Highway Cost Allocation for All Levels of Government

Table 10 compares Federal, State, and local HURs with obligations or expenditures for highways and transit at each of the three levels of government for the base year of 1994, as well as for the Year 2000. To provide a complete overview, Table 10 shows both revenues and expenditures defined in a comprehensive manner. Highway-related taxes and fees include all taxes and fees imposed on motor vehicles and their use. General taxes imposed widely on other sectors, such as income or sales taxes, are not included, but highway taxes that are not used for highways or transit are included. For example, motor fuel taxes devoted to deficit reduction at the Federal level and State fees that provide general support to local governments are included in the table. Similarly, a broad range of highway-related functions, such as maintenance, motor vehicle administration, and highway patrol, are included, regardless of the source of funding, as are all transit programs funded from highway user taxes.

At the Federal level, Table 10 shows that in 1994 receipts from highway taxes and fees dedicated for highway-related purposes were approximately equal to total Federal obligations for highway and transit improvements through the Federal-aid Program and direct Federal construction, maintenance, and operation of Federal roads. When the 6.8 cents per gallon of motor fuel tax that was dedicated for deficit reduction along with a small additional amount dedicated to the Leaking Underground Storage Tank (LUST) Program are considered, total Federal receipts from highway taxes and fees exceeded highway-related Federal obligations in 1994. Since 1994, 2.5 cents per gallon of fuel taxes that had been dedicated for deficit reduction was returned to the HTF, and the LUST Program expired, so the difference between total highway taxes and fees and Federal highway-related obligations will be smaller in 2000. In most of the rest of the report, the analysis focuses on only those Federal HURs used for highways and transit, and on Federal highway and transit obligations funded from HURs.

Table 10. Comparison of Overall National Highway Taxes and Fees With Obligations or Expenditures for All Levels of Government for 1994 and 2000 ($ Billion)

Year and Category

Federal

State

Local

All Levels

1994 Highway Taxes and Fees

   Used for Highways and    Transit

21

43

2.2

66

   Other Uses

11

7

0.1

18

Totals

32

50

2.4

84

1994 Obligations or Expenditures
   From User Revenues

21

45

2.2

68

   From Other Sources

1.3

5

23

29

Totals

22

50

25

97

2000 Highway Taxes and Fees

   Used for Highways and    Transit

27

62

3.3

92

   Other Uses

6

12

0.2

18

Totals

33

74

3.5

110

2000 Obligations or Expenditures

   From User Revenues

27

62

3.3

92

   From Other Sources

1.6

5

27

33

Totals

29

67

30

125

At the State level, aggregate 1994 HURs almost exactly equaled total expenditures of user revenues for highways and transit. However, in many individual States HURs and expenditures did not balance. Some States have user revenues that exceed State expenditures for highway and transit by 10 percent or more; and several other States earmark specific non-user revenues for highways or use substantial amounts of general revenues that significantly exceed State highway and transit expenditures. In contrast to the Federal level, many States do not earmark user taxes for highways, although most States have special accounts and several States have constitutional restrictions on the use of most or all user taxes. Because State HURs are growing more rapidly than State highway expenditures and because of increasing revenue demands for other State programs, a surplus of State user revenues over State expenditures for highways and transit is anticipated by 2000.

At the local level, 1994 user fee revenues were only about 10 percent of highway-related local expenditures. Since these data do not include large transit expenditures by local governments from non-highway sources of funds, the imbalance between revenues and expenditures is understated for overall local surface transportation programs. Reasons for this imbalance include the facts that at the local level, construction on major roads is commonly supported with funds from higher levels of government, and construction on minor roads is commonly performed by private developers. Some increase in local user fees has occurred in recent years as several States have allowed local governments to impose highway user fees, often on an optional basis.

Evaluating relationships between Federal user fees and Federal highway cost responsibility is essential for evaluating the equity of the Federal highway user fee structure, but comparisons of total user fee payments and total highway cost responsibility for all levels of government are important in evaluating overall subsidies to various classes of vehicles that might give them a competitive advantage over other modes of transportation. In fact, State and local governments collect over 62 percent of total HURs and account for 76 percent of total expenditures. (These percentages are higher if Federal deficit reduction revenues are removed and expenditures are grouped by spending agency.)

