Pretty Amazing

[Matthew]

It's 100% because we don't have enough taxes, and because our dysfunctional political culture doesn't allow us to raise them even when it's necessary.

Other countries don't seem to have this problem, at least not to the extent we do.

FWIW, I totally concur. Particularly, with regard to the gas tax.

 

[massmotorist]

Are you saying that if someone goes to the gasoline station convenience store to buy something while filling up, those sales taxes are "fees on motorists?"

No, I'm saying that fees and taxes that add directly to the cost of ownership or operation of motor vehicles are fees on motorists. Notice a few things I don't categorize as fees on motorists: sales taxes on cars (everyone pays sales tax when they buy things), inspection fees (a government mandate, but the revenue doesn't flow to the government).

I think the discrepancy with FHWA is due to different ways of grouping things. Now, the report I cited was covering the overall highway picture from Interstates down. But let's look at Massachusetts more closely.

The T4MA report has a nice diagram showing the inputs: $660 million state gas tax, $500 million registry fees, $302 million from sales tax, $350 from tolls, and $10 million from other. Generally speaking, most people consider "user fees" to be gas tax and tolls. But let's add registry fees for argument's sake. I cannot imagine any reasonable way that sales taxes or property taxes are user fees. That puts us at just about $1.52 billion in "user fees" for our purposes.

Of that, $1.06 billion goes to debt service, $360 million goes to Mass Pike and Tobin bridge, $151 million goes to MassDOT operation. Then some goes to other things like MBTA, RTAs, and snow/ice removal.

$1.52 billion revenues, $1.57 billion expenditures. And that hasn't yet accounted for things like Chapter 90 Road Funding thru Cherry Sheets, which amounted to a $200 million subsidy most recently, and $155 million in the previous year.

That's all a case that we're deferring maintenance by taking on debt, which I agree with, but it's not a case that expenses exceed user fees paid. They're separate issues.

The annual tax for owning a motor vehicle is absolutely a fee on motorists. That's $600m+ right there that goes to municipalities rather than to MassDOT.

I'm just saying motorists pay more in driving-related user fees and taxes than is spent on them every year. Roads are perfectly capable of paying for themselves. That isn't, and never will be the case with fares for mass transit. There's a strong case to be made that the benefits of transit to society (when it's done right, and in the right places) are strong enough and shared broadly enough by society that we should subsidize them through broad taxes such as sales or income taxes. In fact I agree with that, at least for the Boston area.

That's a case that should be made and needs to be made, but the case would be stronger if it was made without demonizing cars, questioning the self-sufficiency of roads, or seeing the whole debate in a sort of culture war context.

 

[omaja]

An expense is something that is actually incurred. We're covering expenses.

Matthew already pointed this out, but the report from T4MA that you linked to says that we haven't even been able to do that.

In FY 2011, MassDOT had to borrow $145 million to cover operating costs. In other words, MassDOT dipped into future funding to pay today’s bills.

 

[Matthew]

That's all a case that we're deferring maintenance by taking on debt, which I agree with, but it's not a case that expenses exceed user fees paid. They're separate issues.

The annual tax for owning a motor vehicle is absolutely a fee on motorists. That's $600m+ right there that goes to municipalities rather than to MassDOT.

I'm just saying motorists pay more in driving-related user fees and taxes than is spent on them every year. Roads are perfectly capable of paying for themselves. That isn't, and never will be the case with fares for mass transit. There's a strong case to be made that the benefits of transit to society (when it's done right, and in the right places) are strong enough and shared broadly enough by society that we should subsidize them through broad taxes such as sales or income taxes. In fact I agree with that, at least for the Boston area.

That's a case that should be made and needs to be made, but the case would be stronger if it was made without demonizing cars, questioning the self-sufficiency of roads, or seeing the whole debate in a sort of culture war context.

I don't think this case requires demonizing cars or culture wars, both of which I think are silly. What I worry about are the negative side-effects of car over-use on cities. But I also think it's wrong to say that roads currently pay for themselves through usage fees. In a sense, roads are just as capable of paying for themselves as public transit.

