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Drive or Walk, You're Paying for Our Roads

April 28, 2010 By Conrad deFiebre, Transportation Fellow

Recent polling shows Americans strongly opposed to higher fuel taxes, bolstered by beliefs that they would do no good for the economy and that they have already risen onerously in recent years. So much for the wisdom of crowds.

Consider, the federal gasoline tax has been stuck at 18.4 cents per gallon since 1993, losing a third of its buying power. Even in nominal terms, the amount it has contributed to the nation's highways and bridges peaked in 1997. Its biggest hikes ever were signed into law by Presidents Ronald Reagan (5 cents in 1983) and George H.W. Bush (another nickel in 1990).

Minnesota's first gas tax increase in 20 years was enacted in 2008 over Gov. Tim Pawlenty's veto. It stands now at 27.2 cents a gallon, slightly below the national average and, adjusted for inflation, about three-quarters of the 1988 level.

A recent Pew Trusts study found that the share of nationwide highway costs supported by user fees such as the gas tax, vehicle registrations and tolls dipped to an all-time low of 51 percent in 2007. And that was before big infusions of non-user revenues to roads via Highway Trust Fund bailouts and the American Recovery and Reinvestment Act--AKA federal stimulus--beginning in 2008.

Meanwhile, the cost of buying and operating a private car rose about one-third slower than general inflation in the past 25 years, according to the president's Council of Economic Advisers. Over the same period, transit riders, the perennial whipping boys for conservative critics of public transportation subsidies, saw their out-of-pocket costs go up nearly 20 percent faster than the overall consumer price index.

It's important to look at the price index when considering transportation funding because fuel taxes are the only major levies, in both Minnesota and the rest of the nation, that don't automatically rise with inflation. Since they are assessed by volume, not price, collections stay the same whether a gallon of gas is $1.50 or $3.

Unfortunately, the cost of building and maintaining roads and bridges isn't similarly locked in place. And more people driving more cars don't make up the difference. Improving fuel economy has reduced gas sales. And plug-in electric cars, which would pay no fuel tax to support highways, are just over the horizon.

Meanwhile, driving miles have been flat or declining for years. Even if they were on the rise, it would just add traffic congestion and wear and tear that current revenue levels have been unable to reverse--despite huge subsidies from income, property and sales taxes.

For several reasons, it's a good thing that these non-user fees have picked up some of the slack. Without them, we'd likely face worse conditions on our roads and bridges than the Minnesota Department of Transportation currently foresees--nearly 20 percent of trunk highways in poor condition by the end of this decade, compared with 2 percent in 2000.

In addition, investments in surface transportation, regardless of who's paying for them, produce more than $4 in direct benefits for each $1 in direct costs. A 2005 study by Robert Shapiro and Kevin Hassett found the benefits split between businesses enjoying lower costs and higher productivity and individuals saving commuting time while earning more income by working farther from home. The study did not attempt to put a value on further advantages in people's access to schools, medical facilities and other non-work destinations.

The Pew Subsidyscope report, issued in November, shows a steady decline in user support of U.S. highways since the 1960s, when it topped 70 percent of expenditures. Pew also noted that 16 percent of the federal fuel tax, unlike Minnesota's, goes to transit projects. "However, even if those funds were fully devoted to highways, total user fee revenue accounted for only 65 percent of all funds set aside for highways in 2007," the report said. 

That calculates to a $67.7 billion non-user subsidy for U.S. roads and bridges in 2007 alone.

Pew also found significant government subsidies for transit, railroads, aviation and the maritime industry, but did not track them over time or in relation to user fees such as fares. So direct comparisons of non-user support for roads versus that for transit remain elusive.

Driving, of course, has been the dominant U.S. transportation mode for decades, partly because of people's preference for private, point-to-point mobility, partly because nearly half of American households have no reasonable access to bus routes or rail service. That domination translates into motorists' pricing power for the roads and bridges they need to keep moving.

Leaders from Governor Pawlenty to President Obama have consistently bowed to that, even as forces usually thought of as powerful--the U.S. Chamber of Commerce, the National Association of Manufacturers, the American Trucking Association and oil giants Shell, BP and ConocoPhillips--have called for increasing the federal fuel tax.  Just this week, in the face of fierce anti-tax sentiment, bipartisan U.S. senators reportedly backed off of a plan to raise the levy as much as 15 cents a gallon as part of climate and energy legislation.     

Obama has said he won't raise the gas tax while jobless rates remain high. But when the economy starts humming again, pump prices are likely to climb back toward $4 a gallon, providing another fine excuse to do nothing.

That wouldn't be good for either our economy or basic fairness in transportation finance. Bipartisan Minnesota leaders did the right thing two years ago in raising user fees for our roads and bridges. Those increases won't kick in fully for several more years.

Now it's up to the federal government to do its part to restore sustainability and equity to highway funding with a return toward the principle that the user pays, especially for driving in private on public infrastructure.

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