The Road to 21st Century Transportation

by Bill Chameides | March 10th, 2009
posted by Erica Rowell (Editor)

Permalink | 3 comments

In 2008 Americans took to the road less than any time since 1956. That’s great news for the environment but bad news for government revenues from gasoline taxes. So what are the feds going to do?

The way Americans are getting from point A to point B is changing. It is not yet clear how the government will respond.

News flash: Americans are changing their travel habits.

  • More Americans used public transportation in 2008 than at any time since 1956, according to the American Public Transportation Association.
  • Relative to 2007, trips on public transit in the United States in 2008 were up by 4 percent while vehicle miles traveled were down by 3.6 percent.
  • U.S. consumption of petroleum fell by 5.8 percent or almost 1.2 billion barrels per day. (Global oil consumption was essentially flat from 2007 to 2008 and is projected to decline slightly in 2009 — see graphic).
  • And, not surprisingly, automobile sales are way off.

Maybe these changes are just a blip in response to rising gasoline prices and then to the economic downturn. But then again maybe they are part of a longer term trend. If so, it will be a seismic change; so much of what America is about is the car and the open highway — although if you live in or near a city, that open highway is more mythical than experiential. It will also be a major step toward reducing our reliance on foreign oil, improving the bottom line on our balance of payments, and reducing our nation’s carbon footprint.

Stimulus Package Supports Mass Transit as Well as Roads and Highways

So how is the federal government dealing with these changes? Is the government continuing to pour dollars into roads and highways, or is it shifting to mass transit projects? One sign can be divined from the stimulus package also known as the American Recovery and Reinvestment Act of 2009:

  • The package spreads the dollars between car travel and mass transit. Here are some highlights:
    • $27.5 billion for highways and bridges,
    • $9.3 billion in rail,
    • $8.4 billion for state-funded public transit,
    • $1.5 billion in grants for state and local non-highway transportation investments, and
    • $192 million for tax-free commuter benefits.
  • One piece of the package that has me scratching my head are the $2.3 billion in tax credits for the purchase of new cars and trucks in 2009. (More on this from and H&RBlock [pdf].) As far as I can tell this tax credit is applicable regardless of whether you purchase a fuel-efficient car or not. Not exactly consistent with the president’s stated intention to use the stimulus package to encourage green technologies.

Fall in Revenues From Gas Taxes — What to Do?

The drop in gasoline consumption has meant falling revenues for the government from gasoline taxes. The government response to these falling revenues is a work in progress.

Americans are taxed 18.6 cents/gallon to support the Highway Trust Fund, which in turns uses those funds to maintain the National Interstate Highway System. But with Americans driving less and thus using less gasoline, revenues to the Highway Trust Fund are declining. What to do?

Raise the Tax on Gasoline?

One approach would be to raise the gasoline tax. This would not only help provide the revenues needed by the Highway Trust Fund but would also encourage motorists to use less gasoline — by continuing to drive less and/or by using more fuel-efficient cars. In this case, the government uses the tax both to discourage behavior that is not in the interest of the public good and to raise revenues. Like the tax placed on cigarettes.

Tax Your Automobile Trips?

Another approach is to give up on a gasoline tax and institute a highway use tax — essentially tax motorists for how many miles they drive instead of how much gasoline they use. Some economists will tell you that this approach has the advantage of directly connecting the fee to the activity to which the fee is being applied. It will have the effect of encouraging people to drive less and to use more mass transit. But it may send the wrong message to motorists. At a time when we need to encourage the purchase of fuel efficient cars, it treats gas guzzlers just like the gas sippers.

So what is likely to happen? It’s still unclear but there are signs that we are headed to the highway use tax approach. The National Commission on Highway Surface Transportation Infrastructure Financing, charged with addressing the revenue shortfall for the Highway Trust Fund, has recommended [pdf] a 50 percent increase in the gasoline tax in the short term but a transition to a highway use tax by 2020.

You may be wondering how the government will be able to assess a highway use tax. The simplest way would be to check odometer readings at the time of annual inspections. But not all locales use annual inspections, and odometers can be tampered with. An alternate method would be to require that each car be equipped with a GPS unit that stores and radios mileage information to a central data repository. If nothing else, this would no doubt prove to be a great time saver for the detectives on Law and Order.

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  1. Daniel Wedgewood
    Mar 25, 2009

    Dr. Chameides, Gas in many countries, like Europe, is heavily taxed. They do this for a variety of reasons, but one of them is to help reduce the environmental impact of vehicle emissions. What is so bad about that? Technology is our friend – we should use every GPS system we can get to help solve our problems. If people are worried about their privacy, they should get off the Internet and go live in a cave. We live in societies of other people – if we don’t find better ways to live and work together, those who remain will all be back in the caves. Dan

  2. Transportation Geek
    Mar 10, 2009

    I generally enjoy the articles on theGreenGrok, but today’s article is so frustrating that I may not read any others. I understand inherent bias, but I believe it’s necessary to give both sides of the issue, and I expect it from a university. I was sorely disappointed by this article. First, the gas tax is a political nightmare in this economy, and as cars become more fuel efficient the gas tax is unable to properly fund our growing transportation needs. Additionally, collecting mileage information through a GPS unit or an EZ-pass type system at gas stations is no more invasive than the current EZ-pass (that we all so lovingly use for the convenience of zipping through tolls) or the advanced assistance/GPS systems (that unlock our car doors for us or perform engine checks via satellite) OR a cell phone for that matter. There are ways to ensure that our privacy is protected. There are also costs for being able to properly fund highway and transit projects. Finally, though in theory a gas-guzzling SUV would pay the same mileage tax as a hybrid – this issue could be solved through tax credits or other incentive programs. The gas tax will only take us so far, we need other viable solutions.

    • Bill Chameides
      Mar 11, 2009

      Transportation Geek: Points well taken. I did not think the post was biased. I pointed out both the pluses and minuses of both the gas tax and the use tax and, I thought, clearly noted when I was expressing my own opinion. But perhaps not. You are absolutely correct that there are other avenues for encouraging use of high mileage cars but I still think a gas tax is worth keeping in place – some refer to it as a carbon tax actually. The statement about “Law and Order” was a joke and not meant to imply a Big Brother threat. Those guys on “Law and Order” already use the EZ-pass and then there are those LUDs. Uh oh, another joke – please don’t take it the wrong way.

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