Gasoline Taxes and User Fees Pay for Only Half of State & Local Road Spending

 
 
January 03, 2014

A key issue for state governors and legislators is how to pay for transportation expenses. In the last year, Virginia and Massachusetts raised a number of taxes for transportation purposes, a handful of states raised gasoline taxes, Oregon began testing a “vehicle mileage tax” (VMT) pricing system, and other states proposed new or expanded toll roads.[1]

The lion’s share of transportation funding should come from user fees (amounts a user pays directly for a service the user receives, such as tolls) and user taxes (amounts a user pays, based on usage, for transportation, such as fuel and motor vehicle license taxes).[2] When road funding comes from a mix of tolls and gasoline taxes, the people that use the roads bear a sizeable portion of the cost. 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.

Nationwide in 2011, highway user fees and user taxes made up just 50.4 percent of state and local expenses on roads. State and local governments spent $153.0 billion on highway, road, and street expenses but raised only $77.1 billion in user fees and user taxes ($12.7 billion in tolls and user fees, $41.2 billion in fuel taxes, and $23.2 billion in vehicle license taxes).[3] The rest was funded by $30 billion in general state and local revenues and $46 billion in federal aid (approximately $28 billion derived from the federal gasoline tax and $18 billion from general federal revenues or deficit financed).

The ratios do not improve when adding in all transportation modes. In 2011, state and local governments spent $58.7 billion on mass transit, $22.7 billion on air transportation facilities, $1.6 billion on parking facilities, and $5.2 billion on ports and water transportation, in turn raising $13.2 billion in mass transit fares, $18.8 billion in air transportation fees, $2.2 billion in parking fees and fines, and $4.2 billion in water transportation taxes and fees.[4] While state and local governments generated surplus revenue from parking facilities and fines, no transportation mode was free of subsidy (see Table 1).

Table 1: User Fees and User Taxes as a Percent of State-Local Transportation Spending, 2011

Transportation Mode

User Fees as a Share of Total State & Local Spending on the Mode

User Taxes as a Share of Total State & Local Spending on the Mode

User Fees & User Taxes as a Share of Total State & Local Spending on the Mode

Parking Facilities

137.5%

n/a

137.5%

Air Transportation

*

*

82.8%

Sea and Inland Ports

*

*

80.8%

Mass Transit

22.5%

n/a

22.5%

Highways, Streets, and Roads

8.3%

42.1%

50.4%

Total, All Transportation Modes

21.1%

26.7%

47.8%

Source: U.S. Census Bureau, State and Local Government Finance 2011.
*Data separating state and local water and air transportation revenues into fees and taxes is not available so are presented here as aggregated.

 

With Americans driving approximately 3 trillion miles each year, total road spending by state and local governments equates to an average of 5.1 cents per mile driven. To cover these costs, Americans paid an average of 0.4 cents per mile in tolls and user fees, 1.4 cents in state fuel taxes, and 0.8 cents in vehicle license taxes. The remaining 2.5 cents was covered by general state and local revenues (1.0 cent) and federal aid (0.9 cents derived from the federal gasoline tax and 0.6 cents derived from general federal revenues).

Table 2 lists the proportion of road spending covered by user fees and user taxes by state. Delaware, Hawaii, Florida, and California do the best, raising about two-thirds or more of their transportation spending from user fees and user taxes. While these states’ commuters and visitors may gripe about high tolls and gasoline taxes, users are helping pay for services that they are themselves using. By contrast, Alaska, South Dakota, Wyoming, and Louisiana raise little of their transportation spending from user fees and user taxes, instead subsidizing it heavily with general revenues.

Table 3 lists this information by dollar amount, and Table 4 lists this information per capita.

Expanding tolls and indexing gasoline taxes for inflation may not be politically popular despite the highly popular nature of transportation facilities and services. Given that transportation spending exists, states should aim to fund as much of it as possible from user fees and user taxes. Subsidizing road spending from general revenues creates pressure to increase income or sales taxes, which can be unfair to non-users and undermine economic growth for the state as a whole.

