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User Pays? Less Than You Think for Roads

June 13, 2013 By Conrad deFiebre, Transportation Fellow

In the nearly six years I've been doing research, analysis and advocacy at MN2020, I've consistently championed the "user-pays" principle for transportation, especially the near-universal U.S. mode of private motoring. Silly me.

In reality, rather than what I thought was ideal public policy, not one form of public-access transportation comes close to being fully financed by its users. Drivers these days directly pay less than half of the full public costs of the roads and bridges they ply, transit riders a bit less. Going back two centuries of our history, canals, railroads, waterways, ports and airports all have enjoyed huge government subsidies.

There are good reasons for this, mainly the clear link between efficient transportation connections and general prosperity. Government invests in infrastructure and recoups its outlay via a broad array of taxes on an expanding economy.

Still, because driving is the most attractive mode of mobility for most Americans, I thought user fees such as fuel and registration taxes ought to cover a lot more of the public costs. After all, according to a recent survey by the American Road & Transportation Builders Association, the average U.S. household spends just $46 a month on fuel taxes, about a third of the cost each of cell phone service, cable and internet access and household electricity and natural gas.

 Meanwhile, poll respondents overwhelmingly valued transportation infrastructure higher than the utilities listed above. Of course, the relative pittance spent on fuel taxes is less than 7 percent of the heavy total costs of private car ownership and maintenance, so the ARTBA comparison isn't exactly apples and oranges. But without the taxes that support roads and bridges, the rest of the average $8,200 annual spending to hit the road wouldn't get you very far.

A mistaken impression that fuel taxes have always gone largely to building and maintaining driving infrastructure also skewed my thinking. In fact, according to a fascinating history of the federal gasoline tax from Kelly Phillips Erb at Forbes, the federal Highway Trust Fund that funnels its collections to road and bridge projects wasn't established until 1956, 24 years after President Herbert Hoover enacted a penny-a-gallon levy to erase a Depression-era federal deficit.

For decades after that, gas taxes paid for industrial recovery and a couple of wars. And conservatives these days complain about a mere fifth of federal fuel tax collections going to transit, bicycling and pedestrian infrastructure -- a "diversion" signed by none other than President Ronald Reagan. (That's verboten in Minnesota; our Constitution says state fuel taxes must go only to "highway purposes.")

By the way, the greatest increases in the history of federal fuel taxes were signed by Presidents Reagan and George Bush I. In 10 years, Forbes noted, those two hiked the pain at the pump by 350 percent. In 1993, President Bill Clinton added the last 4.3 cents to the levy, all of the boost earmarked for deficit reduction. Four years later, with the economy booming and budget surpluses looming, he sent the increase back to the highway fund.

Even though federal fuel taxes haven't always directly supported roads and bridges, Washington has long financed road-building from general coffers. According to Eric Jaffe at the Atlantic Cities, Congress first appropriated $10,000 for an Office of Road Inquiry, forerunner of the Federal Highway Administration, in 1893. The funding's biggest boosters? Bicyclists. There weren't any motorcars to speak of then.

Nowadays, the federal gas tax is stuck at the 1993 level of 18.4 cents a gallon, its buying power battered by inflation, rising fuel economy and even a long-term decline in driving. But we're still building new roads and bridges with money from somewhere, too often maintenance funds. Some states are turning to taxes on general sales, special levies on hybrids and electric cars or dreams of a controversial mileage tax to finance driving infrastructure.

In Minnesota and the nation as a whole, there's bipartisan agreement that fuel taxes can't be raised with the pump prices the way they are. (Nearly a decade ago, Gov. Tim Pawlenty explained that he vetoed a state gas tax hike because gasoline had hit the ungodly level of $2 a gallon. He did it twice more before the Legislature overrode him.)

So where does that leave the gas tax? Our favorite transportation contrarian, the University of Minnesota's David Levinson, thinks it will disappear like the proverbial old soldier.

"My sense is it's more likely to fade away than it is to be reversed in terms of a great new federal role or be eliminated entirely," he told Jaffe. "The status quo policy is to leave the gas tax where it is, and it will slowly diminish over time until it becomes almost an irrelevancy ... Over the next 20 years, I think that's the most likely outcome."

Maybe so. But we'll find some way to keep traffic moving. We always have.

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