According to the FHWA, MA stations sold 2,785,775,000 gallons of ordinary taxable gasoline (not special fuels) in 2010. Average gasoline price in 2010 was $2.694 per gallon. Subtracting 41.9 cents produces $2.275 pre-fuel-tax. Therefore, I estimate that $6,337,638,125 ($6.34 billion) was spent on gasoline in the state pre-tax.

Of that $6.34 billion, none of it was subject to sales tax (6.25%). That amounts to a subsidy of at least $396,102,382 + 0.75% sales tax in certain cities + whatever the special fuels tax revenue would have been. I imagine the gap is larger now that average fuel prices exceed $3.

The motor vehicle "excise tax" in that respect, looks about right, and should be counted as general fund revenue much as the sales tax revenue would have been.

I'm definitely open to transportation finance reform. In a sense, the whole idea of dedicating fuel taxes to building more roads is perverse, since that causes more fuel usage. If increasing fuel usage was the goal, then it would make sense. But I think we can both agree that shouldn't be the case.

 

[bbfen]

User fees (tolls, excise tax, registration and licensing fees) and taxes (gas taxes) paid by drivers exceed the cost of maintaining roadways significantly. I don't recall the numbers exactly, but it's in the realm of 120 billion paid by drivers to 90 billion spent on roads.

... So the PIRG report uses data for Massachusetts that says there's only $760m in state-based revenue, but there's actually at least $2.1 billion. And I'm being conservative and not counting traffic tickets ($60m+), service plaza rental fees, and lots of other things.

Can you please explain then why our roads are in deplorable condition? If the roads are covering their expenses through user fees, then please explain how we have structurally deficient bridges, tunnels, and more craters than the moon on the average road.

Insufficient revenue. The user fees cover expenses; because the fees have been too low the expenditures have been too low. Set properly, user fees will raise enough revenue to properly maintain the roads. The gas tax needs to go up and be indexed to inflation going forward.

Can we come back to this for a minute? Cause I still don't understand.

 

[AmericanFolkLegend]

Thank you for putting that all in one post bbfen. I'm totally confused by the distinction (contradiction?) as well.

 

[massmotorist]

There's actually a few distinct points here that overlap. I'll try and explain.

The first is, do the fees and taxes that motorists pay that relate directly to operation or ownership of vehicles, in the aggregate, exceed the expenses that are spent on roads. I think the answer here is yes. Some of the revenue is allocated towards other purposes, leading to a shortfall in transportation-earmarked funds that requires some general revenue transfers. But if it were all properly earmarked towards roads, revenue would exceed expenses.

The second is, is current revenue sufficient to keep roads in a state of good repair? The answer here is no. Even if the revenue from motorists were properly earmarked for roads, we would still be deferring some maintenance and borrowing money. We need to raise the gas tax significantly to make up for the shortfall. But it's worth noting that the borrowing that's occurring is transportation-earmarked. That is, when the road-related debt is paid, it will come from taxes and fees from motorists paid into the Commonwealth Transportation Trust Fund or the Massachusetts Transportation Trust Fund rather than from a subsidy from general revenue.

The third is, are roads capable of paying for themselves? The answer here seems to unequivocally be yes. If revenue were properly earmarked, and taxes set at their necessary level, roads would have no problem paying for themselves. The same is not and never will be true of intracity mass transit.* Even in NYC, or Paris, or any of these cities, mass transit is heavily subsidized from general revenues. Fares and revenue sources are insufficient to cover expenses. That's fine. But be clear about the distinction and make the case that mass transit deserves a general subsidy for intangible reasons.

*Intercity trains are different; in several corridors these can actually be quite profitable.

 

[massmotorist]

I'm definitely open to transportation finance reform. In a sense, the whole idea of dedicating fuel taxes to building more roads is perverse, since that causes more fuel usage. If increasing fuel usage was the goal, then it would make sense. But I think we can both agree that shouldn't be the case.

I take your point about the sales tax exemption on gas; I'm agnostic on that point and I'd be fine if they removed the exemption and dedicated that to general revenue.

However, I don't agree that dedicating motorist-related fees to roads is a bad idea. There's more to it than fuel usage, it also yields economic development, reduces congestion, and there are fundamental fairness concerns that are implicated. Taking revenue uniquely paid by motorists and assigning it to another interest group is polarizing, it's just not a good idea, and it's what leads to motorists' groups being against mass transit entirely rather than taking a more agnostic stance.

