A better way to fund roads

June 11, 2009

diana-furchtgottroth–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-

Just as motorists began the summer driving season, U.S. Department of Transportation Secretary Ray LaHood told Congress that the Highway Trust Fund will run out of money by August.   Rising gasoline prices and the recession mean less driving, and less driving means lower revenues from gasoline taxes for the Highway Trust Fund.

At the same time, President Obama wants to spend $13 billion as a downpayment on high-speed rail, an expensive form of transportation that will reach only small segments of the country and that will not substitute for highways.  The money would be better spent on developing a more stable  source of revenue for highways, based on miles driven rather than gasoline used, that would help to reduce traffic congestion and greenhouse gas emissions.

When the Highway Trust Fund ran out of money in 2008, Congress transferred $8 billion to the fund from general revenues as a repayment from 1998, when the fund was in surplus, and $8 billion was moved into general spending.  This year, if Congress transfers money, it would be a direct expenditure, with no fig leaf. Without a transfer, work on many projects would stop or slow down.

The federal government financed the interstate highway system by means of a fuel tax because that was the best method available. Legislation passed in 1956 provided that, on completion, the federal tax would be repealed and funding restored to the states. The highway system is now complete, so there is no rationale for continuing federal involvement in financing state roads.

The $13 billion allocated for high-speed rail would be better spent to encourage the states to adopt a new way of charging for road use.  Driving is the primary method of transportation for Americans. They own about 235 million registered passenger cars, vans, pickup trucks and sport utility vehicles, and drive over 2.5 trillion miles a year.

Mechanisms for improving road finance were addressed earlier this year in a pathbreaking bipartisan report by the National Surface Transportation Infrastructure Financing Commission entitled Paying Our Way: A New Framework for Transportation Finance.

The Commission concluded that America should move away from gasoline taxes as a way to fund roads.  With more efficient cars, motorists will be able to travel further using less gasoline while still imposing wear-and-tear on roads. Hence, maintenance and repair should be funded through direct user charges that are based on miles traveled on all streets and roads, rather than on gasoline purchased.

House Committee on Transportation and Infrastructure Chairman Jim Oberstar regards a vehicle mileage charge as one of a number of options under consideration as a complement or alternative to a gasoline tax, but he is not committed to any course of action, according to the committee communications director Jim Berard.

Ideally, a vehicle mileage charge would require a tamper-proof device that would track not only miles and time of day driven but also the route selected.  This would allow states and local governments to vary the charges based on route taken and time of day driven.  Motorists who travel on congested roads at peak times of day could be charged more, encouraging them to shift their travel away from rush hour.

Since the change in road financing cannot be made immediately, the Commission recommends setting up a user-charge system that would work in conjunction with the Highway Trust Fund until 2020, at which point the new system would be in place to take over.

Full transition to this new revenue system would require research, the purchase of technology, and pilot projects, all of which would be a better use of stimulus funds than high-speed rail. With prices of transponders and global positioning systems falling, sophisticated and efficient road pricing systems are now possible. GPS devices could be given to drivers who choose to participate, and drivers could pay as easily as they now pay for cell phones or E-ZPass tolls.

To make road user charges more politically palatable, participating motorists could be exempt from registration fees, but would pay road charges instead, charges that could vary by type of road used and time of day.  Technologies exist to ensure that detailed information on trips is not sent out to motorists so that privacy is preserved.

The vanishing Highway Trust Fund is a wake-up call to use new technology to make our roads flow better.


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“…a tamper-proof device that would track not only miles and time of day driven but also the route selected.” – KGB dream come true.
“Technologies exist to ensure that detailed information on trips is not sent out to motorists so that privacy is preserved.” – I don’t care if the “detailed information on trips” is sent to me the motorist. But I don’t like the idea of this data being stored hell knows where and disclosed to hell knows whom. As for technological protection of privacy – have you ever heard the word “hacker”? These guys may figure out how to use this data for profit, and then it will be only a matter of time before they access and possibly alter the data.
Also I don’t see this system being equitable. A compact sedan inflicts much less wear and tear on the road than a full size SUV, and that, in turn, less than an 18-wheeler. “One size fits all” mileage tax would unduly punish small vehicle owners. Making the tax multi-tiered will only add complexity to the system.
While gas tax is not perfect, the alternative looks worse from almost any angle. Gas tax also serves the purpose of encouraging drivers to switch to more fuel-efficient vehicles. I would even conditionally support gas tax hike – under the condition of equally sized income tax cut. Why not reward people who work harder and drive more responsibly?

Posted by Anonymous | Report as abusive

I think the best thing to do with the money for the high speed rail would be not to spend it.

Posted by Drewbie | Report as abusive

Automobiles are an inefficient way to transport the masses to work. Look at the energy cost per passenger mile( most people do not car pool). Cars are disposable requiring an endless source of resources(metals, plastic, rubber, silica, carbon fiber…). Traffic jams and stop and go traffic in congested cities flush EPA fuel mileage ratings down the commode.

Hey, I like racing around in my BMWs too. I’m afraid it is time to grow up and make a change.

Posted by Anubis | Report as abusive

The only responsible choice in this situation is to start a shift that pulls us away from needing such a high Trust Fund for roads. If Americans drive more than any other country it isn’t likely because they all want to do so. If you could get to the same place equally fast (if not faster because of traffic) and save money doing it on your commutes to work… you would. But the sad fact is, that even in the best cities in America rail and other mass transit is a laughable alternative to driving a car. We have to start somewhere, so a rail system that doesn’t hit a lot of places just yet, I’m all for. When it grows, as long as it maintains good speeds and regular departures, you will see a shift away from the individual propulsion pods we call SUVs.

Posted by Danny | Report as abusive