In the coming months, billions of dollars of new federal investments will start flowing to the states to pay for transportation infrastructure. This is very good news. The Infrastructure Investment and Jobs Act (IIJA), signed into law by President Joe Biden last November, presents us with an opportunity to build a cleaner, better-working and more modern transportation network in America.
But to fully take advantage of the new money, we need to get our transportation priorities in order. That means rethinking the way we price transportation, and redirecting funding to cleaner, safer and more efficient modes of travel.
But wait! (You might be saying.) We have gas taxes, registration fees, tolls…don’t they pay for our roads?
That’s one of the most persistent fallacies underpinning U.S. transportation policy. People expect that because that’s what we intended when we created the “user fee” system of pricing and paying for transportation over a century ago. While it may have worked back then, we’re in a new era. We have new challenges, new needs, new technologies. The old way of doing things doesn’t fly anymore.
Roads don’t pay for themselves
According to the “roads pay for themselves” narrative, gas taxes, registration fees and other driving-related fees from the “users” of those roads – i.e., drivers -- pay to build and maintain roads These revenues, the theory goes, are not conventionally classified as “taxes,” Instead, they’re considered “user fees,” and as such, should be used exclusively for the benefit of those who pay them.
In fact, these “user fees” now account for only around half of the total cost of building and maintaining roads nationwide, and in many places, less than that. This funding has not kept up with either inflation or increased spending, meaning we have to subsidize the costs of driving using general taxpayer funds.
Take the gas tax, for example. Since 1993, the federal gas tax has been 18.3 cents per gallon. That’s right, the federal gas tax hasn’t been raised in nearly 30 years. Since then, construction cost inflation and fuel efficiency gains (a good thing!) have reduced the purchasing power of the 18.3 cent gasoline tax by 64 percent. To make up for lost ground, the gas tax today would need to be increased to 50.8 cents per gallon.
At the same time, average transit fares have increased 143 percent since 1990. In fact, transit policies usually require raising transit prices as needed to cover a certain percentage of costs. By leaving the gas tax stagnant for three decades, we’ve given driving an unfair advantage when it comes to cost-conscious consumers. As a result, we are consistently subsidizing driving while underfunding transit, walking and biking even though they are safer, cleaner and more efficient modes of transportation.
The current model of funding doesn’t account for the societal costs of driving
Everyone who takes any mode of transportation necessarily imposes costs on society – including road wear, congestion, air and water pollution, and contribution to global warming.
But not all modes of transportation are created equal. Some have significantly larger societal costs than others. Driving a gas-powered SUV has a far larger negative impact than biking, walking or taking transit does.
Yet the costs associated with these impacts are currently not reflected in the prices we pay for these various modes of transportation. This means that decisions as to what form of transport to take for any given trip (Should I drive or take the bus? Should I drive a car or an SUV? Should I drive a gas-powered car or an EV?) often wind up with the most societally damaging modes being the cheapest available options.
How to fix it
So who pays for roads? We all do (not only with our tax dollars, but also with our health and safety), no matter how much we drive.
America needs a new approach to transportation funding appropriate for our 21st century needs. We should adopt a system where the impact on society dictates the cost of different modes of transportation and where we prioritize transportation spending.
Shifting our approach to transportation finance away from “user fees” and thinking instead in terms of “impact fees” can bring the financial cost of driving closer to reflecting its true costs. This will help to ensure that the price people pay for automobile use corresponds to the damage it causes, while incentivizing transportation choices that deliver the greatest benefits to or impose the lowest costs on society.
Policies in this vein that we should consider adopting or expanding include:
We also must decouple the source of revenue from the investment. The idea that the “gas tax” should be used solely to pay for roads because it’s a fee imposed on drivers is based on a false premise that has kept us trapped in our cars. In 1925, Winston Churchill said: “Entertainments may be taxed; public houses may be taxed; racehorses may be taxed ... and the yield devoted to the general revenue. But motorists are to be privileged for all time to have the whole yield of the tax on motors devoted to roads. Obviously this is all nonsense. ... Such contentions are absurd.” Yet here we are, nearly a century later.
Instead, we should spend the money where it makes sense. At a time when we need to slash climate emissions and cut air pollution and when roadway deaths are at their highest rates in decades, that means we need to stop spending on highway boondoggles. Instead, we should focus our investment on expanding access to public transportation, making our roads safer for all road users (not just drivers) and transitioning away from fossil fuel-powered vehicles.
With the Biden administration about to send billions of dollars to the states from the infrastructure law, it’s critical that we make this shift now, before we end up on a road to nowhere.
Read more in our new report: Shifting Gears.