Provocateur: Big Myth Busted: Gas Tax Doesn't Cover Road Costs

Excerpted from the Regional Plan Association's May 2, 2003 "Spotlight on
the Region" by Alex Marshall, Senior Fellow

Year after year, revenues from state and federal taxes on gasoline sales pump approximately $45 billion into constructing and maintaining the nation's road network. Advocates of trains, light rail, bicycle paths, ferries, buses and other means of transport look with envy and longing for some similar, stable source of funding.
But Martin Wachs, in a new report released this month by the Brookings Institution (see www.brook.edu/es/urban/publications/wachstransportation.htm), shows that the gas tax has been paying for less and less of the total cost of the national road system. Although Wach's report is at times overly narrow, it is valuable because he shows what many people do not know: that the gas tax pays for only about a third of the cost of the road system. This has major implications for mass transit funding, which is so often criticized for "not paying for itself."

The study's central chart shows how the nation spent $133 billion on roads and highways in 2001. This includes Federal, state and local roads, from big expressways to meandering local roads. On average, the gas tax paid for only 35% of this figure. This means that non-automobile-related taxes pay for about 40% of the total cost of the road network. In addition, Wachs shows that, although huge in absolute dollars, the pool of money raised by the gas tax has declined on a percentage basis over time. Indeed, "on average, fuel taxes in the 50 states would have to rise about 11 cents per gallon just to recoup their 1957 buying power."

One of the problems with Wachs' analysis is that he sees the gas tax as a user fee. In reality, a gas tax is not a user fee. Only a toll is a true user fee because it is point (or pavement) specific. If you use a particular highway, you pay a particular toll.
The very general nature of the gas tax encourages more driving and more road building, while user fees are generally designed to encourage moderation. On the supply side, revenue from the gas tax allows states to build highways that are not always needed, or worse yet, add to the overall congestion problem by encouraging further sprawling development.

Highway planners do not have to prove that a highway would pay for itself through its tolls. Studies have shown that, if a highway had to pay for itself through tolls, almost none would be built. This fact opens the opportunity for a more productive debate on transportation as a whole.

We need a more general discussion of the purpose of transportation. In the United States, much discussion is sidetracked by treating transportation as a profit-driven private business. What if government investment in transportation, which seems to be always crucial, was "a service," more akin to education, than a private business that had to make a profit? If this concept were more generally accepted, transportation debates would revolve around providing the best mix of services for both convenience and economic development. There would be less talk of which type of transportation "pays for itself." In fact, none of them do.

Gas prices are probably the most powerful determinant of the urban environment. A chart by Douglas Kelbaugh, dean of the architectural school at the University of Michigan, showed that there is a direct correspondence between the density of cities worldwide and the price of gasoline in them-high gas prices equal greater density.
The essential point is a political one. Governors, senators and representatives from the Region should use Wachs' report to launch honest debate about the future of transportation funding. The numbers show that viewed on equal terms with highways, mass transit deserves far greater federal investment. Mass transit should no longer have to wear the shameful label of "subsidy" when every other type of transportation, and particularly the highway system, more justly deserve the moniker.

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