How we're going to pay for transportation infrastructure in the face of falling gas tax revenues has been a hot topic lately, with ideas ranging from pretty good to ridiculously bad. The concept that transportation should be primarily funded by user fees (gas taxes, licensing fees, tolls, and other costs that fall specifically on those who use the roads) is fairly unique to government spending and has a lot of merit, but one significant drawback of getting most of your money from drivers is that it tends to overemphasize road capacity expenditures over transit, pedestrian, and bicycling infrastructure--no one likes the idea that they're subsidizing someone else's lifestyle, after all.
Many people note that the federal Highway Trust Fund has been reliant on tens of billions of dollars in general fund revenue for years, effectively resulting in subsidy of drivers' infrastructure by those who drive little or not at all. This is portrayed as a bad thing--a case where drivers' hypocrisy is laid bare--and as a justification for public transit and active transportation subsidies. Using federal income tax revenue (the main source of general fund monies) to shore up the transportation fund has been somewhat demonized when compared to user fees, but perhaps there's something to it.
Technically, we already pay income tax into the Highway Trust Fund.
Structured correctly, such a tax could be very progressive and begin to reduce the maintenance backlog we fall further behind on each year. It could move us toward a less car-centric transportation system, and even be enough to catch us up to the many nations currently ahead of us in building a 21st-century infrastructure.
Now, even a very small tax could be devastating to someone with very low income, at or around the poverty line for example. Say we make it a 1.0% tax on all income over $20,000. Most people make over $20k a year, and many of those that don't are students who will make more in the future, and retired seniors who have already paid their dues. Those that earn less than that don't need any additional burdens, and they're a very small share of the income pie anyway, so exempting them wouldn't have much impact.
Per capita income in the US was slightly above $40,000 in 2011--this includes children, infants, retired persons, the unemployed, etc., so obviously the per capita income of the working population is considerably higher. Total personal income in the US was about $13 trillion for 2011. To account for the first $20k of everyone's income being exempt, we'll pretend everyone earns $40k a year and say the tax is assessed on half of total personal income, or $6.5 trillion dollars. (In reality this would be higher, of course, but there are too many variables for me to know exactly how much.) A one percent tax on this amount would bring in $65 billion a year, more than the federal government spends total on transportation each year ($53.5 billion). Add this to the ever-declining federal fuel tax revenues of $34 billion and we're at almost $100 billion per year. (And remember, there's no reason to get rid of the existing fuel tax.)
One appeal of an income tax for transportation is that it's sensible in regard to how people value their time. Even with a flat percentage on all income, people who earn more will pay more money into the transportation fund, and this makes sense: a person earning $100k a year has more to lose (from a financial standpoint) by wasting time in traffic than a person earning $30k a year, so it's fair that they would pay more for a transportation system that actually works. We need to actually a working network if we're going to collect more taxes though--our transportation network is so degraded and ill-suited to our needs that almost no one feels like their money is being put to good use. An extra $60+ billion a year might just get us there--at the very least it'd make a dent in some of that $2.2 trillion infrastructure backlog we've been ignoring.
Aside from the first-$20,000 exemption, this also solves the problem of "free-loading," the perception by people on all sides of the transportation debate that the other guy isn't paying the full cost of his or her mode of travel. Everyone pays something, so everyone gets a seat at the table when it comes to decision-making.
Of course, a bunch of extra money to spend on infrastructure doesn't do us any good if it's all just frivolously wasted on new capacity, and that's where things could get really interesting. How do we spend this new revenue responsibly? Imagine if, for example 80% of the new revenue had to be spent on maintenance and repair.
Poor roads cost the average vehicle owner $355 a year, not to mention the injury and loss of life that can result from a crumbling, unsafe infrastructure. Or consider that it can cost 6 to 14 times more to repair roads in the last years of their life than in the first fifteen:
With an extra $65 billion a year we could literally erase this maintenance backlog. Once a state had caught up with their repairs--a process that would no doubt take decades, but without additional spending will worsen rather than improve--they could begin to use this money on other projects, assuming they kept things in a good state of repair. It's unfortunate that states can't be trusted to operate with a "fix-it-first" mentality, but when it's costing us all money in the long term and lives in the short term, it's appropriate for the federal government to step in and demand changes. As more roads fall to poor and very poor condition the costs will only accelerate, and we're so far behind at this point that only a significant increase on transportation maintenance spending can get us caught up.
It would also be true under this system that those who don't drive often, or at all, would be contributing more money directly to the transportation fund. As such, we could expect drastic changes to how money is apportioned, and cities and states could make serious progress on their public transportation, walkability, and bicycling goals--something that wouldn't just improve mobility, but also health, the local economy, and the environment. A growing share of trips is already being made on foot, bike, or transit, so the existing 20% of the Highway Trust Fund devoted to transit would have to increase, especially since much more of its funding would be coming from lite- or non-drivers. This would in turn lead to better options for those who would like to use their car less, and greater support for more investment in alternative transportation.
One last benefit of such a system, when compared to other revenue mechanisms like mileage fees and tolls (which certainly have many benefits themselves), is that it wouldn't cost any additional money to administer. Unlike a vehicle-miles traveled system, which requires GPS or mileage tracking hardware in every car, as well as monitoring of all of this data, an income tax is something we're very familiar with in this country and would be very simple to tack on to existing federal income taxes at little or no cost. Tolls and congestion pricing could be retained in dense urban areas for purposes of traffic control of course, but if generating revenue as efficiently as possible is the goal, an income tax is hard to beat.
There would be upsides and downsides for any income-tax based funding mechanism, but I think there's value in at least giving it consideration and discussing how we might make it as equitable as possible. I still believe strongly in user fees, and I generally favor taxing things that produce negative externalities, like gasoline consumption, alcohol, or cigarettes, over taxing positive things like employment. This isn't what I would choose if my goal were to maximize fairness and social justice, but when the scale of the infrastructure problem is so massive and the cost of waiting is so great, maybe the best solution is just the one that actually solves it, and solves it quickly.