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Reason Foundation

Funding System for Roads and Bridges Is Broken

Gas tax should be replaced by direct user fees

Adrian Moore
January 5, 2009

In the midst of a recession and with well over $700 billion in bailouts already splashed around, there is talk of increasing the federal gas tax. Why? Federal transportation spending is exceeding revenue from the tax. Congress is so far unwilling to consider cuts in federal transportation spending, and reasonable estimates say total road spending is already about $30 billion a year short of the amount needed just to properly maintain our current road system, let alone expand it to accommodate future economic and population growth.

But a gas tax increase is wildly unpopular, politically unlikely, and a bad idea on its face. People object to the idea of paying money into a system they don't trust and know is broken.

Ask a man on the street what his first thought is about transportation spending, and there is a good chance he will say "Bridge to Nowhere," the poster child for the earmark-riddled, highly-politicized, and often downright silly way Congress decides how to spend transportation dollars. In the last transportation bill, individual members of the House and Senate carved out special funding for 6,373 pet projects amounting to over $24 billion, which illustrates that the nation's spending decisions are not driven by a desire to provide the best transportation system in the most efficient way possible.

The ebb and flow of politics determines who and what gets funding and when. One consequence of politicized spending decisions is that it is all too easy to put off needed maintenance until next year so that you can spend the money elsewhere this year. Now the deferred maintenance bill is a $300 million annual deficit for roads, bridges, tunnels, and other infrastructure.

Another consequence is that spending is not focused on federal transportation priorities. About 20 percent of federal fuel tax money goes to local transit projects. Billions more each year go to local bicycle trails, walking paths, development incentives and a vast array of transportation and things loosely related to transportation that are strictly local in nature. The only justification for federal transportation spending is providing a national transportation network, and local projects are simply not national in nature or importance and the federal government has no business funding them both in principle and because it diverts funds from things like maintaining the crumbling Interstates.

And if this plague of problems on the spending side is not enough, federal gas tax revenues are failing too. Vehicles are becoming more fuel efficient, so we are paying less gas taxes while driving more miles, which means more wear and tear on the system. The cost of providing those miles of roads is going up, not down, so a transportation system dependent on fuel taxes is fundamentally unsustainable. It is absurd to base the system for funding infrastructure on a gas tax while simultaneously pursuing policies designed to reduce fuel use.

Right now, the average household in the United States pays about $214 in federal gas taxes and between $99 and $374 in state gas taxes (depending on their state) each year. Adding to that burden to throw more money into a bad funding system won't help.

A sensible approach to America's transportation funding crisis, just like when dealing with the family budget, is to first look at managing your spending, then see what you can do about income.

First, transportation money must be spent on the right things, the top priorities.

Until Congress and state legislators base funding on results and refuse to throw good money after bad, no one will trust the system or be willing to put more money into it. Transportation funding decisions need to be driven by results, by what is necessary to provide a functioning and integrated transportation network. This means focusing long-term transportation policy on a "mobility first" strategy that emphasizes connectivity with shorter travel times, lower overall travel costs for individuals and businesses, and expeditiously connecting people and businesses across the network. At the federal level this means narrowly focusing on the national network for personal travel and goods movement, not a politicized process of funding state transportation budgets and pet projects of members of Congress. Simply put, no transportation earmarks. Most importantly this means stopping federal spending on transit and other projects that are not key parts of the national network and are strictly local in nature.

Second, get more bang for transportation bucks.

Some states do a better job than others at providing infrastructure. For example, a comparison of state road conditions shows that some states do a much better job with road maintenance money than do others. States as varied as Massachusetts and Florida have used public-private partnerships to get more maintenance out of the same budget. Too often we say the problem is a lack of funding and the way we do things is fine, when we should be seeking to change and improve how we maintain our transportation systems.

That goes for how we design and build roads as well. In many ways, a new freeway today is built the same way as one in the 1950's. Too often, we are not using the latest materials and innovative designs, and we are way behind on integrating new technologies into our roads to allow them to be better managed.

Third, and only third, look for new transportation revenue.

If people want something, and they know what they have to pay and what they will get for their money, they are willing to pay. Our current transportation system only has the first part-people want to travel, but they don't know what they are paying or what the money is going to.

To reform the system, the fuel tax should go. Fuel taxes are only an indirect user fee, and some could legitimately question whether they are a user fee at all. Fuel taxes generate revenue based on the energy source for the vehicle, not the wear and tear on the road, bridge, or other facility. We need to shift to a direct mileage charge, where we pay for how much we drive and which roads we drive on. This kind of pricing will give transportation system users participation in the funding process in a meaningful way. It creates powerful incentives for transportation providers to pay attention to users. And it a much more precise mechanism for providing accountability for a service as tangible as road than is the ballot box.

American drivers stuck in long traffic jams might be surprised to learn that communist China and many European nations are embracing private-sector investment in roads. At a time when more investment in transportation infrastructure is needed, the hundreds of billions in private capital looking for investment opportunities needs to be invited to our transportation system. Secretary of Transportation Mary Peters has said over $400 billion in untapped capital is ready to be spent on roads and bridges.

Transportation spending should be performance-based and prioritized to provide more mobility; transportation earmarks should be eliminated; private sources of investment should be utilized; and the gas tax should replaced by a sustainable funding system that features direct user fees. Until those reforms are made, talk of raising the gas tax is ludicrous because higher taxes would just mean more pork projects, not better roads and bridges.


Adrian Moore is Vice President, Policy


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