Plus, in the future, most gas tax revenue will go not to expanding roads or building new ones, but to maintaining roads in a state of good repair, improving safety, signage, and signals, or doing things that are actually good for everyone like building an at-grade boulevard to replace the McCarthy overpass. Many of these projects will both improve traffic flow and provide safer and better alternatives for pedestrians and cyclists. So pedestrians and cyclists will already be reaping benefits from projects paid for by the gas tax, which is fine, because we're sharing the benefits, but it's not right to take taxes only we pay and use them to pay for projects we don't use.

 

[AmericanFolkLegend]

There's actually a few distinct points here that overlap. I'll try and explain.

The first is, do the fees and taxes that motorists pay that relate directly to operation or ownership of vehicles, in the aggregate, exceed the expenses that are spent on roads. I think the answer here is yes. Some of the revenue is allocated towards other purposes, leading to a shortfall in transportation-earmarked funds that requires some general revenue transfers. But if it were all properly earmarked towards roads, revenue would exceed expenses.

The second is, is current revenue sufficient to keep roads in a state of good repair? The answer here is no. Even if the revenue from motorists were properly earmarked for roads, we would still be deferring some maintenance and borrowing money. We need to raise the gas tax significantly to make up for the shortfall. But it's worth noting that the borrowing that's occurring is transportation-earmarked. That is, when the road-related debt is paid, it will come from taxes and fees from motorists paid into the Commonwealth Transportation Trust Fund or the Massachusetts Transportation Trust Fund rather than from a subsidy from general revenue.

The third is, are roads capable of paying for themselves? The answer here seems to unequivocally be yes. If revenue were properly earmarked, and taxes set at their necessary level, roads would have no problem paying for themselves. The same is not and never will be true of intracity mass transit.* Even in NYC, or Paris, or any of these cities, mass transit is heavily subsidized from general revenues. Fares and revenue sources are insufficient to cover expenses. That's fine. But be clear about the distinction and make the case that mass transit deserves a general subsidy for intangible reasons.

*Intercity trains are different; in several corridors these can actually be quite profitable.

I think your first point and your second point contradict each other. Depreciation and maintenance are real expenses. They're not operating expenses per se, but they are certainly expenses. There's a reason why Mass launched the Accelerated Bridge Program, which borrowed $3B against future federal highway money to fix bridges: because we hadn't been maintaining the bridges in the past and we had never set up any kind of replacement reserve.

As for the third point, you say

roads would have no problem paying for themselves. The same is not and never will be true of intracity mass transit.

But that was true for a very long time before government's started building massive new highways for automobiles.

 

[BostonUrbEx]

The third is, are roads capable of paying for themselves?

All modes of transit can pay for themselves.

But in a truly free market, I think it's pretty crazy to think the car would still be the #1 choice of travel mode.

 

[massmotorist]

All modes of transit can pay for themselves.

But in a truly free market, I think it's pretty crazy to think the car would still be the #1 choice of travel mode.

They don't, though. Anywhere. Even where the market is ideal for transit, such as in NYC.

I'm sympathetic to the idea that zoning codes, minimum parking requirements, underpriced street parking, etc. are economically inefficient and favor cars - at least in urban areas. But even in areas where density is extremely high and policy is good, transit still doesn't come anywhere near sustaining itself. In the past it did so for the same reason that, say, building a huge canal was profitable: Given the structure of the economy then, labor was far cheaper than it is now.

In cities themselves, perhaps, the car would not be the #1 choice of travel, but in countries and metropolitan areas as a whole it would be.

 

[Matthew]

However, I don't agree that dedicating motorist-related fees to roads is a bad idea. There's more to it than fuel usage, it also yields economic development, reduces congestion

Dedicating fuel taxes to roads means producing more roads. We need some obviously. But do we need to have that decision dictated by earmarked revenues? At some point, building more roads and parking lots becomes detrimental to the economy, as it tears apart cities. And if people don't walk, and instead add vehicles on the road, that only adds to congestion.

It is actually really strange for a tax revenue to be dedicated to one purpose like fuel taxes are. In any other context, that would be considered unfair. Do taxes on furniture go to producing more furniture? Do taxes on computers go to building more computers? Do taxes on cigarettes go to producing more tobacco? Of course not.

