Mileage fees are a great idea -- in addition to gas taxes, not in place of them

Vehicle mileage fees have become a popular topic of conversation for those concerned with keeping our transportation system fully funded, and rightly so. Gas tax revenues are being eaten away at by inflation on the one hand and increasingly fuel-efficient cars on the other, and the Highway Trust Fund has been dependent on general fund transfers for the past 5 years. Mileage fees provide a way to increase revenues while more fairly distributing the cost of road-building and maintenance: the more you drive, the more you pay. 

The pro-VMT (vehicle-miles traveled) fee camp got another boost last month with the release of a Government Accountability Office report detailing the benefits of this system of transportation funding. Right off the bat they came out with a strong endorsement: 

“Mileage-­based user fee initiatives in the United States and abroad show that such fees can lead to more equitable and efficient use of roadways by charging drivers based on their actual road use and by providing pricing incentives to reduce road use.”

 (Streetsblog summed up the report's key points here.)

The report's authors, however, seem to be operating under the assumption that a VMT fee would be adopted as a replacement to the 18.4 cent per gallon gas tax, not as a supplementary source of revenue. If so, that's a mistake we need to avoid. 

The fairest and most efficient solution would be to retain the gas tax and index it to inflation, then set a mileage fee (also indexed to inflation) at a level that gets our total transportation funding to whatever target we choose. While either a gas tax or VMT fee by itself could be set at a level to achieve our transportation revenue goals, combining them has a unique and important benefit: it disentangles two distinct externalities of driving, pollution from gasoline and the cost of building and maintaining roads. 

Currently our gas-tax-only system only taxes drivers for the amount of pollution they release into the air, not the amount they actually use our road and highway network. It's nice that Prius drivers get a break for polluting our environment less per mile than SUV drivers, but building roads is expensive and it's clearly unfair for some to pay much more than others for the privilege of using them (assuming equal miles driven). The Prius driver also contributes just as much to congestion, and to the opportunity cost of dedicating large amounts of urban space to car travel and subsidized parking.

By adding a mileage fee to our funding mix we are able to preserve the benefits of taxing pollution (specifically, encouraging people to choose more environmentally-friendly transportation) while finally doing something to assess the other societal and financial costs of driving.

Unlike the mileage-fee-only system the GAO seems to be suggesting, this combination would also ensure that drivers of higher-mpg vehicles aren't punished. Take a look at the following chart from the GAO report:

From GAO.

The three bars under "baseline" are the estimated mileage fees paid by the average driver if we wanted to collect 1) the same amount of revenue as gas taxes currently do, 2) the amount we actually spend on transportation, and 3) the amount we would need to collect to maintain our current transportation network, respectively. As you can see, the SUV driver actually pays less under the "current revenue levels" system than under the baseline scenario, while the hybrid driver pays double. In the highest revenue system the Prius driver's tax bill increases almost four-fold, while the SUV pays slightly less than double. Everyone pays the same amount regardless of the gas mileage of their vehicle.

Clearly though, the costs imposed by a 16 mpg SUV are not the same as those of a 40 mpg hybrid (or a 100 mpg electric vehicle for that matter). Not only is the SUV producing much more pollution, carbon dioxide and otherwise, but due to its weight it's also more damaging to the road surface and more destructive to any people or property it crashes into. To ignore these differences would be blatantly unfair, and in many ways a worse solution than simply increasing the gas tax to appropriate levels. 

Large, low-mileage vehicles have a greater impact on our roads, our economy, and our health than do smaller, higher-mileage vehicles, and our federal policy should reflect that. 

If we want more equitable and financially solvent transportation funding, adopting a mileage fee is the way to go--but not at the cost of ignoring the real and significant costs of gasoline consumption. We can have both, and we should.

Governor of Virginia offers worst transportation funding proposal in modern memory

Sometimes, in order to better appreciate our current policy and the options before us for improving it, you've got to get an idea for how much worse things could be. You've got to hear an idea so bad, so backwards and wrongheaded, so utterly devoid of merit, that it can't help but bring people together in united opposition. In the spirit of such bipartisan cooperation/condemnation, Virginia Governor Bob McDonnell has proposed the what is possibly the worst transportation funding plan that you're ever likely to see from a serious politician. Really, it's that bad.

The plan has a several components. First, get rid of the state's 17.5 cent gas tax (the federal tax of 18.4 cents would still be in place, of course). Second, make up for lost gas tax revenue by jacking up the state sales tax by 0.8%, from 5.0 to 5.8. Third, just for funsies, charge drivers of hybrid and electric cars a $100 fee on top of their regular vehicle fees.

Starting from the top: eliminating the gas tax is foolish regardless of what else you intend to do to shore up transportation funding. It's true that fuel tax revenues are declining as vehicle mpg increases and people drive less, and it doesn't help that in most places the taxes aren't indexed to inflation. There are almost certainly better ways to pay for transportation--a vehicle miles traveled (VMT) tax, for example--but this doesn't change the fact that burning gasoline to get around is bad for people and bad for the planet. Anything done to raise additional funds should be in addition to the existing gas taxes.

Independent of the value of raising money with the gas tax, it rightly serves as a mild disincentive to purchasing gasoline. There are other transportation options besides driving a single-occupancy vehicle these days. If people choose to drive, which they are of course free to do, it should be recognized that this is to the detriment of human and environmental health, and that privilege shouldn't cost nothing. Market demand sets the price of gas, government sets the cost of pollution. As far as state fuel taxes go, Virginia already does a worse job of pricing those negative externalities than most states: its gas tax ranks #40 in the country (New York is #1 at 49 cents).

