Do Roads Pay for Themselves?

Setting the Record Straight on Transportation Funding

U.S. PIRG Education Fund |January 2011

Tony Dutzik and Benjamin Davis | Frontier Group
Phineas Baxandall, Ph.D. | U.S. PIRG Education Fund

Highway advocates often claim that roads “pay for themselves,” with gasoline taxes and other charges to motorists covering—or nearly covering— the full cost of highway construction and maintenance. They are wrong. Highways do not—and, except for brief periods in our nation’s history—never have paid for themselves through the taxes that highway advocates label “user fees.” Yet highway advocates continue to suggest they do in an attempt to secure preferential access to scarce public resources and to shape how those resources are spent. To have a meaningful national debate over transportation policy—particularly at a time of tight public budgets—it is important to get past the myths and address the real, difficult choices America must make for the 21st century.

Gasoline taxes aren’t “user fees.”

Highway advocates often describe gasoline taxes as “user fees” in order to argue that those funds should be used only on highways. Yet, gasoline taxes are not user fees in any meaningful sense of the term.

• “Fees” are not connected to “use” – The amount of money a particular driver pays in gasoline taxes bears little relationship to his or her use of roads funded by gas taxes—unlike other true user fees such as admission fees for state parks or turnpike tolls.

• State gas taxes are often not entirely “extra” fees – Most states exempt gasoline from the state sales tax.

• Federal gas taxes have typically not been devoted exclusively to highways – Since 1973, the gasoline tax has been used to fund a variety of important transportation priorities and has periodically been used to reduce the federal deficit.

• Many states use gas tax revenue for a variety of purposes – According Federal Highway Administration data, roughly 20 cents of every dollar collected in state gas taxes, motor vehicle fees or tolls nationwide is used for public transportation and other governmental purposes.

Highways don’t pay for themselves.

• Since 1947, the amount of money spent on highways, roads and streets has exceeded the amount raised through gasoline taxes and other so-called “user fees” by $600 billion (2005 dollars), representing a massive transfer of general government funds to highways.

• Highways “pay for themselves” less today than ever. Currently, highway “user fees” pay only about half the cost of building and maintaining the nation’s network of highways, roads and streets.

• These figures fail to include the many costs imposed by highway construction on non-users of the system, including damage to the environment and public health and encouragement of sprawling forms of development that impose major costs on the environment and government finances.

• New or expanded highways are even less likely to pay for themselves in the future as changing demographic conditions and consumer choices limit the growth in vehicle travel and fuel use that would otherwise provide the revenue for a major program of highway expansion.

Highway advocates use the “user fees/highways pay for themselves” myth in an effort to secure access to scarce government revenue for their desired public policy ends—distorting transportation decision-making.

• Highway advocates often argue that the fact that highways come with their own built-in source of revenue in the form of gasoline taxes make them a financially conservative option relative to other transportation investments, but they typically fail to document whether the new or expanded roads Executive Summary they propose will raise enough revenue to pay for their costs.

• Highway advocates often use funding myths to make public transit and other forms of transportation appear relatively more expensive—diverting attention from the full accounting of costs and benefits that should be the basis of sound transportation decisionmaking.

To make the right choices for America’s transportation future, the nation should take a smart approach to transportation investments, one that weighs the full costs and benefits of those investments and then allocates the costs of those investments fairly across society.

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