The current arrangement of fuel taxes is a historical oddity. A better way to structure it might be to undo the sales tax exemption for gasoline, but then change the fuel excise tax to resemble something like the tobacco tax. New roads would have to be justified on the merits in competition with maintenance of existing infrastructure, as well as other uses for general funds such as education, instead of having a dedicated revenue stream that can only be used for roads. The fuel excise tax would go towards encouraging fuel efficiency and mitigating the environmental and health damage done by combustion.

Roads and transit can (and do) generate operating profits if managed correctly and not undermined by subsidies of each other. But I'm not entirely sure that should be the goal, like it is in Japan or Hong Kong. There is a reasonable argument for government support of both. But I would like to see competent management too.

 

[JonFrum]

Instead of trying to prove massmotorist wrong, I'm going in a different direction here. How does Germany fund its infrastructure? Their highways are sterling, they have the ICE everywhere, and I can't recall driving over a bad street any time I've been there outside of the still bombed-out parts of Potsdam.

Why is ALL of our infrastructure in such deplorable condition? Not enough taxes? Country too large to efficiently manage? Too large a system with too few resources due to sprawl and inefficient uses of land? Aliens?!?

All of our infrastructure is in such deplorable condition because the legislators you vote for constantly add new spending to the budget to buy votes. That new spending comes out of money that should have been spent keeping up bridges, roads, dams, public transportation, etc. You can't buy votes with old spending needs.

 

[Kahta]

Dedicating fuel taxes to roads means producing more roads. We need some obviously. But do we need to have that decision dictated by earmarked revenues? At some point, building more roads and parking lots becomes detrimental to the economy, as it tears apart cities. And if people don't walk, and instead add vehicles on the road, that only adds to congestion.

This is insanity.... Please name one city that was torn apart and the regional economy was ruined because of highway construction. I can think of plenty of cities that had negative economic impacts because of the lack of roads which prevented them from being able to change their supply chains to being truck based.

It is actually really strange for a tax revenue to be dedicated to one purpose like fuel taxes are. In any other context, that would be considered unfair. Do taxes on furniture go to producing more furniture? Do taxes on computers go to building more computers? Do taxes on cigarettes go to producing more tobacco? Of course not.

The idea behind fuel taxes is this: gasoline is used almost exclusively by cars. Cars use roads. Taxing gasoline is the easiest way to pay for roads without getting non-car users upset.

New roads would have to be justified on the merits in competition with maintenance of existing infrastructure, as well as other uses for general funds such as education, instead of having a dedicated revenue stream that can only be used for roads.

This is bordering on insanity.

The fuel excise tax would go towards encouraging fuel efficiency and mitigating the environmental and health damage done by combustion.

The best way to eliminate the health consequences of vehicle traffic is to decongest it. As an example, the health impacts of implementing EZPass are known.

Roads and transit can (and do) generate operating profits if managed correctly and not undermined by subsidies of each other. But I'm not entirely sure that should be the goal, like it is in Japan or Hong Kong. There is a reasonable argument for government support of both. But I would like to see competent management too.

Since it's already been established previously that roads aren't subsidized, are you suggesting that MBTA fares be increased by 400%?

 

[massmotorist]

I think we're getting to a point where it's just a difference of opinion. I think it's a good idea, both in terms of basic fairness and economic efficiency, to have programs with revenues and costs pay for themselves. Otherwise you have one constituency leeching off another.

That's not to say you should only have such programs. But where possible that model should be favored. This is the case with airports, roads, Social Security, Medicare, Medicaid, and lots of other programs, and it seems to work pretty well.

Not to mention, you'd have to change Article 78 of the Massachusetts Constitution, and that'll never happen.

 

[massmotorist]

All of our infrastructure is in such deplorable condition because the legislators you vote for constantly add new spending to the budget to buy votes. That new spending comes out of money that should have been spent keeping up bridges, roads, dams, public transportation, etc. You can't buy votes with old spending needs.

I see your point, earmarks are bad, but at the same time earmarks in Massachusetts are unique in that they are simply authorizations. The Governor is the one with the authority to borrow money, and if he thinks a project isn't worth it, he can simply ignore the earmark's authorization to borrow. It happens all the time.

