I recently attended a lecture given by Arnold Kling, who is a former Federal Reserve economist on the Board of Governors staff, former senior economist at Freddie Mac, and all-around financial and monetary expert. The...
- Gas Taxes Pay for only a Fraction of Road Spending
Gas Taxes Pay for only a Fraction of Road Spending
States Consider Raising Gas, Sales Taxes for Transportation
Washington, D.C., January 17, 2013—Despite being dedicated to fund transportation projects, revenue from gas taxes and tolls pays for only about a third of state and local spending on roads, according to a new analysis by the Tax Foundation. Wyoming and Alaska come last in transportation funding derived from gas taxes and tolls, while Delaware and Florida rank the highest.
“The lion’s share of transportation funding should be coming from user taxes and fees, such as tolls, gasoline taxes, and other user-related charges,” said Tax Foundation Tax Foundation Vice President of Local and State Projects Joseph Henchman. “When road funding comes mostly from tolls and gas taxes, the cost is borne directly by the people who benefit from the state’s spending. 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.”
Transportation funding is a top issue for many state legislatures this year. Maryland Governor Martin O’Malley (D) and Virginia Governor Bob McDonnell (R) have proposed sales tax increases for transportation, Wyoming Governor Matt Mead (R) has proposed raising his state’s second-lowest-in-the-nation gasoline tax, and others have proposed new toll roads or the adoption of a “vehicle mileage tax” (VMT) system.
State and local governments raised $37 billion in motor fuel taxes and $12 billion in tolls and non-fuel taxes in 2010, but spent $155 billion on highways. In other words, highway user taxes and fees made up just 32 percent of state and local expenses on roads. The rest was financed out of general revenues, including federal aid.
The story is much the same even when taking adding other transportation options to the mix. In 2010, state and local governments spent $60 billion on mass transit, $23 billion on air transportation facilities, $1.6 billion on parking facilities, and $5.3 billion in ports and water transportation, in turn raising $13 billion in mass transit fares, $3.2 billion in parking fees and fines, $18 billion in air transportation fees, and $3.8 billion in water transportation taxes and fees. Altogether, states raised about 36 percent of their transportation spending from user taxes, fees, and other charges.
The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or email@example.com.
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