Table 11 shows total 1994 HURs for all levels of government by type of fee. This table provides additional detail on revenues shown in Table 10, breaking down revenues at each level of government into sources by the three broad categories that have traditionally been used to classify HURs:

n First Structure Taxes. Fixed fees such as vehicle registration fees that do not vary by amount of highway use, and are therefore insensitive to one of the prime determinants of highway cost responsibility -- T. First structure taxes can be sensitive to another prime determinant of highway cost responsibility -- vehicle weight.

n Second Structure Taxes. Fuel taxes that are highly correlated with VMT but relatively insensitive to vehicle weight.

n Third Structure Taxes: Vehicle usage taxes, which are designed to reflect costs occasioned by vehicles' use of the highways, to a greater or lesser extent depending on the specifics of the tax.

The Federal Government has the lowest proportion of its tax structure in both first and third structure user taxes (10 percent and 1 percent respectively) of the three levels of government, and the highest proportion (89 percent) in second structure taxes. Thus the Federal user fee structure reflects costs related to the amount of highway travel relatively well, but does not reflect as well as typical State user fee structures variations in costs related to weight and other vehicle characteristics besides VMT. However, the Federal fuel tax structure includes a higher diesel fuel tax rate (a "diesel differential" of 6 cents per gallon) a feature that significantly improves the Federal tax structure in relation to cost responsibility.

The States vary greatly in their relative mixes of the three types of taxes. As a whole, States rely more on first structure taxes (39 percent) than either of the other two levels of government. However, several States have shares of first structure taxes about as low as at the Federal level and have substantial shares of their taxes in third structure taxes. None of the States has a higher proportion of its tax structure in second structure taxes than the Federal Government, although a few come close (70 to 80 percent range). Also, only a few States have substantially higher diesel fuel tax rates like the Federal diesel differential of 6 cents per gallon.

Table 11. 1994 HURs by Type for All Levels of Government ($ Billions)

Revenue Categories

Federal1

State

Local

All Levels

First Structure (Fixed Fees)
   Registration
   Title Fees
   Ad Valorem
   Drivers' License
   Heavy Vehicle Use
   Other or Miscellaneous
Subtotal
 
---
---
---
---
0.6
1.4
2.1
 
9.1
3.4
6.2
0.8
---
---
19.5
 
---
---
---
---
---
0.8
0.8
 
9.1
3.4
6.2
0.8
0.6
2.2
22.4
Second Structure (Fuel Taxes)
   Gasoline
   Diesel
   Gasohol
   Other
Subtotal
 
13.9
3.5
0.7
0.4
18.4
 
19.6
4.4
1.7
0.2
25.9
 
0.5
0.2
--
--
0.7
 
34.0
8.1
2.4
0.6
45.0
Third Structure (Use Related Fees)
   Weight-Distance
   Tire
   Tolls and Other
Subtotal
 
--
0.3
--
0.3
 
0.6
--
3.8
4.4
 
--
--
1.1
1.1
 
0.6
0.3
4.9
5.8
Total

20.8

49.9

2.5

73.2

Although local governments as a whole recover only about 10 percent of their costs from highway users, they do collect the highest share from third structure taxes (about 45 percent), almost all in the form of tolls. Tolls have the potential for reflecting cost responsibility quite well depending on the toll structure and the extensiveness of toll facilities. However, many toll road fee schedules currently do a poor job of reflecting differences in cost responsibility among different vehicle classes.

Table 12 shows estimates of highway user payments by vehicle class for all levels of government for the Year 2000. These user payments include all the revenue sources shown for each level of government in the preceding Table. The Federal tax structure in general tends to increase user payments more rapidly with the size and weight of vehicle classes than the State and local tax structures. Federal user fees are 25 percent of total user fees paid by passenger vehicles, 28 percent for single unit trucks, and 39 percent for combinations. This progression also occurs to a significant extent as registered weight increases, with one important exception - the heaviest class of combination trucks (>80,000 pounds) pays a smaller percentage of its total national user fees at the Federal level than any of the lighter classes of combinations. The current Federal tax structure does not increase with weight above 80,000 pounds as much as occurs, on average, at the State level.

