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Sunday, January 15, 2012

Roads and highways are heavily subsidized

Interstate highway I-93 in Boston, part of the Big Dig (source)

Many people who own cars believe that they "pay their way," through the gas tax, when it comes to road construction and maintenance. That impression is a myth. To begin with, every single state in the country receives more highway funds than they contribute in gas taxes. Congress has appropriated an extra $30 billion to build and maintain interstate highways since 2008, taken from general funds. Many toll roads run deficits. The United States has one of the lowest gas taxes in the world. The Federal gas tax has not changed from the early 90s, it is a flat 18.4 cents per gallon. It is far too low to cover costs. According to the BLS inflation calculator, the buying power of the original tax has diminished by about a third, to 11 cents.

The situation at the Massachusetts state level is just as dire, if not more so:
The Finance Commission estimates that there is a funding gap of approximately $9 billion between what will be needed to bring the road and bridge system to a state of good repair and expected state and Federal funds.
Some have proposed a pay-per-mile tax (or VMT tax). As I've discussed before, this is a somewhat creepy and overly intrusive solution. It is much more reasonable to require only that commercial vehicles pay for VMT. Since commercial vehicles (trucks, buses) are already tracked by their operations managers, and they are not private passenger cars, it should be much easier and less objectionable to implement. Long-haul large trucks are already restricted to certain roads. Also, trucks and buses do the most damage to the roads, while passenger cars do relatively little.

Rocky Mountain Double (source)
Arguably, it should be car owners who have the most interest in this kind of proper taxation. The damage done to the road appears to be approximately proportional to axle load raised to some power between three and four. That means trucks and buses do extreme amounts of damage to roads compared to passenger cars. Only a few states even care about truck weight, and none of them come close to recovering the costs proportionally. So, ordinary drivers are paying much of the costs of trucking.
Modern freight rail container shipping (source)

There is a wider benefit to having roads. I'm not opposed to using public funds for road projects, I'm opposed to people who pretend that we don't do that. Roads are not free, and they are heavily subsidized by state and federal governments. To claim otherwise is dishonest. The gasoline and diesel fuel taxes must be brought into line with year 2012 costs, and set on a solid track for the future. States should strongly consider recovering the true cost of supporting heavy freight trucking on their roads through a commercial VMT tax, instead of putting the burden on the ordinary taxpayer. Businesses that need to transport freight long distances would go back to more appropriate modes, such as the railroads, which have improved their operations tremendously in the last 30 years. Not only would this reduce the cost of maintenance on our highways, but it would increase safety and reduce congestion at the same time.

The current, nearly 20 years old, Federal gasoline tax rate should be indexed to inflation, and raised from 18.4 cents per gallon to 28.8 cents per gallon (38.2 cents per gallon of diesel). This data on trucks and VMT in 2002 suggests that the majority of trucks are in the 60,001lb to 80,000lb range, traveling about 77 billion miles on our roads, out of approximately 145 billion truck miles overall. Presumably, these numbers have only gotten larger in the last ten years. Still, at those rates, an average tax rate of 10 cents per mile would recover over $14 billion that would be directly correlated with road damage. To be fair, lower weight trucks should pay significantly less than higher weight trucks - perhaps even following the power law to some extent. For example, if 80,000lb trucks pay 20 cents per mile, then 10,000lb trucks could fairly pay 0.04 cents per mile, given some simplifying assumptions. Of course, to get a real idea of the effect of VMT fees, it will be necessary to model the reduction in truck traffic (and reduction in road damage) that would result, as well as the costs of administration.

Update:
Do Roads Pay for Themselves?:
Since 1947, the amount of money spent on highways, roads and streets has exceeded the amount raised through gasoline taxes and other so-called “user fees” by $600 billion (2005 dollars), representing a massive transfer of general government funds to highways.
Rank hypocrisy on 'subsidies':
Today, over-the-road heavy trucks pay approximately $14,000 per year in combined fuel and other highway taxes. This amount does not come close to paying for the damage to roads and bridges caused by trucks, let alone the capital cost of the highway system or for new or expanded road and bridge construction.

6 comments:

  1. Call me crazy but I am happy in a way that we are way under funding the federal department of transportation. And I sort of hope we continue to do so. It may be the only way to more 28 lane "avenues" out of the heart of our cities. When cities have to foot the bill, more money will be spent on maintaining roads and over time fewer lane miles will probably exist. Pipe dream perhaps...

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  2. Perhaps, but it seems the highway lobby finds ways to get the money one way or another. Usually by stealing it from another worthy cause.

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  3. True. By the way, I love your map. I used to keep track of my walks but never published a map. I think you have inspired me to get back into doing this.

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    1. Thanks. I played with JavaScript for awhile to try and embed the KML file into a map, but actually it turns out to be much easier to simply upload one to a custom Google Map.

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  4. There's a very good reason to decouple the gas tax from road funding: it makes people think that all gas taxes, including ones that are pure externality taxes, should go to roads. It's important to change this - to create a situation in which APTA doesn't oppose climate change bills on the grounds that the carbon costs charged to cars are not deeded to transportation. Gas taxes should be thought of as analogous to cigarette and alcohol taxes.

    Instead, the freeways should all be tolled, to charge for access. Roads that are not freeways cannot be tolled except at such chokepoints at bridges and tunnels, but on the national road level, it's fine to have freeways subsidize the US Highways. A commercial VMT tax is a good idea in addition, since trucks cause so much road damage; however, even roads that have no trucks or buses on them require maintenance, and before the progressive nationalization of expressway construction beginning in the 1920s, private tollways charged for access and not just for direct construction and maintenance costs.

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    1. I did assume the notion of "gas tax as user fee" would continue to hold. I think a large part of that comes from the sheer inconvenience of toll-collecting in the past. It's much easier now with EZ-pass type systems. Gas taxes (as well as VMT fees) could go towards remedying externalities and also funding maintenance of roads too small to toll practically. Also, tolling is likely needed for implementing decongestion pricing.

      Politically, I'm not sure how you could go about decoupling gas taxes and roads. If you shift the burden into tolls and VMT fees, then there will be even more people trying to reduce the gas tax. And there's a larger constituency behind gas usage vs cigarettes or even alcohol.

      I think you're right though, that it's important not to tie ourselves down by mandating gas taxes go only to road building and maintenance. It's a crude form of user fee, chosen mostly for convenience.

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