Replacing the gas tax with a sales tax increase is almost as bad as not replacing the revenue at all. Sales taxes are notorious for being one of the most regressive ways of funding government spending. Take Washington as an example, a state that relies more heavily on the sales tax than perhaps any other. In Washington, because there is no income tax and most revenue comes from the sales tax, middle-income, and particularly lower-income people pay a higher share of their income to state and local taxes than the national average, and a much higher percentage of their income than do high earners:

From the Institute on Taxation and Economic Policy.

To be fair, the gas tax is also regressive. It hits poor people harder for exactly the same reasons as the sales tax does. It differs, however, in that people have options for transportation--very few are completely dependent on driving a car (at least not driving by themselves). There are no options when it comes to buying things like clothing, furniture, or kitchen utensils--you just need them, and you'll pay sales tax on them. But perhaps more importantly, those who earn very little are already much more likely to not drive; under McDonnell's plan, a gas tax they didn't need to pay would be replaced by an increase to the sales tax they pay every day. And the money would be used to fund roads that, by and large, they don't ever use. I doubt the governor would admit that his goal is to shift the burden of transportation funding to his lowest-income constituents, but that's the practical effect of this plan.

This would also make driving cheaper at the expense of those who don't drive, or don't drive often. At 17.5 cents, the current state gas tax accounts for about 5% of the cost of gasoline at the pump. Drivers would save this money and be able to spend it elsewhere--like on things that are subject to sales tax. The proposed increase in the gas tax is only 0.8%, however. So where before about 5% of the money drivers spent on gas was going toward transportation funding, now they can take that money and spend it on an extra coffee at Starbucks every week and only 0.8% of that money is going to transportation. This is a blatant shift further away from user fee-funded transportation, but in more ways than are immediately obvious.

Compare this to people who don't drive, who save exactly nothing and pay more on nearly all of their day-to-day purchases. And again, the people who don't drive are already disproportionately lower-income. Those who may have decided to get rid of their car or rely more on public transportation for financial reasons are being punished for that decision, while drivers are encouraged to keep on keepin' on.

Last, and most insane (although least significant overall), is the $100 fee assessed on hybrid and electric vehicles. This has been proposed in many places in response to the fact that these vehicles use the roads but, because they use so much less gasoline, contribute much less to transportation infrastructure funding. (This is also yet another reason to add a VMT tax to our funding mix.) I have reservations about penalizing people for doing right by the environment and their fellow man, but I understand why such fees exist and think they're okay, all things considered. In the case of Virginia, however, there's not supposed to be a gas tax that electric vehicle owners can skip out on--it's just an arbitrary punishment for owning a low-emissions car. This fee doesn't actually serve any purpose.

I've heard that the real reason for this fee is to make up for the federal gas taxes that these Virginians aren't paying much of either, but that makes no sense. For one, the fact that the federal government is failing to collect revenue from hybrid and electric vehicle owners is not something that Virginia or any other state needs to worry about. Let the federal government figure that out, the states get their money either way. You should be happy that you get to keep more of your own money--isn't that what every state wants? And I somehow doubt this $100 per car is going to to be sent to the U.S. Highway Trust Fund in lieu of foregone gas taxes. More likely it'll go straight to the state coffers, which means it's just a sneaky, dishonest way of shaking down electric vehicle owners and hoping they don't notice.

So Virginians, don't support this. Your legislature just recently shot down two transportation funding bills, one a mild sales tax increase (without removing the gas tax) and a much better one indexing the the gas tax to inflation. Neither was enough. Now's your chance to do even better and try out a VMT on a larger scale than the pilots going right now, like the one in Oregon. And while you're at it, stop exempting gasoline from the sales tax. And the rest of you states and governors, the low bar has been set. It can only get better from here. Right?

Drunk driving prevention is difficult, but we already know how to do it

Out of roughly 34,000 traffic-related fatalities in 2009, about one-third involved a driver with a blood-alcohol content of 0.08 or above (the minimum for a DUI offense in every state). Thinking about this I wondered whether this number could be reduced by increasing the penalties for higher BAC levels, since the chances of a collision rise quickly as impairment increases, but fines, suspensions, and jail time do not. After doing some research on the subject, I found instead that this is actually a very complicated issue (surprise!), and my intuition didn't really stand up to scrutiny. Case in point was Wisconsin, a state that already has penalties that scale with BAC but in both 2008 and 2009 had significantly higher rates of alcohol-related fatalities than the national average. Something else is going on here.

Just so you can get a sense for the argument I was making originally, here's the bulk of what I'd written before deciding to add the above disclaimer and what comes afterward:

Idea: drunk driving penalties should be more closely tied to blood-alcohol content

The penalties for a DUI conviction usually include a small amount of jail time, a 30-day to one-year driver's license suspension, and a few hundred to a few thousand dollars in fines--most states also have enhanced penalties which kick in BAC levels of 0.15-0.20. In the case of Washington state, though, the increased penalties for BAC at or above 0.15 don't have much bite: the same maximums for jail time and fines, with barely increased minimums, and a longer license suspension, one year instead of 30 days. Drunk driving of any kind is a serious crime that threatens the lives of the driver, passengers, and anyone else on the streets or sidewalks, but there's a big difference between driving with a 0.08 and a 0.15 BAC. We need to formally recognize this reality, and ensure that the penalty is commensurate with that increased risk.