Table 2: Share of State & Local Road Spending Covered by User Fees and User Taxes, 2011

State

Tolls & User Fees

Rank

Fuel Taxes

License Taxes

Total, User FEES & User TAXES

Rank

Delaware

48.1%

1

21.2%

9.3%

78.6%

1

Hawaii

0.8%

37

30.2%

46.4%

77.3%

2

Florida

15.1%

6

38.4%

15.3%

68.8%

3

California

4.4%

20

38.7%

21.3%

64.4%

4

North Carolina

0.3%

44

43.4%

15.9%

59.6%

5

Massachusetts

18.2%

5

25.8%

14.7%

58.7%

6

Rhode Island

5.3%

16

36.4%

16.9%

58.6%

7

New Jersey

32.8%

2

12.1%

13.6%

58.5%

8

New Hampshire

19.5%

4

21.7%

16.8%

58.0%

9

Michigan

3.3%

25

28.1%

25.7%

57.0%

10

New York

29.1%

3

14.6%

12.8%

56.5%

11

Ohio

5.6%

15

34.9%

15.6%

56.1%

12

Texas

10.0%

9

28.4%

17.6%

56.0%

13

Oklahoma

9.7%

11

18.6%

26.9%

55.2%

14

Oregon

3.1%

26

22.6%

29.4%

55.0%

15

Illinois

9.8%

10

21.1%

23.3%

54.2%

16

Maryland

12.5%

8

25.5%

15.1%

53.1%

17

Tennessee

0.0%

50

35.4%

17.5%

53.0%

18

South Carolina

4.6%

19

34.4%

12.8%

51.9%

19

Colorado

5.2%

17

26.0%

19.7%

50.9%

20

Washington

6.7%

14

29.8%

12.4%

48.9%

21

Maine

12.7%

7

25.7%

10.5%

48.8%

22

Iowa

0.4%

43

21.4%

24.8%

46.6%

23

Nebraska

3.7%

24

27.7%

14.9%

46.3%

24

Arkansas

1.9%

30

33.9%

10.4%

46.2%

25

Virginia

3.7%

23

24.7%

16.2%

44.7%

26

Kentucky

0.2%

47

32.8%

11.0%

44.1%

27

Wisconsin

4.3%

21

26.9%

12.5%

43.6%

28

Connecticut

0.1%

49

30.9%

12.6%

43.6%

29

Georgia

1.0%

36

32.1%

10.2%

43.4%

30

Indiana

0.2%

48

28.7%

14.2%

43.1%

31

Minnesota

1.4%

34

24.0%

16.6%

41.9%

32

Pennsylvania

9.6%

12

22.9%

9.3%

41.8%

33

Kansas

5.2%

18

24.9%

11.6%

41.7%

34

Montana

1.6%

32

23.6%

16.2%

41.4%

35

Idaho

2.9%

27

23.8%

14.1%

40.9%

36

Arizona

0.7%

38

31.0%

9.1%

40.8%

37

Alabama

0.7%

39

28.1%

10.0%

38.9%

38

Nevada

0.5%

41

26.8%

10.8%

38.1%

39

West Virginia

7.4%

13

30.4%

0.3%

38.1%

40

Mississippi

0.2%

46

25.2%

7.7%

33.1%

41

New Mexico

1.3%

35

20.2%

11.6%

33.1%

42

Missouri

0.6%

40

22.5%

8.5%

31.6%

43

North Dakota

1.9%

29

18.1%

9.8%

29.8%

44

Vermont

0.2%

45

17.9%

10.9%

29.0%

45

Utah

2.0%

28

20.1%

6.7%

28.8%

46

Louisiana

1.6%

33

20.2%

3.6%

25.4%

47

Wyoming

1.7%

31

10.1%

12.7%

24.5%

48

South Dakota

0.5%

42

14.1%

7.0%

21.5%

49

Alaska

3.9%

22

2.3%

4.3%

10.5%

50

District of Columbia

0.0%

(51)

9.0%

13.5%

22.5%

(49)

U.S. Average

8.3%

 

26.9%

15.2%

50.4%

 

Source: Tax Foundation calculations from U.S. Census Bureau, State and Local Government Finance 2011. District of Columbia rank is for comparative purposes and does not affect other states’ ranks.

