User Fees' Triple Bonus: Cutting Traffic, Reducing Pollution, and Paying for Transportation Improvements

It’s not often I see eye-to-eye with conservative groups such as the Competitive Enterprise Institute, National Taxpayers Union, Reason Foundation, and Taxpayers for Common Sense. It turns out that user fees for transportation infrastructure are one such occasion, and today we all transmitted a letter to the House of Representatives saying that

...proposals for funding the [transportation] bill passed by the House Natural Resources and Ways and Means Committees the week before last are fundamentally atodds with this longstanding funding principle: directing royalty revenues from expanded onshoreand offshore oil and gas production into the Highway Trust Fund. Further increasing the relianceof the Highway Trust Fund on revenue streams not connected to use would threaten the futurehealth of America’s highways.

As is well known, the maintenance and improvement of our transportation infrastructure is virtually at a standstill because the traditional mechanism for funding these undertakings has stagnated; revenue from gas taxes is woefully inadequate because our representatives lack the political courage to take the unpopular step of raising gas taxes.

While user fees may be inappropriate for many public services – education, libraries, public safety for example – in the case of transportation, they make sense.

That’s because, particularly in the case of roads, we need to avoid the unnecessary cost of oversupplying pavement. This principle is especially important to keep in mind due to the real, measurable "induced traffic" effect on travel demand with new lane mileage. For example, as a conservative friend of mine says, the infamous bridge to nowhere would not have been seriously considered if there had been a requirement that it pay for itself via tolls. (There would have been too little traffic to justify it.)

Marc Scribner, a transportation policy analyst for the Competitive Enterprise Institute, favors user fees to fund transportation infrastructure because this combination is fair, proportional to road use, provides a predictable source of funds, and is attractive to investors.

From an environmental point of view, user fees can reduce pollution, greenhouse gas emissions, and other unhealthy emissions. If, in addition to the costs of maintenance and construction, the cost of externalities such as pollution were incorporated into user fees(click here for a recent, comprehensive study of externalities due to energy use in transportation by the National Academy of Sciences), consumers would be given an even more accurate signal as to the real cost of using roads. Including the costs of externalities would further bring demand in line with the costs, in the broadest sense of the word, we are willing to pay. In addition, making user fees a regular component of the funding mix would provide additional revenue for the funding of new public transportation alternatives.

While user fees and gas tax revenue should fund most highway maintenance and construction, I am concerned about equity and believe that some projects and modes are worthy of some public subsidy. For example, even relatively well-run transit agencies like the Southeastern Pennsylvania Transportation Authority (SEPTA) require a lot of support. At the same time, public transportation agencies need to do a better job of recouping revenue based on the value of their services by charging adequate fares; such "value capture" from new economic activity -- for example, when commercial development thrives at a commuter rail stop -- is a worthy policy tool.

However, House Republican Leadership's unprecedented "drill and drive" linkage which undermines user fees is yet another awful idea in this bill, underlining the need to vote against H.R. 7.