A version of this testimony was submitted to the Washington House Transportation Committee.
Chairman Fey, Ranking Minority Member Barkis, and Fellow Members:
My name is Baruch Feigenbaum. I am the Senior Managing Director for Transportation Policy at Reason Foundation, a non-profit think tank. For more than four decades, Reason’s transportation experts have been advising federal, state, and local policymakers on transportation funding and financing.
Overview of Testimony
While the federal government continues to delay action on meaningful transportation funding reform, states are leading the way. Understandably, raising taxes is unpopular. And while the motor fuel tax has been a reliable funding mechanism for the past 100 years, due to the combination of an increased number of electric vehicles, an increased number of hybrid vehicles, and particularly the increased fuel efficiency of vehicles powered by internal combustion engines, the fuel tax will not be a reliable mechanism in the future.
While states have studied multiple options ranging from statewide sales taxes to kilowatt-hour fees for electric charging, two national surface transportation commissions, the National Conference of State Legislatures, and the Washington State Transportation Commission have all recommended that states transition from a fuel tax to a road usage charge. Reason Foundation echoes that recommendation.
A road-usage charge, similar to the current fuel tax, follows the users-pay/users-benefit principle. Using this principle to fund and finance transportation projects has at least five benefits:
- Fairness: Those who pay the user fees receive most of the benefits, and those who benefit are the ones who pay. This general principle is used with other utilities, such as electricity and water.
- Proportionality: Those who use more highway services pay more, while those who use less pay less (and those who use none pay nothing).
- Self-limiting: The imposition of a user tax whose proceeds may only be used for the specified purpose imposes a de facto limit on how high the tax can be: only enough to fund an agreed-upon need for investment.
- Predictability: A user fee produces a revenue stream that can and should be independent of the vagaries of government budgets.
- Investment signal: The users-pay mechanism provides a way to answer the question of how much infrastructure to build, assuming that the customers have some degree of say. With respect to toll roads, the value of the facility can be judged by how many choose to use it and what level of tolls they are willing to pay.
Beyond the basic principles, there are several things to like about Washington State House Bill 1921, which authorizes a statewide permanent road usage charge to replace the motor fuel tax.
First, the bill acknowledges the benefits of a more direct funding system. In today’s political climate, it is a refreshing change for a legislative body to make laws based on principles that the majority of the population supports.
Second, the bill is revenue-neutral. It does not seek to use the conversion to mileage-based user fees to increase funding. Popular support has been much lower for road charging bills that also act as tax increases.
Third, the program is a permanent solution. Some states have had a series of endless pilot projects with no prospect of a permanent program. This bill proposes a permanent program, which all drivers would eventually join.
Fourth, the program provides choices. Drivers could choose from a simple odometer reading collected annually or from location-based options that provide drivers additional benefits, such as vehicle health monitoring.
However, we recommend that two problematic parts of the bill be amended. First, the bill adds an additional 10% road usage assessment of all the funding collected to a new program to fund rail, bicycle, pedestrian, and public transportation. This bill component is a violation of the users-pay principle. More practically, it is unnecessary. The state of Washington already provides more than $5 billion in annual transit funding, among the highest per capita funding rates of any state in the country. Counties and cities also provide funding for transit. It is not necessary to force drivers to subsidize a transit system that is already well-funded.
Further, it would be helpful if the 18th Amendment provisions were strengthened. The 18th Amendment prohibits fuel tax revenue from being used for non-highway purposes. In order for a road usage charge to be subject to the 18th Amendment, it would need to be approved by voters. I understand the practical challenges of holding a vote with no guarantee that voters will approve a road usage charge. But I also worry about legislative intent without legal support. Lawmakers can take the first step by passing Senate Joint Resolution 8202, which requires revenue collected from a road usage charge to be used for roadway purposes.
Thank you for the opportunity to submit my comments today on transportation funding.