Tax Foundation makes case for gas taxes, user fees

Surprised to read that the Tax Foundation would support a tax? Vice president Joseph Henchman explains why in a news release targeting states’ methods for funding transportation projects.

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). 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). 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. …

… 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.

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