 

[Matthew]

This is insanity.... Please name one city that was torn apart and the regional economy was ruined because of highway construction. I can think of plenty of cities that had negative economic impacts because of the lack of roads which prevented them from being able to change their supply chains to being truck based.

That's easy. New Haven. Newark. Pittsburgh. The Bronx. Shall I go on?

Can you give me an example of an American city which suffers from a shortage of roads?

The idea behind fuel taxes is this: gasoline is used almost exclusively by cars. Cars use roads. Taxing gasoline is the easiest way to pay for roads without getting non-car users upset.

It's not the paying for roads which is unusual -- it's the pure dedication of that revenue towards roads, which is the case in many states. That's unusual for tax revenue in general. You don't get to dictate where your income taxes get used, for example. So I think it's quite reasonable to ask whether the situation of dedicated gasoline taxes should continue. I'm not saying it should necessarily be abolished -- just that it should be reconsidered.

The best way to eliminate the health consequences of vehicle traffic is to decongest it. As an example, the health impacts of implementing EZPass are known.

And as we well know, the only way to decongest roads is to implement demand management programs of some sort. Usually tolls, although there are other options these days.

Since it's already been established previously that roads aren't subsidized, are you suggesting that MBTA fares be increased by 400%?

It has? Roads and parking lots are, in fact, quite well subsidized and so is the MBTA. And so are almost all forms of travel. Air travel is one of the most heavily subsidized as well -- providing infrastructure in the form of airports (even to small markets), air traffic control, as well as the bailouts of carriers.

 

[Matthew]

I think we're getting to a point where it's just a difference of opinion. I think it's a good idea, both in terms of basic fairness and economic efficiency, to have programs with revenues and costs pay for themselves. Otherwise you have one constituency leeching off another.

I'm conflicted about it. As you say, it would be nice to have such a thing. But unless you want to increase user fees to a politically unacceptable level, there's always going to be some subsidies. And arguably, the decisions about how funding should be distributed should not hinge on the vagaries of one commodity, but should reflect a deeper and democratic consensus about priorities.

That's why I bring up the dedication of fuel tax revenue towards roads. It should be reconsidered. Since roads have wider economic effect than just the fuel that is used on them, there is a reasonable argument that subsidies are warranted. But then, the importance of those subsidies should be considered in parallel with other needs as well. So it's not necessarily a good thing to tie down those revenues to one use.

 

[massmotorist]

Roads and parking lots are, in fact, quite well subsidized and so is the MBTA. And so are almost all forms of travel. Air travel is one of the most heavily subsidized as well -- providing infrastructure in the form of airports (even to small markets), air traffic control, as well as the bailouts of carriers.

Parking, implicitly, yes, through zoning requirements, is subsidized, but that's a separate issue from roads. I won't beat a dead horse as far as roads other than to say I think it's clear that driving-related fees exceed driving-related expenses. I should also note that some of the Federal gas tax goes to transit, and if that went to roads instead, you'd have less of a shortfall.

Commercial air travel is not subsidized, at all. The FAA (including air traffic control) is funded entirely through fees and taxes on air travel. Airports are funded through fees on the airlines. In fact, FAA regs prohibit the use of those fees on anything other than airports (MassPort's subsidization of the Port of Boston is grandfathered).

The 2001 airline bailout is, to my knowledge, the only one in history. Part of that was compensation for the mandatory grounding of aircraft after 9/11. September 11th was a pretty unusual event that uniquely impacted airlines, and I think it warranted some federal emergency assistance, just like you'd get in a disaster area. I wouldn't call that a subsidy.

The Treasury Department actually made a profit on the loan guarantee portion of the bailout from warrants that allowed them to purchase airline stock at below market prices.

 

[Matthew]

Leaving aside the bailout of 2001, airlines haven't been profitable since deregulation, with few exceptions. The endless cycle of airline bankruptcy is paid for by who else? But air travel is useful, so we pay for it.

If air traffic control isn't subsidized, then why is it being subject to cuts in the upcoming sequester? How about the "Essential Air Service" which pays so that small markets can have nearly empty flights go in and out every day for the last 30 years?