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Road Rage: State Tax Policies Cause Congestion

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Road Rage: State Tax Policies Cause Congestion

January 16, 2014

Driving on roads should cost you more than it does now. According to a new report from the nonpartisan Tax Foundation, only half of state and local road spending is covered by tolls, user fees, and consumption taxes.

The report reveals the extent to which driving is subsidized by general revenues, leading to congested roads and frustrated commuters.

Road conditions have slowly been deteriorating in the United States. In 2011, American vehicles drove 92.4 percent more miles than in 1980, but space on the roads increased by only 8.2 percent over that time. The American Society of Civil Engineers has consistently graded American roads as “D” since 1998. Furthermore, the federal Highway Trust Fund has been running deficits since 2008. Its 2011 deficit was $7.6 billion, 17 percent of its total expenditures.

States should become less dependent on the federal government and look for new revenue to dedicate to road construction. Road construction is funded by tolls, user fees, fuel taxes, license taxes, and money from the general fund. The worst method of funding road construction is taking money from the general revenue fund. This indirect method of funding road construction causes those who drive less to subsidize those who drive more. Road users should pay for roads’ construction and maintenance.

The Tax Foundation report revealed a variety of state methods to fund road construction. Delaware’s state and local road spending was 79 percent funded by user fees and consumption taxes, the highest in the nation. On the other end, Alaska’s state and local road spending was 11 percent funded by user fees and consumption taxes. Nationwide, state and local governments spent $153 billion on road construction, but 50 percent of spending came from general local, state, or federal revenues. On average, Americans pay just 2.6 cents per mile driven in user fees and consumption taxes.



Congress has not raised the federal gas tax in 20 years, but a House bill introduced last month would change that. The bill, introduced by Rep. Earl Blumenauer (D-Ore.), would nearly double the federal gas tax, raising it to 33.4 cents per gallon, while the diesel tax would rise to 42.8 cents per gallon. The federal gas tax currently stands at 18.4 cents per gallon, with the federal diesel tax at 24.4 cents per gallon.

While fuel taxes are a better source of funding than general revenue, they are not a cure-all solution. Increasing fuel efficiency has made the federal gas tax an ineffective method of raising funds. According to Blumenauer, “the average motorist is paying about half as much as they did in 1993.” Electric cars, which are slowly gaining popularity, do not pay any federal gas tax. They enjoy the benefits of using roads without having to pay fuel taxes.

Ideally, all road construction should be funded by tolls and user fees. Vehicles that cause more deterioration, such as semi-trucks, should continue to be charged more than typical vehicles. This would ensure that those who use roads the most pay proportionately for their upkeep.

However, because of the Federal-Aid Highway Act of 1956, states cannot charge tolls for interstate highways. Some tolled highways were grandfathered into the system, and Congress allowed for some flexibility in the 1990s, but federal authorization is still required. States would be wise to pressure Congress to lift this ban.

Whenever legislators decide to raise gas taxes or user fees, it should be accompanied with an income or sales tax cut. This would ensure the revenue increase is politically feasible, and also keep more money in taxpayer’s wallets. Legislators should also design tolling and fee systems using the newest technology to make payment convenient and not interrupt transit. For instance, Oregon has a pilot program for a vehicle miles traveled tax that gives drivers several different options for tracking miles driven.

The purpose of state and local spending on infrastructure is to make transit faster and less congested. However, new roads that do not charge drivers only encourage people to drive more. Legislators should look for alternate methods of funding so they can stop using general fund revenues to fund road construction.


Jason Russell is a research associate at the Manhattan Institute for Policy Research. You can follow him on Twitter here.

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