By Eric Sundquist
In the post-Interstate-building era, questions about the role of the federal government in funding surface transportation have become more common. Critics from donor states, for example, have argued that they should just keep their money at home, avoiding the transaction costs of sending revenues to Washington.
Most of these arguments have come from conservatives. A new call for eliminating the federal role comes from a different perspective, though—a green one. Rohit T. Aggarwala leads Bloomberg Philanthropies’ environmental program and is a visiting scholar at Stanford University; previously he was director of long-term planning and sustainability for the City of New York.
In a January 23 column published by Bloomberg News, Aggarwala argues that the current federal program inhibits the ability of state and local government to levy gas taxes, and spurs excess road-building in some places.
[P]eople don’t generally support raising the gas tax, for the simple reason that they think their current gas taxes, which are mostly federal, are wasted.
Thus, the federal gas tax has become both a ceiling and a floor. It makes raising state gas taxes unpalatable. And since states get back at least what they contribute, the tax encourages them to keep spending even if they don’t really need more roads.
But if the federal gas tax went away, wouldn’t that reduce the cost of driving— already subsidized through property and sales taxes—and spur more travel and emissions? Aggarwala says no, partly because of the general revenue subsidy for roads in the federal program, but mostly because of the way gas taxes are used:
Traditionally, environmentalists have supported higher federal gas taxes as a way to discourage driving and fund federal programs for transit and to mitigate congestion. But the current tax—roughly 6 percent at current prices—is too low to change consumer habits. And funding formulas that can gain congressional support usually benefit those states with the most automobile-dependent policies.
In fact, the most car-centric states tend to be the ones most opposed to raising the gas tax. Without federal transportation money, they would be the most likely to reduce spending on new roads. Conversely, those states most willing to raise funds for transportation are already the ones most likely to invest in transit, walkable streets or bike lanes.
Readers may judge for themselves how compelling those arguments are. We pass along Aggarwala’s article not only because of his critical perspective but also because, according to the old journalistic maxim that three of anything constitutes a trend, the Bloomberg piece makes a trend of prominent pronouncements away from user fees.
Though Aggarwala would kill the federal gas tax, he isn’t opposed to gas taxes at the state level, but he argues that “sales taxes, property taxes, [or] local taxes” could be just as good. If we assume the federal tax was replaced with such a mix, the result would be more general revenue and less user revenue in the system.
The two other pronouncements against user fees come from governors. We reported earlier this month that Virginia Gov. Bob McDonnell had proposed doing away with gas taxes in his state, largely replacing them with a sales tax increase. The proposal received a mixed, but generally negative, reaction.
At the other end of the political spectrum, Massachusetts Gov. Deval Patrick has released a budget that would bolster transportation and education programs mainly through an increased income tax. Patrick’s proposal does not go as far as Aggarwala’s or McDonnell’s and actually do away with gas taxes. In fact it would tie the current gas tax to inflation. But in the short term the funding to address MassDOT’s $1.02 billion per year shortfall would be income-tax-generated.
Other groups advocate for a stronger user-fee-based approach. The Washington-based Tax Foundation just released a report this month that argues:
The lion’s share of transportation funding should come from user taxes and fees, such as tolls, gasoline taxes, and other user-related charges. When road funding comes from a mix of tolls and gas taxes, the people that use the roads benefit from them and should bear a sizeable portion of the cost. 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.
However, in the United States user fees cover only about half the cost of roads, according to the report. The share varies widely, with Alaska at the bottom, covering only 20 percent of road costs, and Delaware at the top, covering 80 percent.
Eric Sundquist is Managing Director at SSTI.