 

 

Table 3: Road-Related User Fees and User Taxes Collected by State, 2011
 ($ millions)

State

Tolls & User Fees

Fuel Taxes

License Taxes

Total, User Fees & User Taxes

Total, State-Local Road Spending

Share Covered

Rank

Alabama

$16.1

$618.6

$220.5

$855.2

$2,199.6

38.9%

38

Alaska

$65.2

$39.6

$73.0

$177.8

$1,692.2

10.5%

50

Arizona

$18.3

$774.6

$227.6

$1,020.5

$2,500.7

40.8%

37

Arkansas

$26.1

$468.6

$143.3

$638.0

$1,381.0

46.2%

25

California

$651.1

$5,705.5

$3,132.0

$9,488.6

$14,726.5

64.4%

4

Colorado

$124.9

$622.8

$471.2

$1,218.9

$2,396.1

50.9%

20

Connecticut

$1.8

$477.8

$195.3

$674.8

$1,548.4

43.6%

29

Delaware

$258.3

$113.8

$50.0

$422.1

$537.2

78.6%

1

Florida

$1,235.8

$3,151.8

$1,253.6

$5,641.2

$8,200.4

68.8%

3

Georgia

$30.3

$932.7

$296.8

$1,259.8

$2,903.6

43.4%

30

Hawaii

$4.4

$170.5

$261.8

$436.7

$564.6

77.3%

2

Idaho

$28.7

$239.0

$141.8

$409.4

$1,002.3

40.9%

36

Illinois

$694.1

$1,492.5

$1,653.4

$3,840.0

$7,088.4

54.2%

16

Indiana

$5.5

$775.3

$384.9

$1,165.6

$2,702.3

43.1%

31

Iowa

$9.2

$448.0

$520.2

$977.4

$2,096.3

46.6%

23

Kansas

$90.6

$436.9

$204.2

$731.6

$1,755.2

41.7%

34

Kentucky

$4.9

$732.8

$246.3

$984.0

$2,231.9

44.1%

27

Louisiana

$48.4

$607.5

$108.7

$764.7

$3,014.2

25.4%

47

Maine

$117.9

$239.4

$97.7

$455.0

$931.6

48.8%

22

Maryland

$367.7

$752.2

$444.1

$1,564.0

$2,945.3

53.1%

17

Massachusetts

$467.9

$660.8

$378.1

$1,506.8

$2,564.8

58.7%

6

Michigan

$113.4

$975.0

$891.0

$1,979.4

$3,470.4

57.0%

10

Minnesota

$48.1

$847.9

$587.6

$1,483.5

$3,538.4

41.9%

32

Mississippi

$4.1

$424.3

$129.1

$557.5

$1,683.5

33.1%

41

Missouri

$19.4

$719.4

$270.9

$1,009.7

$3,197.7

31.6%

43

Montana

$14.3

$209.4

$144.0

$367.7

$888.9

