Highway programs derive most of their funding from user fees, which are special taxes and charges incurred by vehicle operators in relation to their use of roads. Governments dedicate most highway user fee revenue to highway spending ($85 billion out of $107 billion collected in 2004) and also devote a share to transit ($11 billion in 2004). Fuel taxes generate most highway user fee revenue (64 percent of the total in 2004); other user fee revenues are from vehicle registration fees, excise taxes on truck sales, and tolls. This study assesses the revenue-generating prospects of fuel taxes and other user fees and identifies alternatives to the present finance arrangement. Transportation officials have been concerned that the sources that provided stable and growing revenue for their programs for many decades could become unreliable in the future. They see two possible threats to the viability of the established arrangement: that fuel consumption and fuel tax revenue could be depressed by changes in automotive technology, rising fuel prices, or new energy or environmental regulations; and that the user fee finance principle that has been the basis of highway finance may be eroding in practice, as nonhighway applications of user fee revenues proliferate and dependence on revenue from sources other than user fees grows. The vulnerability of excise tax revenue to inflation in an era when tax rate increases often seem politically infeasible magnifies these concerns. In judging the merits of the present finance system and alternatives, the Transportation Research Board study committee focused on how finance arrangements affect the performance of the transportation system by influencing the decisions of travelers and government investment and management decisions. This criterion led the committee to give special attention to methods of charging fees that could be directly related to the cost of providing services—in particular, tolls and mileage charges. The committee did not estimate how much governments should spend on transportation and did not interpret its task as devising revenue mechanisms to support an increased level of spending. There is no certainty that finance reform in the direction of improving the efficiency of transportation would increase revenues. A reformed finance system would remain subject to many of the external political and economic constraints that limit the revenue potential of the present system. However, reform would help transportation agencies to manage capacity and to target investment to projects with the greatest benefit to the public. Each dollar spent would be more effective and services would improve, and it is conceivable that the public would be willing to pay more for transportation programs that worked better. (Author/publisher)
Abstract