Iowa House Republican leaders oppose the Iowa City to Chicago passenger rail project, because it would cost the state budget about $10 million in start-up costs and roughly $3 million per year in ongoing government subsidies. New House Speaker Kraig Paulsen argues that passenger rail should be able to support itself.

Leaving aside the economic and environmental benefits of expanding passenger rail networks, the Republican argument would be more persuasive if the state and federal governments didn’t massively subsidize road construction and maintenance every single year. This week the Iowa Public Interest Research Group released a report showing that “gas taxes cover barely half the costs of building and maintaining roads, and can be expected to cover an increasingly smaller percentage over time.” Iowa PIRG advocate Sonia Ashe observed, “Here in Iowa our state gas taxes can only be spent on highways. The road lobby promotes the idea that highways therefore pay for themselves, but the truth is that general taxes still massively subsidize our roads.”

The full report, “Do Roads Pay for Themselves?” can be downloaded on this page of the Iowa PIRG site. After the jump I’ve posted a press release and the report’s executive summary, which cover the key findings.

If lawmakers claim to support only modes of transportation that pay for themselves, they need to be honest about how much taxpayers subsidize our highways.

January 4, 2011 press release:

Des Moines, IA – A new report released today by the Iowa Public Interest Research Group disproves the common misperception that road building is paid for by user fees. The report, ‘Do Roads Pay for Themselves?’ finds that gas taxes cover barely half the costs of building and maintaining roads, and can be expected to cover an increasingly smaller percentage over time.

Among the findings of the report:

·      Federal gasoline taxes were originally intended for debt relief, not roads.

·      Highways, roads and streets have received more than $600 billion in subsidies over the last 63 years in excess of the amount raised through gasoline taxes.

·      The amount of money a particular driver pays in gasoline taxes bears little relationship to his or her use of roads funded by gas taxes. Drivers pay gasoline taxes for the miles they drive on local streets and roads, even though those proceeds are typically used to pay for state and federal highways.

·      Iowa’s gas taxes are partly offset by subsidies that exempt gasoline from sales taxes

“Here in Iowa our state gas taxes can only be spent on highways. The road lobby promotes the idea that highways therefore pay for themselves, but the truth is that general taxes still massively subsidize our roads,” said Sonia Ashe of Iowa PIRG, “By earmarking those transportation funds based on false premises, our tax dollars don’t necessarily go where the needs and benefits are greatest.”

Currently, many rural communities in Iowa have been forced to abandon road pavement projects due to lack of funding. We have also heard from Governor Branstad that the question of funding for a high-speed rail that is projected to bring more than 800 jobs to Iowa is still up in the air.

This year, Congress will address funding for the nation’s Highway Trust Fund again, which has been bailed out four times with $35 billion from general funds since 2008. Federal gas taxes have not increased since 1993 and revenues are expected to remain flat as Americans continue to drive less and use more fuel-efficient cars.

“Highway advocates often wrongly portray highway spending as financially conservative by falsely portraying gas taxes as “user fees” that pay for roads,” said Ashe. “It’s time to have some difficult debates about how we pay for transportation, and what our transportation goals are for the future.”

Executive summary:

Myth Busted: Road Costs Not Covered by Gas Taxes

EXECUTIVE SUMMARY

Highway advocates often claim that roads “pay for themselves,” with gasoline taxes and other charges to motorists covering-or nearly covering- the full cost of highway construction and maintenance. They are wrong. Highways do not-and, except for brief periods in our nation’s history-never have paid for themselves through the taxes that highway advocates label “user fees.”

Yet highway advocates continue to suggest they do in an attempt to secure preferential access to scarce public resources and to shape how those resources are spent. To have a meaningful national debate over transportation policy-particularly at a time of tight public budgets-it is important to get past the myths and address the real, difficult choices America must make for the 21st century. Gasoline taxes aren’t “user fees.”

Highway advocates often describe gasoline taxes as “user fees” in order to argue that those funds should be used only on highways. Yet, gasoline taxes are not user fees in any meaningful sense of the term.

• “Fees” are not connected to “use” – The amount of money a particular driver pays in gasoline taxes bears little relationship to his or her use of roads funded by gas taxes-unlike other true user fees such as admission fees for state parks or turnpike tolls.

Drivers on local streets and roads, for example, pay gasoline taxes for the miles they drive on those roads, even though those taxes are typically used to pay for state and federal highways. Efforts to ensure that residents of a given area “get back” what they pay in gasoline taxes-such as the federal equity bonus program-actually perpetuate wasteful pork-barrel spending since they allocate money with no consideration of need or the benefits those investments would deliver to society.

• State gas taxes are often not entirely “extra” fees – Most states exempt gasoline from the state sales tax. The substitution of the gasoline tax for the sales tax diverts much of the money that would have gone into a state’s Do Roads Pay for Themselves? general fund to a fund used often for the exclusive benefit of drivers. In some states, such as New Jersey, the gasoline tax is at times lower than the corresponding sales tax would be, meaning that drivers get a net tax subsidy that encourages the purchase of gasoline relative to other goods.