41.4%

35

Nebraska

$42.3

$318.1

$171.3

$531.6

$1,147.7

46.3%

24

Nevada

$7.7

$376.2

$151.7

$535.5

$1,403.9

38.1%

39

New Hampshire

$146.7

$162.8

$126.2

$435.6

$751.5

58.0%

9

New Jersey

$1,414.9

$524.2

$587.5

$2,526.6

$4,318.1

58.5%

8

New Mexico

$15.5

$239.5

$137.8

$392.7

$1,186.0

33.1%

42

New York

$3,212.2

$1,609.4

$1,414.7

$6,236.4

$11,029.3

56.5%

11

North Carolina

$12.5

$1,663.0

$608.0

$2,283.5

$3,829.5

59.6%

5

North Dakota

$17.9

$170.9

$93.0

$281.8

$945.6

29.8%

44

Ohio

$281.7

$1,757.2

$787.3

$2,826.3

$5,037.4

56.1%

12

Oklahoma

$233.6

$447.5

$646.2

$1,327.3

$2,403.5

55.2%

14

Oregon

$62.1

$454.4

$590.8

$1,107.3

$2,012.5

55.0%

15

Pennsylvania

$859.1

$2,064.2

$834.3

$3,757.6

$8,995.4

41.8%

33

Rhode Island

$18.3

$126.3

$58.7

$203.3

$346.9

58.6%

7

South Carolina

$71.3

$527.8

$196.6

$795.7

$1,532.7

51.9%

19

South Dakota

$4.1

$127.4

$63.3

$194.8

$906.9

21.5%

49

Tennessee

$1.0

$845.4

$419.1

$1,265.5

$2,388.9

53.0%

18

Texas

$1,096.8

$3,108.4

$1,924.1

$6,129.3

$10,939.1

56.0%

13

Utah

$36.4

$370.0

$122.3

$528.7

$1,837.0

28.8%

46

Vermont

$1.5

$104.7

$63.8

$170.0

$586.3

29.0%

45

Virginia

$137.4

$908.0

$594.3

$1,639.7

$3,671.6

44.7%

26

Washington

$271.0

$1,205.9

$503.5

$1,980.4

$4,046.4

48.9%

21

West Virginia

$96.5

$397.7

$3.8

$498.1

$1,307.2

38.1%

40

Wisconsin

$156.4

$989.5

$458.7

$1,604.6

$3,678.8

43.6%

28

Wyoming

$12.1

$70.2

$88.2

$170.5

$696.9

24.5%

48

Source: Tax Foundation calculations from U.S. Census Bureau, State and Local Government Finance 2011. District of Columbia rank is for comparative purposes and does not affect other states’ ranks.

 

 

 

 

 

 

Table 4: Road-Related User Fees and User Taxes Collected by State Per Capita, 2011

