By Dennis Polhill

Few people dispute the importance of efficient transportation in an open and free society. As individuals gain in personal affluence, they willingly allocate a portion of their new wealth to increased mobility and freedom. As long as the wealth of society increases (both collectively and on a per capita basis), demand for transportation that efficiently responds to the individual needs of people will increase.

Until the creation of the gasoline tax in 1956, government was unable to respond to the demand for paved roads. The gasoline tax provided appropriate user fee financing. The access to land and the mobility that paved highways offered caused real estate to escalate in value. Free movement of goods and services provided greater access to a wider variety of options and increased market competition helped to lower costs to consumers. The direct benefit to the economy of construction of the 40,000 mile interstate highway system was at least five dollars for each dollar spent on construction. Highway construction adds value via mobility to existing economic generators. When highways are constructed where there are no preexisting economic generators, no economic development benefits result because there are no markets or resources to access. This is a reasonable test for the viability of transportation projects. If mobility and access are improved, the benefits of the project can be balanced against the costs.

The advent of the gasoline tax was simultaneous with the Federal Highway Trust Fund. As interstate highway construction progressed and the power of the gasoline tax was recognized, use of the trust fund was expanded. Federal matching share increased. Funds became more readily available for appurtenances, relocations, environmental, archeological, safety, and other project considerations. Subsequently, trust fund moneys became available for an expanded federal aid system, off-system projects, and maintenance. The trust fund has also been accessed to subsidize other transportation modes: mass transit, aviation, railroads, waterways, and bike paths. Last, but not least, the gasoline tax user fee has been accessed by Congress to finance a portion of the national debt. So the original concept of a user fee for transportation has been greatly expanded and co-opted. The gas tax has become part user fee and part tax based on consumption.

Currently the Colorado tax is $.22 per gallon and the federal tax is $.183 per gallon for a total of slightly over $.40 per gallon. If an average vehicle gets 20 miles per gallon, the user fee is $.02 per mile. However, users have a degree of control over their tax rate. Some own vehicles that get 40 miles per gallon and thus pay only $.O1 per mile user fee. Some get less than 10 miles per gallon and pay $.04 per mile user fee. Advocates of other-than-auto transportation quickly point to subsidies from other sources that go to highways. The Brookings Institution estimates these subsidies at about $22 billion per year nationwide, slightly less than $.O1 per mile. Rush hour traffic congestion points to the fact that not all vehicle-miles traveled are equal. A rush hour vehicle-mile is more valuable than a non-rush hour vehicle-mile.

Heavy vehicles do not pay their fair share of highway costs as measured by structural damage to the facility. A vehicle that weighs twice as much produces 16 times as much road damage (2 to the 4th power). Similarly, due to the fee structure, there is little incentive to avoid overloads, unbalanced loads, or to configure vehicles to mitigate damage. Conversely, truckers argue that autos do not pay their fair share of the highways since they are few compared to the many that consume the capacity of the system.

Mass transit advocates argue that highway taxes should pay for mass transit because congestion is relieved when commuters ride mass transit. Because transportation economics has been contorted by the distortions of subsidies, it is difficult to rationalize logically the role of mass transit in the entire picture. Without massive public subsidies to mass transit, it could not survive. Mass transit ridership nationwide continues to decline in spite of massive subsidies. Currently, ridership is less than 5 % of all commuters. Roughly 5 % of commuters walk to work and 15 % use carpools. It is unlikely that a system of fixed routes and fixed schedules can meet the needs of an increasingly diverse, mobile, affluent, and unconstrained population. It is, however, clear that economic distortions and subsidies to highways work to the disadvantage of viable mass transit. A public policy that subsidizes highways to the detriment of mass transit and then requires additional taxpayer subsidies to mass transit to offset the damage is not rational.

Transportation is a private good, wherein the benefits accrue primarily to an individual. Thus, transportation is a service that receives public subsidy inappropriately. Historically, it has been virtually impossible for aspects of transportation to recover their costs in user fees. However, recent technological advances make it feasible to assign the true cost of transportation services more directly to those who benefit.

The gas tax as a user fee may be inadequate and obsolete. ISTEA (the 1991 Federal Transportation Act) liberalizes the use of congestion pricing, weight-distance
fees and toll roads. As society moves in the direction of free market governance, such fees can be expected to evolve into common usage. The sooner Colorado comes to recognize the future condition, the sooner Colorado can capture the benefits that a more liberal free market approach can yield.