According to this study by the National Highway Traffic Safety Administration, the risk of a crash is 1.74-2.69 times higher at a BAC of 0.08. At 0.15, crash risk is increased by 8 to 22 times, and at 0.20 the risk is 21 to 82 times higher relative to driving unimpaired. (The ranges represent the difference between the study's observed crash rates and its adjustment for those who refused to participate, were involved in hit-and-runs, etc., so the higher number is theoretically the more accurate risk estimate.) So in Washington, even though you're about 30 times more likely to get into a wreck at a BAC of 0.20 compared to 0.08, the punishment hardly differs at all. In the eyes of the law, the severity of each crime is essentially the same. Below is a graph from the study, illustrating the exponential increase in crash risk as BAC increases:

Crash risk vs. BAC, from NHTSA.

DUI laws in Washington (and many other states, I'm sure) aren't very sensible, but we can look elsewhere for guidance toward a better system. Although I think it still underrates the seriousness of BAC levels much higher than 0.08, Wisconsin has a system that's definitely superior to Washington's. There, penalties double, triple, and finally quadruple as BAC increases. A driver with a >0.25 blood-alcohol content faces penalties four times greater than someone arrested for DUI with a BAC between 0.08 and 0.149, and this includes fines, jail time, and license suspension. Of course, we can see from the above graph that a person with a BAC of 0.25 has a 160-times higher risk of getting into a collision compared to a sober person, and fifty times the risk of a person with a BAC of 0.08, so penalties that are only four times worse (at most) don't really capture the seriousness of driving with a very high BAC.

If BAC-scaled penalties aren't the solution, what is?

Based on the data from Wisconsin, increasing penalties for more serious drunk-driving infractions is not the whole solution. That doesn't mean it can't be a part of it, but it's not enough by itself. So what else can we do? My next thought was that perhaps part of the problem is that, at least in Washington, we so rarely actually convict people of DUIs. I have several friends who have been arrested for DUIs, and all of them were able to plead down to a "wet reckless" with the help of a lawyer, a much less serious crime, even though they blew over a 0.08 on the breathalyzer. Maybe the problem isn't that DUI penalties are insufficient, but that so few people are actually convicted of the crime they've committed.

Nope. Texas doesn't allow defendants to have their charge reduced to a wet reckless, and yet they had even higher rates of alcohol-related fatalities than Wisconsin did. Again though, things aren't so simple: Texas has extremely lax penalties even for a DUI conviction, with no minimum for fines, and as little as 3 days in jail and a 90-day license suspension.

Like I said, this turned out to be pretty complicated (again--surprise!). The most effective solution I found was actually a program that started in Washington state itself in November 2006, and was followed up in 2010. The study was performed in the three biggest counties in Washington and consisted of adding six--yes, just six--state patrol officers to each county, their primary goal being to crack down on alcohol and drug-impaired drivers. The report can be found at the NHTSA's web site [PDF]; it's only 5 pages and I encourage you to check it out for yourself. The gist of the report is captured by the following graph:

From National Highway Traffic Safety Administration.

The TZTP counties are the three with the extra WSP officers. As you can see, compared to the average over the previous five years, the TZTP counties experienced a 34.4% decline in alcohol- and drug-related fatalities. That's in one year. Compare this to a 28.4% increase in the next two biggest counties (Clark and Spokane), and an 8.5% decline in the rest of the state. It's very possible that the numbers might jump up a bit after people get used to the presence of these extra patrols, but the difference between the pre- and post-TZTP eras is stark and worth investigating further. I have to reiterate once more that this is the result of adding just 18 officers (plus another ten or so support staff) to three counties with a total population of 3.5 million. We could do much more.

During the 10-month window of the study these officers made over 3,000 DUI arrests, 3,000 speeding citations, and 900 seat belt citations. In theory this should mean several million dollars in fines, more than enough to cover the expense of these extra patrols. Due to the leniency of our sentencing, however, I couldn't really guess what we're actually collecting as a result of these arrests. But more importantly than all that, the presence of these officers saved dozens of lives, possibly including the innocent drivers, bicyclists, and pedestrians these drunk drivers might have struck with their vehicles. The fact that it was at essentially zero cost to the state is just icing on the cake.

One way to ensure that we can capture that revenue and keep our drunk-driving patrols funded is to follow in Texas' footsteps (never thought I'd say that) and stop allowing offenders to plea down to wet reckless. Instead of punishing drunk drivers through the justice system's fines and suspensions, we're basically just redirecting that money to DUI lawyers--the people I know that were arrested for DUIs each paid about $5,000 through the whole process, but most of that money went to their lawyers. And for what? What do the lawyers contribute? No one is disputing the fact that these people were driving with a BAC at or above 0.08. The state should collect that money itself in the form of the DUI fines it rarely seems to collect, and use it to fund more patrols instead of enriching a few unnecessary lawyers.

