Subsidized driving

January 25, 2013

(This article was originally published at Statistical Modeling, Causal Inference, and Social Science, and syndicated at StatsBlogs.)

This post is by Phil.

This DC Streets Blog post gives a concise summary of a report by “The Tax Foundation”. The money shot is here, a table that shows what fraction spending on roads in each state in the U.S. is covered by local, state, and federal gas taxes, tolls, registration fees, etc. (Click on the ‘rank’ table heading to put it in useful order). The national average is 51%, and in no state do drivers directly pay more than 80% of the cost of the roads and highways. That means that, nationwide, half the cost of the roads is paid out of general government funds. Even if it were 100% this still wouldn’t cover additional government costs of driving (such as military spending to protect the oil supply, and law enforcement costs, etc.) but I’ll ignore those in this post.

Of course, most of the general funds that make up the difference are themselves paid by people who drive, so this isn’t as grossly unfair as it seems. But it’s still pretty unfair, and it is a huge “market distortion”.

As a crude approximation, what if all gas taxes, tolls, and registration fees were doubled. All other things being equal, drivers would then be paying the cost of the roads. Except all other things wouldn’t be equal: there would be a stronger incentive to shift to more efficient cars and to drive less, which would reduce the gas tax revenue. So the first-order effect suggests you would have to _more_ than double the taxes and fees in order to have the drivers pay for the roads.

But with people driving less, and driving lighter cars, the roads wouldn’t degrade as quickly, so the repair costs would be lower. And with fewer and smaller cars on the road there would be fewer road expansion projects, and fewer lanes of roadway to maintain. So the second-order effect would be in the direction of needing less money. Perhaps simply doubling all of the fees and taxes would be enough after all.

Are there any good arguments for charging drivers much less than the cost of the roads? Actually, let me refine that question: I’m sure there are good _political_ arguments that explain why politicians haven’t made this happen, but are there any good environmental, social, or economic arguments?

This post is by Phil.

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