State

Tolls & User Fees

Fuel Taxes

License Taxes

Total, User Fees & User Taxes

Total, State-Local Road Spending

Share Covered

Rank

Alabama

$3

$129

$46

$178

$458

38.9%

38

Alaska

$90

$55

$101

$246

$2,341

10.5%

50

Arizona

$3

$119

$35

$157

$386

40.8%

37

Arkansas

$9

$159

$49

$217

$470

46.2%

25

California

$17

$151

$83

$252

$391

64.4%

4

Colorado

$24

$122

$92

$238

$468

50.9%

20

Connecticut

$1

$133

$55

$188

$432

43.6%

29

Delaware

$285

$125

$55

$465

$592

78.6%

1

Florida

$65

$165

$66

$296

$430

68.8%

3

Georgia

$3

$95

$30

$128

$296

43.4%

30

Hawaii

$3

$124

$190

$318

$411

77.3%

2

Idaho

$18

$151

$89

$258

$632

40.9%

36

Illinois

$54

$116

$128

$298

$551

54.2%

16

Indiana

$1

$119

$59

$179

$415

43.1%

31

Iowa

$3

$146

$170

$319

$685

46.6%

23

Kansas

$32

$152

$71

$255

$611

41.7%

34

Kentucky

$1

$168

$56

$225

$511

44.1%

27

Louisiana

$11

$133

$24

$167

$659

25.4%

47

Maine

$89

$180

$74

$343

$701

48.8%

22

Maryland

$63

$129

$76

$268

$505

53.1%

17

Massachusetts

$71

$100

$57

$229

$389

58.7%

6

Michigan

$11

$99

$90

$200

$351

57.0%

10

Minnesota

$9

$159

$110

$278

$662

41.9%

32

Mississippi

$1

$142

$43

$187

$565

33.1%

41

Missouri

$3

$120

$45

$168

$532

31.6%

43

Montana

$14

$210

$144

$368

$891

41.4%

35

Nebraska

$23

$173

$93

$288

$623

46.3%

24

Nevada

$3

$138

$56

$197

$516

38.1%

39

New Hampshire

$111

$124

$96

$330

$570

58.0%

9

New Jersey

$160

$59

$67

$286

$490

58.5%

8

New Mexico

$7

$115

$66

$189

$570

33.1%

42

New York

$165

$83

$73

$320

$567

56.5%

11

North Carolina

$1

$172

$63

$236

$397

59.6%

5

North Dakota

$26

$250

$136

$412

$1,383

29.8%

44

Ohio

$24

$152

$68

$245

$436

56.1%

12

Oklahoma

$62

$118

$170

$350

$634

55.2%

14

Oregon

$16

$117

$153

$286

$520

55.0%

15

Pennsylvania

$67

$162

$65

$295

$706

41.8%

33

Rhode Island

$17

$120

$56

$193

$330

58.6%

7

South Carolina

$15

$113

$42

$170

$328

51.9%

19

South Dakota

$5

$155

$77

$236

$1,100

21.5%

49

Tennessee

$0

$132

$65

$198

$373

53.0%

18

Texas

$43

$121

$75

$239

$426

56.0%

13

Utah

$13

$131

$43

$188

$652

28.8%

46

Vermont

$2

$167

$102

$271

$936

29.0%

45

Virginia

$17

$112

$73

$203

$453

44.7%

26

Washington

$40

$177

$74

$290

$592

48.9%

21

West Virginia

$52

$214

$2

$268

$705

38.1%

40

Wisconsin

$27

$173

$80

$281

$644

43.6%

28

Wyoming

$21

$124

$155

$300

$1,227

24.5%

48

Dist. of Columbia

$0

$35

$53

$89

$395

22.5%

(49)

Total, United States

$41

$132

$74

$247

$491

50.4%

 

Source: Tax Foundation calculations from U.S. Census Bureau, State and Local Government Finance 2011. District of Columbia rank is for comparative purposes and does not affect other states’ ranks.

 



[1] See, e.g., Joseph Henchman, Virginia Legislators Approve Increases in Sales Tax, Car Tax, Regional Taxes, Tax Foundation Tax Policy Blog, Feb. 25, 2013, http://bit.ly/1d6FynY; Joseph Henchman, Massachusetts to Have Second Highest Cigarette Tax, Rare Tax on Computer Services, Higher Gas Tax, Tax Foundation Tax Policy Blog, Jul. 26, 2013, http://bit.ly/1hCHo0L; Tanya Snyder, Ten Questions (and Answers) About Oregon’s New VMT Charge, DC Streets Blog, Sep. 24, 2013, http://bit.ly/K0HDag; U.S. Government Accountability Office, Highway Trust Fund: Pilot Program Could Help Determine the Viability of Mileage Fees for Certain Vehicles, No. GAO-13-77, http://www.gao.gov/assets/660/650863.pdf; Michelle Boudin, Controversial toll road planned to widen I-77, NBC Charlotte, Jan. 14, 2013, http://bit.ly/W0pEDs; Lawmakers Criticize Kasich’s Turnpike Plan, WKBN, Dec. 18, 2012, http://bit.ly/W77duH. For state level gasoline taxes in recent years, see http://bit.ly/1fF9eYZ.

[2] For state-by-state treatment of the distinction between taxes and fees, see Joseph Henchman, How Is the Money Used? Federal and State Cases Distinguishing Taxes and Fees (Mar. 27, 2013), http://bit.ly/19Bgjcc.

[3] U.S. Census Bureau, State and Local Government Finance 2011. Our report this year includes vehicle license taxes in the “user tax” category, which was not the case for our report last year.

[4] See id.

 

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