I started this post planning to make a strong argument for increasing drunk-driving penalties, but after starting to write I realized there isn't evidence to back up my claims. Not without controls that don't yet exist, at least. And that's fine. Perhaps not surprisingly, I learned that enforcement seems to be the most effective way to prevent drunk driving and save peoples' lives. These two arguments intersect, however, at funding. If we want to be able to pay for extra patrols, the money needs to come from somewhere, and more strict penalties--or consistent sentencing, at least--could be part of the solution. And as we work to increase enforcement and seek to provide further evidence for its efficacy, let's keep finding new ways to prevent drunk driving, whether that means harsher penalties, more accessible alcohol and drug treatment programs, better transportation options, or all of the above. Even the most incremental improvement can mean hundreds of lives saved over the next few decades, and safer roads for everyone.

Infrastructure stimulus is different

The theory behind stimulus spending is that when private spending and investment fall short of expectations, government can step in and make up the difference. Things like temporary payroll tax cuts, extending unemployment benefits, and grants for states to keep teachers in schools are great examples of ways the federal government can assist individuals, businesses, and cities, but they differ from infrastructure spending in a key way: while most stimulus measures are only needed as a response to recessions and shortfalls in consumer demand, investing in infrastructure and maintenance is something we need to do--but haven't--in booms as well as busts. What they share, however, is that recessions (and their recoveries) are always the best time to make these expenditures.

Why is this the best time to spend on infrastructure? Contracting is very cheap right now since construction companies are so desperate for business. Borrowing costs for the federal government are so low that investors are willing to accept a year-over-year loss on their bond purchases, after inflation (which is also exceedingly low). Unlike during a boom, we can be confident that public expenditures won't be crowding out private investment. And, of course, more people will have construction jobs, which lowers the unemployment rate directly as well as indirectly when those newly-employed workers start spending their money in the broader economy.

But for those who choose to believe that "stimulus" is just code for big government, socialism, etc., or that it doesn't actually boost the economy, infrastructure--particularly maintenance--is still a sensible way to spend our money. As has been widely reported, including on this blog, the U.S. has an estimated $2.2 trillion infrastructure backlog. Whether we choose to spend that money now or later, it's going to be spent. The longer we wait the worse the degradation and the more expensive each of those repairs will be, and the more it will cost us in vehicle wear-and-tear, lost productivity, and injuries and lost lives as pipes burst and bridges crumble. If we've got to make the investment either way, let's do it now, while the costs are least and the benefits greatest.

With driverless cars on the way, smarter transportation investment is needed

Even though driverless cars have only been popular in the news for a few years, it's looking increasingly likely that they're the future of personal vehicle travel. Already, California and Nevada have taken steps to approve the use of Google's model, and Google co-founder Sergey Brin believes autonomous vehicles will be commercially available within a decade. The advantages to driverless cars are numerous and significant, but they raise serious questions about how we invest in infrastructure as the technology matures. In particular, are we wasting billions on highway capacity that will soon be obsolete?

There's a lot to like about autonomous vehicles. There's great potential for them to be operated much more safely than manually-driven vehicles, and if this bears out it'd be justification enough to make the switch. They would also reduce the need for parking directly adjacent to destinations, since the car could drop you off and find a space further afield. It'd also be easier to save a lot of money by getting rid of your own vehicle, instead taking advantage of a massive fleet of cheap, robotic vehicles. 

Then there's congestion. 

According to a recent study by Columbia University's Patcharinee Tientrakool, a highway populated exclusively with driverless, communicating vehicles could increase its efficiency by up to 273%. In this scenario almost four times as many cars could travel through a corridor, safely and quickly, as are currently able to do so. This is mainly thanks to the decreased following distances required by autonomous vehicles--about 100 feet at 60 mph for humans, compared to less than 20 feet for computer-driven vehicles--and their ability to coordinate speeds, merging, etc. Although not absolutely equivalent, fully adopting driverless cars would be akin to more than tripling the number of lanes of every highway in the country.

Patcharinee Tientrakool, Columbia University.

Whether that transition takes twenty years or fifty, it's coming. (And if it doesn't, it will be because of some other revolutionary technology that solves the problem even more effectively.) Given that reality, and with vehicle miles per capita on the decline, continuing to invest scant transportation dollars on increased capacity is a monumentally wasteful practice. According to a Congressional Budget Office report [PDF], we spent about "$146 billion to build, operate, and maintain highways in the United States," about two-thirds of that paid for by state and local governments, in 2007 alone. Not all of this is capacity expansion, but you can count on the fact that a great deal of it is. This is at the same time as the American Society of Civil Engineers is telling us that we've got a $2.2 trillion infrastructure backlog, and the longer we wait to make these necessary repairs the more expensive they'll become.

In urban areas it costs tens, sometimes even hundreds of millions of dollars per mile to add new highway lanes--and in as little as a generation we're going to be forced to to tear them right back out. 

It's been said again and again, but it really is time to turn the corner and start investing more in the maintenance and repair of our ailing transportation system, and directing funds toward projects that do more for promoting health, sustainability, and economic productivity. It's understandable, if not acceptable, that the threat of increasing population and traffic congestion has made it difficult to focus on simply maintaining what we already have. It's increasingly clear, however, that this is no longer a question of useful expansion vs. useful repair. Only one choice makes sense for our future. We can do better, and we're running out of excuses for failing to do so.

Improving the downtown driving experience is impossible

Downtown Seattle--as with most central districts in most medium-to-large cities--can't expand its network of roads. Everything that isn't a building, a park, or a parking lot is already devoted to road space or pedestrian space, and even if you wanted to do so you couldn't take away enough sidewalk to provide an extra lane anywhere. On top of that, any congestion relief that new lanes added would quickly be eaten up by the incredible demand for driving to business district destinations; induced demand and the Tragedy of the Commons at work. So even if extra car lanes magically appeared, traffic would be no better off in the long run. You'd just have more cars.

