Study: Gas and User Taxes Don't Fund Most Transportation Projects

By Jason Bramwell, Staff Writer

A new study by the Tax Foundation found that revenues from gasoline taxes and tolls only fund approximately 50 percent of state and local transportation projects.

According to the report, Gasoline Taxes and User Fees Pay for Only Half of State and Local Road Spending, which was written by Joseph Henchman, Tax Foundation vice president of state projects, a key issue for state governors and legislators is how to pay for transportation expenses.

“In the last year, Virginia and Massachusetts raised a number of taxes for transportation purposes, a handful of states raised gasoline taxes, Oregon began testing a vehicle mileage tax pricing system, and other states proposed new or expanded toll roads,” Henchman wrote.

In the study, Henchman believes the majority of transportation funding should be derived from user taxes and fees, such as tolls, gas taxes, and other user-related charges.

“When road funding comes from a mix of tolls and gasoline taxes, the people who use the roads bear a sizeable portion of the cost,” he stated. “By contrast, funding transportation out of general revenue makes roads ‘free’ and, consequently, overused or congested – often the precise problem transportation spending programs are meant to solve.”

Based on 2011 data, highway user fees and user taxes made up just 50.4 percent of state and local expenses on roads. State and local governments spent $153 billion on highway, road, and street expenses but raised only $77.1 billion in user fees and user taxes - $12.7 billion in tolls and user fees, $41.2 billion in fuel taxes, and $23.2 billion in vehicle license taxes.

The rest, according to the study, was funded by $30 billion in general state and local revenues and $46 billion in federal aid – about $28 billion from the federal gas tax and $18 billion from general federal revenues or deficit financed.

Congressman Earl Blumenauer (D-OR) introduced a bill in the US House of Representatives last month that would raise the federal gas tax by 15 cents per gallon. Under the proposal, the national gas tax would increase to 33.4 cents per gallon and 42.8 cents per gallon for diesel. The federal gas tax has not been increased since 1993.

Blumenauer said the gas tax hike would help fix the nation’s “decaying infrastructure system – roads, bridges, and transit.”

The Tax Foundation study also examined state and local government spending when all transportation modes are factored in.

“In 2011, state and local governments spent $58.7 billion on mass transit, $22.7 billion on air transportation facilities, $1.6 billion on parking facilities, and $5.2 billion on ports and water transportation, in turn raising $13.2 billion in mass transit fares, $18.8 billion in air transportation fees, $2.2 billion in parking fees and fines, and $4.2 billion in water transportation taxes and fees,” Henchman wrote. “While state and local governments generated surplus revenue from parking facilities and fines, no transportation mode was free of subsidy.”

Delaware and Hawaii ranked highest in transportation funding derived from gas taxes and tolls – 78.6 percent and 77.3 percent, respectively – while Alaska and South Dakota were at the bottom at 10.5 percent and 21.5 percent, respectively.

Given that transportation spending exists, Henchman said states should aim to fund as much of it as possible from user fees and user taxes.

“Expanding tolls and indexing gasoline taxes for inflation may not be politically popular despite the highly popular nature of transportation facilities and services,” he wrote. “Subsidizing road spending from general revenues creates pressure to increase income or sales taxes, which can be unfair to nonusers and undermine economic growth for the state as a whole.”

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