• Federal gas taxes have typically not been devoted exclusively to highways – The federal gas tax began its life as a deficit-fighting measure under President Herbert Hoover decades before the Interstate Highway System. Only during a brief 17-year period beginning in 1956 did Congress temporarily dedicate gas tax revenues to construct the Interstate network, a project completed in the 1990s. Since 1973, the gasoline tax has been used to fund a variety of important transportation priorities and has periodically been used to reduce the federal deficit.

• Many states use gas tax revenue for a variety of purposes – While many states have historically dedicated their own state gasoline taxes to highways, that decision has not been universal. According to Federal Highway Administration data, roughly 20 cents of every dollar collected in state gas taxes, motor vehicle fees or tolls nationwide is used for public transportation and other governmental purposes. Many of the states that do use gasoline taxes solely for highways do so because they remain bound by constitutional earmarks of gasoline taxes imposed as much as three-quarters of a century ago, regardless of whether those decisions still make sense today. Highways don’t pay for themselves.

• Since 1947, the amount of money spent on highways, roads and streets has exceeded the amount raised through gasoline taxes and other so-called “user fees” by $600 billion (2005 dollars), representing a massive transfer of general government funds to highways.

• Highways “pay for themselves” less today than ever. Currently, highway “user fees” pay only about half the cost of building and maintaining the nation’s network of highways, roads and streets.

• These figures fail to include the many costs imposed by highway construction on non-users of the system, including damage to the environment and public health and encouragement of sprawling forms of development that impose major costs on the environment and government finances.

• New or expanded highways are even less likely to pay for themselves in the future as changing demographic conditions and consumer choices limit the growth in vehicle travel and fuel use that would otherwise provide the revenue for a major program of highway expansion. Highway advocates use the “user fees/highways pay for themselves” myth in an effort to secure access to scarce government revenue for their desired public policy ends-distorting transportation decision-making.

• Highway advocates often argue that the fact that highways come with their own built-in source of revenue in the form of gasoline taxes make them a financially conservative option relative to other transportation investments, but they typically fail to document whether the new or expanded roads Executive Summary they propose will raise enough revenue to pay for their costs.

• Highway advocates often use funding myths to make public transit and other forms of transportation appear relatively more expensive-diverting attention from the full accounting of costs and benefits that should be the basis of sound transportation decisionmaking. To make the right choices for America’s transportation future, the nation should take a smart approach to transportation investments, one that weighs the full costs and benefits of those investments and then allocates the costs of those investments fairly across society.

A Better Way to Go

EXECUTIVE SUMMARY

America’s automobile-centered transportation system was a key component of the nation’s economic prosperity during the 20th century. But our transportation system is increasingly out of step with the challenges of the 21st century. Rising fuel prices, growing traffic congestion, and the need to address critical challenges such as global warming and America’s addiction to imported oil all point toward the need for a new transportation future.

This report shows why rail, rapid buses and other forms of public transit must play a more prominent role in America’s future transportation system. America has grown more dependent on car travel with each passing year. America has more cars per capita than any other nation in the world. The number of miles driven on America’s highways has doubled in the last quarter-century, and our reliance on cars for transportation is at the root of many of America’s most intractable problems. For example, with two out of every three barrels of oil the United States consumes each year used to fuel our transportation system, our economy is hindered by oil price spikes and our national security vulnerable

This report shows that every American can benefit if we expand the reach and improve the quality of transit in the United States. By making a bold, national commitment to expand and improve transit, the United States can address many of our greatest challenges and create a transportation system built for the needs of the 21st century. Existing public transportation already plays a key role in addressing key problems faced by America:

-In 2006, transit saved an estimated 3.4 billion gallons of gasoline in the United States, enough to fuel 5.8 million cars for a year. In monetary terms, transit saved more than $9 billion that would otherwise have been spent on gasoline.

-In 2005, transit prevented 540.8 million hours of traffic delay, according to the Texas Transportation Institute, equivalent to more than 61,700 people sitting in traffic for an entire year. The monetary value of those savings was $10.2 billion.

-Transit reduced global warming emissions by nearly 26 million metric tons in 2006. In New York state alone, transit avoided 11.8 million metric tons of carbon dioxide pollution, more than was produced by the entire economies of Rhode Island, Vermont or the District of Columbia.

For every dollar invested in transit, America saves nearly two dollars in avoided costs on top of the economic development benefits. In 2005, federal, state and local governments spent $30.9 billion to provide transit services (not including fares). These investments yielded at least $60 billion per year in benefits from reduced vehicle expenses, avoided congestion, global warming emission reductions, reduced road expenditures, reduced spending on parking, and avoided traffic accidents. In other words, investment in transit more than pays for itself even before accounting for its direct economic stimulus.

Despite transit’s many benefits, America has historically underinvested in transit. The paper lays out a plan for expanding America’s transit network paid for by more efficiently allocating costs among those who will reap the benefits.