You simply can't win with cars in dense areas: once a terrible-but-just-barely-acceptable level of congestion is reached, equilibrium sets in and the number of cars entering the district doesn't change much. Logistically it can't increase (there's no more room), and it won't decrease because the hassle of dealing with that equilibrium level of traffic is still a fair trade for many people compared with the conveniences of driving. Look at any large city and you see the same thing. Terrible traffic is a staple of big cities because downtowns contain far more destinations than there are roads to facilitate driving to them, and that's not going to change. We've accepted that dense cities are valuable economically, socially, environmentally, and culturally, and we need to accept that as long as this is true traffic will accompany it. The best thing we can do is to provide alternatives to driving that are actually appealing to the average person.

These facts regarding driving downtown are important because of how they contrast with transit use downtown: by dedicating more space to buses, streetcars, and light rail we are actually able to improve the quality of transit trips, something we can't achieve for cars. With the recent advent of bus rapid transit (BRT) in Seattle, we've seen very clearly the price we pay for our decision to force buses to share lanes with cars. That price, of course, is consistent congestion and delays that effectively negates the entire purpose of BRT. This is what we're seeing with the D Line traveling from Ballard to Downtown, and plenty of other popular lines--particularly those that travel along permanently-congested corridors like Denny, or just about any area in downtown.

And back to cars, just as increasing car lanes wouldn't improve traffic downtown, decreasing them wouldn't worsen it. Instead, it would change the equilibrium level of cars entering and leaving the central business district. It would change the congestion vs. convenience equation for enough people that transit ridership to and from downtown would increase and single-occupant vehicle driving would decrease, but traffic congestion in general would remain relatively unchanged. Except for transit riders! There are real gains that we can make on behalf of those who choose not to commute by car, or can't afford to. They're the only real gains available to us, and we should seize them.

We have three choices. First is to stick with the status quo, which no one really likes. It's not good for anyone. It sucks to drive in Seattle, and it sucks to take the bus. Our second option is to take away what few lanes are currently dedicated to transit and turn them over to cars, and to expand road space for cars wherever we can, however little space there may be for it. This won't improve things for current car commuters because of the reasons discussed above, and will leave transit users worse off. Third is to take some lanes (some lanes--a tiny minority of the total road space) away from cars in order to vastly improve the reliability and speed of some of the most vital transit lines in the city. Some car drivers will be forced to find another way to get into downtown during rush hour, yes, but quite a few will also be happy to start taking the bus with it's newly-improved service. And those who continue to drive won't notice much difference, because traffic can only get so bad and we're already there.

There's plenty of complaining in the news about cars being picked on, but I don't hear much constructive criticism about how things can actually be improved, whether it be for cars, transit users, or both. The status quo is untenable, and we can't devote any more space to cars. What else can we do? I choose option three.

In Washington state, the gas tax is not a user fee

Over the 2011-2013 biennium Washington state is projected to collect about $2.5 billion in gas tax revenue, or roughly $1.25 billion per year. The state gas tax rate is 37.5 cents per gallon, which means we used 3.3 billion gallons of gasoline last year. For none of that gasoline were drivers required to pay sales tax, depriving the state of more than $800 million in revenue. Why don't we pay sales tax for gasoline in Washington?

The simplest answer is that sales tax has been replaced by the gas tax for this specific consumer good. The state began imposing a gas tax in 1921, starting at one cent per gallon. At the time gasoline cost about 26 cents per gallon. (This pdf has a list of all the Washington state gas tax levels since 1921, and this one has the average national gas price since 1919.) When the State Constitution's 18th amendment passed in 1944, the state gas tax was at 5 cents per gallon. The 18th amendment says the following (paraphrased by the Department of Transportation):

The 18th amendment to the Washington State Constitution dedicates motor fuel tax collections to “highway purposes". Revenue generated from the gas tax is distributed to counties, cities and state accounts. The state receives about half of the total revenues collected. These are the funds which support the WSDOT highway programs as well as the Washington State Ferry System, which is deemed a state highway system by constitution. Highway construction, maintenance, preservation, administration and debt service on highway construction bonds are all funded by these revenues. The other half of the fuel tax revenues are distributed directly to cities, counties and other agencies for roadway programs that are not part of the state highway system.

This means that all gas tax money must be spent on roads, although there is some flex to whether this applies to certain transit programs. At the very least, all of the money must be used for transportation purposes, and certainly the vast majority of transportation dollars are spent on  roadways. In this biennium, for example, the WSDOT's budget is $7 billion, four billion of which is devoted "highway improvements," with another $750 million for "highway preservation." (Less than 10% goes to rail and transit.) Over this two year period, the gas tax barely covers half the cost of highway construction and repair. Worse, this is true despite the fact that we fall further behind on road maintenance every year.

Many drivers feel they "pay their own way" for the infrastructure they use in the form of various taxes, fees, and tolls, but can this really be true when they're exempted from paying normal taxes on the purchase of gasoline? After all, if I buy a new couch at a furniture store, the tax I pay is not earmarked to help me pay for a place to store it. Sales tax paid for a new ink cartridge in my printer isn't earmarked to compensate me for said printer. Perhaps most tellingly, when I buy a bicycle the sales tax on it isn't dedicated to new bike lanes, cycle tracks, pothole repair, or anything else meant to help me get around safely and efficiently. And it probably shouldn't, because it would be extremely limiting to government's ability to decide where the greatest need is, and where the tax proceeds of my purchase should be spent.

