The Ineluctable Politics of Transport Funding

» If we insist on charging car users to fund transit, we have to accept increasing highway spending in exchange for more public transport subsidies.

Here is a matter worth noting: The vast majority of federal subsidies for transit are collected from automobilists who pay taxes on fuel. Revenue sources at other levels of government are more broad-based, many of them relying on sales taxes and the like, but in Washington what matters right now is the fuel tax. Similarly, any future major revenues for transit would likely come from increased tolling on roadways or a vehicle miles travelled fee.

The economic theory explaining why a government might charge car drivers to help pay for the commutes of people who use public transportation is sound: Drivers produce a number of negative externalities like pollution, congestion, and sprawl. And subsidizing transit makes an attempt to ensure adequate mobility for people of all classes and with all sorts of disabilities, which is an important goal.

Nonetheless, the American transport funding mechanism is routed in the user fee, a product of a certain logic that assumes that people should pay for what they use.

The reliance on the user fee is a reasonable explanation for why it is politically necessary to devote the majority of fuel tax revenue to roads resources rather than transit. From an economics perspective, transit may be construed as simply another part of the greater transport system, so there is not necessarily a contradiction between the user fee and the transit subsidy. But in a country where the vast majority of people drive to fulfill the majority of their transport needs, it would be politically untenable to suggest that most roads money be transferred to transit users.

That’s why I find the recent discussion by Cap’n Transit on this issue so perplexing. In critiquing my argument in favor of increased funding for infrastructure in general, he suggests that the problem is not necessarily the overall lack of funds but rather the manner in which those funds are distributed. “It doesn’t matter how much transit funding is cut,” he argues, “as long as road funding is cut more.“ He points to several examples in which a large roads project could be replaced by a transit one and serve the same number of people, while producing a lower level of negative social costs.

I certainly agree that the American transport system would be more sustainable and safer were the portion of capacity devoted to automobiles diminished with respect to transit capacity. You do not necessarily need more funding to make this possible, you just need to find the political will to cut funding for roads.

In essence, this is what has occurred in countries like France, where of the planned national spending on transportation over the next twenty years, just 4.5% will be distributed to highway construction. A major increase in transport expenditures has not been proposed there, just a redistribution of overall funds, just as Cap’n Transit has promoted.

Unfortunately, that argument is politically unsustainable in the United States, at least under the existing funding system. For politicians representing people who drive (most), it is virtually impossible to suggest that we collect transport revenues from fuel taxes and then devote most of those funds to transit rather than roadways.

France’s focus on non-automotive modes arguably has two origins: A lower mode share in the transport system for drivers (though it is still quite large), and a disconnect between fuel tax receipts and transport spending. The latter is problematic to economists, who like to see a direct connection between user fees and spending, but it allows the country’s politicians both to extract a very high tax on fuels and to spend a lot on public transport. France’s overall fuel tax revenues are almost as large as those of the U.S. federal government, despite the country having only one-fifth the population (though American states also have their own fuel taxes). Decisions about funding for transportation in France do not begin with an evaluation for how much the fuel tax per se brings in, since the connection is indirect: Money comes out of the general budget, into which the fuel revenues as well as those from other taxes had been deposited.

It is perhaps unsurprising that local transport agencies in the U.S., which collect funds locally from sources other than the fuel tax and collect federal fuel tax funds, but indirectly, are able to act basically in isolation from the political demands of motorists. Take Los Angeles Metro, which is supposed to take responsibility for highways and transit in its region. Of the $40 billion the agency is expected to bring in over the next thirty years from the 1/2¢ sales tax approved in 2008, just 35% will go to roads, with the rest being spent on transit capital and operations expenditures.

What are the implications for changes in how the American national government spends its transportation dollars? The continued use of the fuel tax as the primary — and direct — funding source suggests that from a purely political perspective the federal government has no choice but to spend massively on roads, certainly more than on transit. Fundamentally, that is why I have been a supporter of increasing infrastructure spending overall.

But a right-headed long-term approach would require that either we pull the national government out of the transport financing game altogether, or that we pull away from the direct connection between highway user fee collections and spending. Only after that change has been made can we really focus on altering the manner in which we distribute our limited transportation dollars.

Image above: St. Louis Metrolink station at 8th and Pine Streets, from Flickr user Jeramey Jannene (cc)