy to spend 100% of federal fuel taxes on highways would yield about $11 billion per year—hardly the whole answer to the shortfall, but a meaningful start on the federal component of increased investment.

But what about transit, and non-highway modes? If the federal government is going to continue to function local transit, one alternative is the federal general fund. If you review the last two annual general-fund bailouts of the Highway Trust Fund, the $7-8 billion per year is about the amount mass transit gets from the Trust Fund. So Congress could eliminate the middle-man by funding transit directly from the general fund. Others have suggested allocating a portion of the proceeds from any cap-and-trade or carbon tax measure for non-highway transportation.

Transit, bikeways, sidewalks, and recreational trails (all of which now get highway users’ tax money) are essentially community development/quality of life programs. And under the Administration’s new emphasis on livability and sustainability, the justification for streetcars and similar projects is now more focused on community development than on transportation. But all other federal social infrastructure is carried out by agencies such as HUD, using general fund monies. Why should only highway users—as opposed to all taxpayers—pay for community development projects, at the expense of ailing highways?

But shouldn’t government be discouraging the use of “bad” things like cars and trucks? To the extent that cars and trucks produce negative externalities, those “bads” should be dealt with by some combination of regulations (e.g., CAFE standards) and taxes (e.g., carbon taxes). When shippers choose to use trucks, it’s for very good reasons of speed, reliability, etc. When citizens choose to use cars, it’s because in the particular circumstances of their lives, the car is the most sensible choice. We should dea l with the externalities inherent in those choices but not second-guess those choices themselves.

To sum up, highways and motor vehicles will remain essential to American mobility for as far as we can reasonably project. Due to the aging and declining performance of the highway system, it needs a large, ongoing increase in capital investment. The users-pay/users-benefit principle still has numerous advantages, and should remain the basis of highway funding. Since that principle doesn’t fit well for transit, bikeways, and sidewalks, this kind of social infrastructure should be paid for out of general taxes rather than highway users fees.

Getting this right is important before we design the VMT charge system that will replace motor fuel taxes. We will have to choose between VMT taxes and VMT charges. Some are already urging it be a “VMT tax,” incorporating a whole variety of social-engineering criteria, while others (including me) believe it should be a charge for using highways, very similar to tolls on toll roads. All the arguments I’ve made above apply equally to the kind of VMT charge I think we should adopt.

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March 1, 2010 7:46 AM

By Robin Chase

CEO, GoLoco, Meadow Networks

"User pays" was the foundational concept and an interesting one to reflect on. The question notes that current gas taxes inadequately cover even simple maintenance requirements on existing roads, yet the phrase resonates strongly with drivers. They sincerely believe that they have paid for all that is required with their gas taxes at the pump.

If the road user really paid what driving costs to maintain, what driving costs to widen and build new, what driving costs in police forces, emergency personnel and equipment, lifetime effects of accident road deaths and injuries, watershed destruction, groundwater and run-off pollution, excess asthma rates, higher incidence of heart disease and negative effects for those living near highways, congestion, and CO2 emissions (etc, my list is truncated), we wouldn't be in the unfunded situation we are in today.

Also, if "user pays" included all those "externalities" (so many things in quotes), it would seem perfectly appropriate for the gas tax to include pedestrian and sidewalk improvements, mass transit, electric charging stations...

"User pays" was the foundational concept and an interesting one to reflect on. The question notes that current gas taxes inadequately cover even simple maintenance requirements on existing roads, yet the phrase resonates strongly with drivers. They sincerely believe that they have paid for all that is required with their gas taxes at the pump.

If the road user really paid what driving costs to maintain, what driving costs to widen and build new, what driving costs in police forces, emergency personnel and equipment, lifetime effects of accident road deaths and injuries, watershed destruction, groundwater and run-off pollution, excess asthma rates, higher incidence of heart disease and negative effects for those living near highways, congestion, and CO2 emissions (etc, my list is truncated), we wouldn't be in the unfunded situation we are in today.

Also, if "user pays" included all those "externalities" (so many things in quotes), it would seem perfectly appropriate for the gas tax to include pedestrian and sidewalk improvements, mass transit, electric charging stations, and environmental remediation efforts because all of those things are attempts to mitigate the real and costly negative impacts caused by the car-driving users.

At the end of the day, if we take political realities into account, the one thing I ask for is for drivers to truly understand what their fuel tax is actually paying for, and what is quietly and covertly being subsidized by their other taxes. Because we haven't included these costs in the gas tax, we are using local, state, and government money brought in from other sources to cover the difference. When we say we don't have enough money for education, or welfare, or parks, or elderly programs, we need to recognize that this shortfall is in part because we are paying for all sorts unfunded car-related expenses with non-gas-tax dollars.

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