As long as gas is exempt from sales tax, drivers can't claim that the gas tax is a "user fee" anymore than the tax I pay on a Subway sandwich is a "user fee." Compare to a true user fee, the tolled road: roads and bridges tend to be free to drive on, but a toll has been added in order to help pay for construction and/or maintenance of the road. A gas tax, on the other hand is not an additional charge placed on top of the cost of driving. Instead, it's a bait-and-switch in which money is effectively taken from the general fund (via lost sales tax revenue) and moved into the motor vehicle fund every time someone purchases gas. This is particularly true now, when, at current gas prices, sales tax or fuel taxes would produce almost exactly the same amount of revenue for the state.

Worse, calling it a "gas tax" gives some drivers the fantasy that they're paying their own way without assistance, when in fact the cost of building and maintaining our road infrastructure falls on everyone. Even if the gas tax actually was a user fee, it wouldn't come close to funding our highway program--even with the addition of vehicle- and driver-related fees--and would need to take money from the general fund (as it does now). And this is fine! Infrastructure is important and should be funded adequately, but when we give certain groups of people the impression that they're the "producers" and everyone else are the "moochers," we end up making infrastructure decisions that aren't in the interest of the cities, the state, or our future, and having unproductive fights about how bicyclists, pedestrians, and transit users are "stealing" money from drivers. 

Likewise, although I don't own a car I still make use of the roads. I take the bus, ride my bicycle, walk, and occasionally get rides from friends or family for more distant events. I'm glad the roads are there (many of them, at least), and happy to pay for my share of them. But with driving on the decline and driverless cars likely to reduce congestion in the future, building more roads is a strategy that favors current drivers at the expense of current non-drivers and the future generations that are forced to maintain or demolish their excess capacity. This isn't intended as a demonization of drivers, it's simply a recognition that they don't warrant any special status, including a sales tax exemption for the product that makes their vehicles run.

A better system would be to stop exempting drivers from sales taxes and devote 100% of gas tax revenues and user fees to maintenance and existing bond repayment. This would have a few key benefits:

1. State revenue would increase by about $1 billion per year, and could be spent on education, health services, public safety, or whatever's needed, including transportation;
2. We'd be performing some minimum level of road maintenance that is clearly not being met currently, and tends not to be considered in the total cost of road construction;
3. We'd be less likely to continue accumulating infrastructure that isn't going to be useful in the future;
4. The remaining transportation budget could be spent rationally, since none of it was coming exclusively from drivers or devoted exclusively to them; and
5. Consumption of gasoline would be discouraged further.

Then, of course, there are downstream benefits of this, like better transit service, less pollution and congestion, healthier people, and all the other things that come with less auto-oriented places and more spending on social services. 

Now, reinstating the sales tax is probably something that couldn't happen without a repeal of the 18th amendment which, unfortunately, seems very unlikely. But it doesn't mean we should just accept this destructive and misleading status quo, either. Even without removing gasoline's sales tax exemption we could dedicate all gas tax revenue to maintenance, for example. We could still raise the fuel tax, which historically has been closer to 20% of the cost of gasoline, rather than the current ~10%. And most importantly we can make it clear that everyone helps pay for transportation infrastructure, and all of our voices matter in the decision-making process--including those who are going to have to live with (and pay for) the consequences in years to come. Compared to everyone else, those who drive the most don't contribute more to the state's budget--they just contribute in a different form--and they shouldn't receive any special subsidies or elevated stature because of it.

We need a better system for delivery of commuter tax benefits

Most people are familiar with the concept of purchasing their health insurance through their employer with pre-tax income, but fewer are aware that the same option is available for the costs of commuting (transit or parking). Part of the reason for this is that it's up to employers whether they want to offer the benefit, and not all of them do, and it's a newer program than the one for health care premiums. But given that pre-tax benefits of this type lower taxes for both employee and employer, why don't all employers offer it? If there are legitimate reasons to be hesitant to participate, we in Seattle and we as a nation should be doing everything in our power to address those concerns and encourage maximum use of the commuter benefit for transit users.

First some background: the commuter tax benefit, found in section 132(f) of the  Internal Revenue Code, began in 1993 and offered deductions of up to $60 a month for transit use and $155 a month for parking costs. In recent times the value of the transit/vanpool benefit has been approximately half the value of the parking benefit (a policy failure worthy of its own post), but during 2010 and 2011 they came to parity when they were both set at $230. Unfortunately, in 2012 the value of the transit benefit was allowed to fall back to $125 whereas the parking benefit was increased to $240. Even so, someone making $35k a year using their full $125 transit benefit every month ends up saving almost $30 a month in taxes, and more than $300 a year. Those earning more than $35k a year save even more. And on the employer side there's a little over $110 per year tax savings.

Commuter tax benefits since 2007. From Wikipedia.

Just for reference, I calculated the employee number by summing the 15% for federal income tax (at that income level), 6.2% for Social Security tax, and 1.45% for Medicare, then multiplying that percentage by the $125/month. For employers, the savings are just the payroll taxes, since they don't pay federal income tax.

