By Dennis Polhill
The wealth Americans enjoy depends upon the efficient movement of goods and services.
When the Pennsylvania Turnpike opened between Philadelphia and Pittsburgh, trip time 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 micro-level, proportionately smaller in scale. A new traffic signal that hastens traffic flow produces economic benefits. Similarly, one that hinders more than hastens, cause economic damage.
America’s transportation system is the envy of the world. Yet, managers have failed to keep pace with growth. The inevitable result, growing traffic congestion, imposes economic cost 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, scheduled to expire in 1972, was introduced in 1956 to finance construction of the Interstate Highway system. The Federal tax is currently at $0.184 per gallon. State taxes range from Georgia’s $0.075 to Wisconsin’s $0.321 with Colorado at $0.22.
This generates 40 billion Federal dollars annually and most of this money eventually finds its way back to the states in some form. There are no federally-owned highways, airports, railroads or transit systems. Colorado gets about 1.275%, but about 1/3 is diverted.
Since completion of interstate highway construction in 1982, Congress has turned the Federal gas tax into the nation’s most outrageous pork program. 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 CDOT and nearly 400 Colorado local governments with roads. Three intractable trends are shrinking HUTF revenues: fuel economy, inflation, and diversion. Their combined effect may exceed 5% 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 tax user fees 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, rush hour, resulting in system failure known as traffic congestion. This, in turn, motivates infrastructure to be unnecessarily enlarged. A close look at traffic count data reveals that the most congested roads are capable of moving twice as many vehicles.
Electronic toll collection has made tollbooths obsolete and facilitates variable tolls. ETC eliminates tollbooth accidents and reduces collection costs. Variable tolls vary with demand insuring 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. Excess revenue generation is a signal that more infrastructure may be needed and provides a funding source.
Prior to 1956 Eisenhower, who favored tolls and McDonald, his highway chief, who favored the gas tax, struggled to decide the future of transportation finance. The gas tax accelerated rapid development of a four million mile roadway network. A finance system that helps operate and maintain the existing system is now appropriate for the future.
Tolls are inevitable. Enlightened political leadership will work to educate the general public of the benefits by strategically located demonstration projects. As 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.