The wealth Americans enjoy depends, and always has, on the efficient movement of goods and services.
When the Pennsylvania Turnpike opened between Philadelphia and Pittsburgh, trip times were halved. Suppliers suddenly had twice as many people to sell to. Consumers had twice as many purchasing options. Efficient transportation yielded benefits to both suppliers and consumers.
The same benefits accrue at the local levels, proportionately smaller in scale. A new traffic signal that hastens traffic flow produces economic benefits. Similarly, one that hinders causes economic damage.
America’s transportation system is the envy of the world. Yet managers have failed to keep pace with growth. The inevitable result – increasing traffic congestion – imposes economic costs many times greater than the cost to eliminate it.
Users seem paradoxical in their willingness to pay for better service and in their simultaneous resistance to higher taxes. This apparent conflict frustrates political leaders who fail to recognize the consistency in the paradox. A coherent new policy has yet to crystallize.
Scholars from both the political left and right have been in agreement for at least two decades that transportation must move to market-based financing. Resistance to change is centered in the most powerful of special- interest groups: the political class. Empowerment of markets or consumers means less power for politicians.
The federal gas tax, originally scheduled to expire in 1972, was introduced in 1956 to finance construction of the interstate highway system. The federal tax is currently at 18.4 cents per gallon. State taxes range from Georgia’s 7.5 cents to Wisconsin’s 32.1 cents, with Colorado at 22 cents.
The federal tax generates $40 billion annually for the federal government, most of which eventually finds its way back to the states in some form to be used for highways, airports, railroads or transit systems.
Since completion of interstate highway construction in 1982, Congress has turned the federal gas tax into the nation’s most outrageous pork program. President Reagan vetoed the 1982 transportation bill because it contained 10 earmarks. Historically, specific project designations in federal legislation were prohibited. There are currently 3,248 earmarks.
Colorado gasoline taxes fund the Highway User Trust Fund. HUTF revenues are shared between the Colorado Department of Transportation and nearly 400 Colorado local governments. Three intractable trends are shrinking fund revenues: fuel economy, inflation and diversion. Their combined effect may exceed 5 percent per year. This halves the HUTF every 15 years. The politician who advocates doubling taxes will have a short career. A different finance system is inevitable. The challenge is to conceive one that works better than the gas tax.
Gas taxes have two fatal flaws. Centralization of funds creates a target for special interest groups and political interests. More significantly, paying at the pump conveys the perception that system use is free, causing a tragedy of the commons. That is, disproportionate numbers try to use the system at the same time – i.e., rush hour – resulting in system failure known as traffic congestion. This, in turn, motivates unnecessary expansion. A close look at traffic count data reveals that the most congested roads are capable of moving twice as many vehicles if managed properly.
Electronic toll collection has made toll booths obsolete and makes variable tolls possible. The system eliminates toll booth accidents and reduces collection costs. Variable tolls vary with demand, ensuring that a lane is never congested. Never-congested lanes move more vehicles during peak periods than do congested lanes. Moving traffic consumes less fuel per mile traveled, reducing emissions. If a toll road starts generating excess revenue, that’s a signal that more lanes or another road may be needed, and provides a funding source.
In the 1950s, the federal decision to rely on gas taxes enabled construction of the interstate highway system. Now we need a new finance system that helps operate and maintain the existing system.
Tolls are inevitable. Enlightened political leadership needs to educate the public of the benefits of a new way of paying for highways. And, as state dependence on the gas tax decreases, those revenues can be reassigned to local governments to help address their funding shortfalls.
Dennis Polhill is a former city public works manager, a consulting transportation engineer and a senior fellow with the Independence Institute.