Employees--both those who already use transit and those who would like to--can't participate in this program if their employer doesn't offer it. But what employer wouldn't want to save up to $110 a year per employee? I think the "per employee" part is the answer: like any other program, government-operated or otherwise, there will be paperwork and accounting to accompany it, and it's possible that for small employers the costs would outweigh the potential savings. This is an unfortunate loss for the employees, but it's understandable why the employer wouldn't want to lose their own money for the greater good of his or her employees.

This is also why participation in this program is much more common among large employers, like mine at the University of Washington, for example. (This pdf is an impact survey that has tons of information on the program in various cities, including that fact.) If you have to administer the same program whether you've got ten employees or ten thousand, economies of scale make it much more efficient--you could have an employee whose sole job was to administer this program, and even if only 1,000 workers took advantage of the program you'd be saving over $100,000 a year, far more than you'd need to pay your new administrator, and all of those participating employees would be saving even more for themselves.

Small businesses can't take advantage of these economies of scale, so I think we should build that economy for them by outsourcing the administration and accounting to government or a non-profit organization. State and local governments would benefit tremendously from the savings, leaving their citizens with more spending money to contribute to the local economy, so the costs of creating such a system would be far outweighed by the benefits. And the benefits aren't just financial: by increasing participation in the commuter benefit program we'd be adding ridership to our transit system at no cost, decreasing pollution and congestion, and ultimately encouraging more people to live in denser, more efficient transit-oriented developments.

I've never owned a business, so I don't know the details of how employee payrolls are managed and how the various pre-tax deductions available are tracked and accounted for by employers. That said, we needn't look any further than health care for a similar example of what I'm suggesting, and how it might work. As a result of Obamacare we'll soon have health care exchanges, run by state governments (or the federal government for states that choose not to participate), which will allow people to purchase health care independent of their employers. There are various merits to this system, but since this isn't a health care blog I'll only mention the one that I think is relevant to this discussion; namely, the shift away from employers being responsible for their employees' health care plans. In the long term there's no rational reason to have an employer-based system because it takes choice away from the employee, and as we see with the commuter benefit it can also lead to some arbitrarily missing out on savings--a worker shouldn't be punished for working at a small business whose owner doesn't feel up to the task of setting up and overseeing a commuter benefit plan, and frankly there's no particular reason that the employer should bear this responsibility in the first place.

Perhaps states could set up a similar exchange in which all of a state's transit agencies are represented, and residents can purchase their passes through it according to their location. The state can track the purchases and award the tax savings in real time, then go to the federal government to get reimbursed. Or, at the very least, those who aren't offered the benefit at work can claim a separate deduction (on top of their standard or itemized deductions) on their tax returns every year. This isn't ideal because it forces individuals to save the records of all their transit spending and once-a-year tax refund windfalls don't lend themselves well to responsible financial planning, but it'd be an improvement over the status quo.

This post was originally inspired by a post at Mobilizing the Region about a law that was recently passed in California requiring businesses with at least 50 employees to take part in this program (or offer their own transit benefits), and this is certainly an option too, but not an ideal one. For one, it's not easily replicable. But besides that, many, many people work at businesses with less than 50 people. Ignoring them just because it might take a little more effort isn't fair to them, and it fails to take full advantage of the opportunity to get more people out of their cars. 

What we have right now is a system that favors large employers and their employees over small businesses and their workers, and just as with health care, an exchange or similar institution might be a solution to the problem. Certainly, what we're doing now just isn't working.

What would Seattle look like if Metro fares weren't subsidized?

There are a lot of people out there who consider it a waste to use taxpayer money subsidizing transit fares in urban areas. Obviously I'm not one of them, and my response to those people is usually to note that if all those people drove instead traffic would be (even more) unbearable, pollution and oil dependence would increase, public health and safety would suffer, and more space dedicated to parking in apartment units would increase rents as well.

This usually leads to an argument about how if I want to save the world then it shouldn't be on the car drivers' dollar, to which I respond that the majority of Metro's operating budget comes from sales tax*, which everyone pays (and the lower your income the larger the proportion of your income paid as sales tax), followed by transit fares, then federal and state grants for the capital budget. The total spent on transit by King County Metro is about $1 billion per year. Certainly some money comes directly from those who drive, for example the 2-year $20 vehicle license fee in effect right now that the King County Council approved to mitigate a 17% cut in Metro service last year. There are other things too, higher up in the state budget. But most people who use the bus also own at least one car. So round and round we go, point-counterpoint.

Where your sales tax money is being spent (source: kingcounty.gov)

Lately I've been asking the question: what do you propose we do instead? These people seem extremely averse to spending money on mass transit, but especially in light of our growing population and a lack of room for any more roads, I don't hear many alternatives being offered. I'm all for directing more money toward maintenance rather than endlessly expanding our infrastructure (and therefore our maintenance liabilities), but it's obvious that simply maintaining what we've got is a recipe for a steadily worsening transportation system as the population increases. I've yet to get a straight answer from anyone on what they'd actually prefer to see (as opposed to "no more trains!" and "no more war on cars!"), so feel free to let me know in the comments what your vision is for the transportation system if you don't support subsidizing mass transit.

