Gasoline Taxes and Tolls Pay for Only a Third of State & Local Road Spending

January 18, 2013

A key issue for many state legislatures this year is transportation funding, says Joseph Henchman of the Tax Foundation.

The lion's share of transportation funding should come from user taxes and fees, such as tolls, gasoline taxes and other user-related charges. When road funding comes from a mix of tolls and gas taxes, the people that use the roads benefit from them and should 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 2010, state and local governments raised $37 billion in motor fuel taxes and $12 billion in tolls and non-fuel taxes, 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 ratios do not change much when adding in all transportation modes.

  • 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, $18 billion in air transportation fees, $3.2 billion in parking fees and fines, 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.

Expanding tolls and indexing gasoline taxes for inflation may not be politically popular, even though transportation facilities and services are highly popular. Given that transportation spending exists, states should aim to fund as much of it as possible from user-related taxes and fees. Subsidizing highway 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.

Source: Joseph Henchman, "Gasoline Taxes and Tolls Pay for Only a Third of State & Local Road Spending," Tax Foundation, January 17, 2013.

 

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