Today, I want to offer the fourth of my recommendations to reform U.S. surface transportation policy. I advise eliminating federal-aid gas tax funding for all non-highway uses.
The federal highway transportation program is structured as a users-pay/users-benefit system with fuel taxes funding construction and maintenance of the Interstate and national highway system. Over the last 30 years, the program has diverted an increasing percentage of its funds to transit, bicycling, walking, smart growth, transportation museums, weed removal and other non-federal transportation purposes. While these programs have value, they also reduce the funding available for federal aid to highways; this has jeopardized interstate commerce. Eliminating federal aid funding for all non-highway uses will return the federal highway program to a users-pay/users-benefit program that spends limited resources on the most critical infrastructure.
U.S. government policy is based on the principle of federalism where the federal and state government share legislative responsibilities. In transportation, the federal government funds interstate passenger and goods movement using federal aid highways, aviation, inland waterways, and ports. Traditionally, other transportation modes have been funded by state and local governments. While transit and active transportation are important in certain states and regions, such systems are not federal in nature and should not be funded by the federal government. Most local governments and some states provide substantial funding for transit. Federal government funding makes up less than 30% of the revenue for the most important transit agencies such as the New York Metropolitan Transportation Authority. The funding of these modes from federal aid amounts to a cross-subsidy from highway users to other modes.
Federal transportation funding is limited. With little bipartisan interest in increasing the gas tax or embracing an alternate funding mechanism coupled with increasing vehicle fuel efficiency, federal gas tax receipts must be targeted as effectively as possible. Fuel tax diversions significantly reduce funding for highways.
While transit is important in many communities, it should be funded by farebox revenue and with supplementary local funding that does not come from federal roadway funding. U.S. transportation policy is predicated on a users-pay/users-benefit system. Potential funding sources for transit include local general tax revenue and value capture. (Value capture uses increases in land values resulting from highway and transit projects to finance infrastructure improvements.)
This change could devote more revenue to highways. Assuming all non-roadway funds are dedicated back to roadways, under Moving Ahead for Progress in the 21st Century (MAP-21) transit receives approximately $11 billion per year. Additionally, there is approximately $5 billion per year in highway funding that is flexed to transit, bicycling, walking or non-transportation purposes. This totals $16 billion in additional highway funding per year, or about 1/3 of federal gasoline taxes.