As a thought experiment about public transportation subsidies, here's what I think it would look like if we started demanding that everyone pay the full, unsubsidized cost of their fares:

First off, Metro fares are currently about $2.50 (up a dollar since 2008) in Seattle. We've got a roughly 28% farebox recovery rate, meaning that we recoup 28% of our operating expenses in the form of user fees. If we wanted to increase that to 100% we'd have to charge about $9 per ride and that's making the inane assumption that increasing fares more than threefold will not reduce ridership. So, to get to and from work we're looking at $18, and assuming five work days a week we've got about $360 a month spent just on the work/school commute. Add another ten trips during the month for various errands and we're up to $450.

Many bus riders could afford this, but would they choose to? Given that the vast majority of mass transit users own cars anyway, the question now becomes whether gas + parking (car payment, licensing fees, and insurance already being paid for) adds up to $450 per month, and the answer is almost certainly "no." So everyone who owns a car starts using it for almost all of their trips, even if they used to prefer using the bus or train to get around most of the time.

For those who don't own cars, the decision is a bit more difficult. They have to decide whether the cost of a car payment, licensing fees, insurance, gas, and parking are a better deal than $450 a month in fares. Personally, I owned a 1995 Camry for five years that cost me $5,000 to purchase and about $2,000 in maintenance over it's lifetime, which adds up to about $120 per month for 60 months. Add $50 for liability insurance (if you're over 24 and have a clean driving record, at least), $50 or so for various fees, and $100 for gas (optimistically). We'll ignore parking for now, but I'll get to that later. That adds up to $320 per month, far under the cost of a month of busing and much more convenient, too. So many people who don't currently own cars also start driving them to get around everywhere.

Who's left after that? Basically the very poor, the young, and the very old. In other words, the transit system falls apart due to lack of a constituency and we don't actually have mass transit anymore. Everyone drives everywhere, and those who can't due to age, ability, or income are left to fend for themselves. Even if we limited transit subsidies to just these people, they don't make up a large enough share of the population to constitute a real transit system and many of them already struggle with $2.50 fares, so instead we'd end up with a bunch of incredibly inefficient routes serving a relatively small pool of people. In our quest to end transit subsidies we end up with a system with a farebox recovery rate that is probably closer to 5-10%, subsidized to an even greater degree than before. If efficiency was the goal here we've failed miserably.

And what about all the people already driving as their primary means of transportation? Needless to say, traffic and parking get much worse, particularly downtown where a large proportion of transit trips begin and end. Less of their money is going toward transit projects though, and more toward roads. This does almost nothing to improve traffic in Seattle since there's no room for more roads, but maybe existing roads are kept in a better state of repair. Maybe not though, since all of those cars take a toll on the road, and since congestion has increased everyone is spending more of their time on the pavement. Pollution worsens; people walk around less and sit in traffic more, both of which are bad for physical and mental health; and although the full 1.8 cents of sales tax** that is devoted to transit is no longer needed, those savings are almost certainly eaten away--and then some--by the extra gas wasted sitting in the worsened traffic.

More of this. Right on.

To make matters worse for drivers, with more people now reliant on cars parking in central Seattle will become scarce. This means two things: first, metered street parking rates increase drastically in order to maintain their target of one open space per block; second, as paid parking lots and garages begin to fill up and supply is saturated, demand drives prices for private parking up too. Likewise for parking rates in apartments, driving up effective rents. New apartments and condos built in the city will start including more underground parking (an extremely expensive form of parking infrastructure), adding tens of thousands of dollars to the cost of each unit. This general phenomenon would likely recapitulate itself in every neighborhood center, driving up parking rates not just in downtown, Capitol Hill, and South Lake Union, but Fremont, Ballard, the University District, Wallingford, Queen Anne, Columbia City, Eastlake, etc.

This would be a terrible outcome for drivers, particularly those who preferred to take the bus but can no longer afford it, but it's bad for the economy too. There are already people who avoid traveling to Seattle because of the traffic and lack of cheap parking. (Personally, I hated Seattle before moving here because my only experiences involved driving around in it.) If the buses disappear you can count on that sentiment getting far stronger, and a lot of business that comes in from outside the city will quickly evaporate. That means less business for just about every type of service- or retail-based company in the city, and reduced tax revenue as a result. So all that money we're saving by not sending the entire 1.8 cents of sales tax toward transit? It's at least partially offset by the loss of sales tax revenue from non-Seattleites who now avoid Seattle when they can. That's to say nothing of Seattleites themselves, who are now spending more on gas (or in the case of former busers, transportation in general) and have less money to spend on food, drinks, entertainment, rent, electronics, bicycles, clothing, etc. Once again, this means less revenue for the city, and all those sales tax savings are chipped away even further.

Have I made myself clear? Subsidized public transportation is not a luxury in a large urbanized city: it's a necessity. I made a point of glossing over the moral implications of removing these subsidies not because it's unimportant--it's vitally important--but because the economic argument is sufficient unto itself. By dedicating 19% of our sales tax toward public transportation we ensure that Seattle is able to function as the cultural and economic center of our region. Non-automotive options for getting into, out of, and around the city are essential if we're to retain that position, and our investment in those options more than pays for itself by keeping more spending local, restraining housing costs, and allowing us to remain a viable destination for those who come to our city by car, either by choice or of necessity.

*Fun fact: One-quarter of the sales tax collected for Metro goes toward capital expenses. If the entire 1.8 cent sales tax was directed toward operating expenses, user fees + sales tax revenue would exceed the operating budget.

**The 1.8% sales tax dedicated to transit pays for both King County Metro and Sound Transit.