States Must Get Creative to Fund Highways

September 10, 2013

With cars becoming more fuel efficient and miles driven declining -- 2.938 trillion miles traveled in 2012 compared with 3.031 trillion in 2007 -- federal and state fuel tax revenues are increasingly insufficient to build new roads and maintain existing ones. Electric cars, a favorite of President Obama, use no gasoline at all, so those drivers do not pay for road use, says Diana Furchtgott-Roth, a senior fellow with the Manhattan Institute.

  • Federal gasoline taxes are now 18.4 cents per gallon (24.4 cents for diesel).
  • Unfortunately, current fuel and vehicle-related excise taxes, with 2011 collections of $36.9 billion, are not yielding sufficient revenues for maintaining or improving the road network, and Congress does not want to raise fuel taxes.
  • On many roads the road damage costs per mile driven are greater than the fuel tax revenue.
  • In 2011, the Highway Trust Fund income totaled $36.9 billion, while expenditures totaled $44.5 billion, a deficit of $7.6 billion.
  • The 1956 legislation that set up the Highway Trust Fund provided for federal highway expenditures to be funded only out of the trust fund, and made no provision for replenishing it from general revenues.

In the future, the most obvious substitute for fuel taxes is to charge road users directly for vehicle miles traveled (VMT), enabling them to get the roads they are prepared to pay for.

  • Each vehicle could have an on-board meter to pay for VMT.
  • These could also be adapted to pay for street parking and tolls, find a vacant parking space in the city center, and get discounts at parking garages.

In the 21st century, charging for roads and deciding where they should go should be the responsibility of state or private providers. The interstate highway system is complete, and the technology for pricing roads without stopping vehicles is readily available. As the Highway Trust Fund revenues shrink, those states that are raising funds for their own roads -- especially Oregon, with its mileage-based user fee -- are the wave of the future.

Source: Diana Furchtgott-Roth, "Road Rage: States Get Creative to Fund Highways," Market Watch, August 30, 2013.

 

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