Table 12. 2000 Highway User Fee Payments by Vehicle Class for All Levels of Government ($ Millions)

Vehicle Class/
Registered Weight

Federal

State

Local

Total

Autos

$11,576

$34,524

$1,164

$47,264

Pickups and Vans

$5,812

$16,263

$479

$22,554

Buses

$20

$311

$6

$337

All Passenger Vehicles

$17,408

$51,098

$1,649

$70,155

Single Unit Trucks
   <25,000 pounds

$1,500

$3,831

$84

$5,415

   25,001 - 50,000 pounds

$611

$1,802

$58

$2,471

   >50,001 pounds

$487

$924

$31

$1,442

All Single Unit Trucks

$2,598

$6,558

$173

$9,329

Combination Trucks
   <50,000 pounds

$306

$560

$15

$881

   50,001 - 70,000 pounds

$504

$902

$21

$1,427

   70,001 - 75,000 pounds

$370

$548

$14

$932

   75,001 - 80,000 pounds

$5,521

$7,652

$145

$13,318

   >80,000 pounds

$468

$1,156

$12

$1,636

All Combinations

$7,168

$10,818

$208

$18,194

All Trucks

$9,766

$17,376

$380

$27,522

All Vehicles

$27,174

$68,474

$2,029

$97,677

A few important clarifications are necessary to interpret the findings summarized in Table 13:

    1. The results at the Federal level differ slightly from those shown previously in Table 7 because the previous results included only Federal programs funded from the HTF; whereas Table 13 also includes direct Federal construction and maintenance on Federal lands funded from sources other than the HTF.

    2. User revenues do not equal obligations or expenditures at any level of government, unlike the previous analysis based on the HTF, because all user revenues are included in this table, except Federal fuel taxes dedicated for deficit reduction, regardless of their use; and all highway expenditures (or obligations at the Federal level) are included regardless of their funding source.

    3. At the State and local levels, the projected revenues are based on extrapolation of trends, rather than on current tax rates, as assumed for the Federal level analysis. The State and local revenue projections imply trend increases in tax rates, and incorporate some shifts in the proportion of revenues from different sources.

    4. Because State revenues and programs are larger than those of the other levels of government, the State equity ratios have more effect on the overall national equity ratios.

    5. Because local HURs are only a small fraction of local expenditures, the local level equity ratios are a much less important component of the all levels of government equity ratios.

Table 13. Ratios of 2000 User Fee Payments to Allocated Costs for All Levels of Government

Vehicle Class

Federal

State

Federal and State

Local

All Levels of
Government

Autos

0.9

1.0

1.0

0.1

0.7

Pickups and Vans

1.2

1.2

1.2

0.1

0.9

Buses

0.1

0.8

0.5

0.0

0.4

All Passenger Vehicles

1.0

1.0

1.0

0.1

0.8

Single Unit Trucks

 

 

 

 

 

   <25,000 pounds

1.4

2.2

1.9

0.1

1.5

   25,001 - 50,000    pounds

0.6

1.0

0.8

0.0

0.6

   >50,001 pounds

0.5

0.5

0.5

0.0

0.4

All Single Unit Trucks

0.8

1.2

1.1

0.1

0.8

Combination Trucks

 

 

 

 

 

   <50,000 pounds

1.4

1.7

1.6

0.1

1.3

   50,001 - 70,000    pounds

1.0

1.3

1.1

0.1

0.9

   70,001 - 75,000    pounds

0.9

1.1

1.0

0.1

0.8

   75,001 - 80,000    pounds

0.9

0.9

0.9

0.1

0.8

   >80,000 pounds

0.6

1.0

0.9

0.0

0.7

All Combinations

0.9

1.0

0.9

0.1

0.8

All Trucks

0.9

1.1

1.0

0.1

0.8

All Vehicles

0.9

1.0

1.0

0.1

0.8

Table 13 shows that the ratio of highway user fees to highway-related expenditures/ obligations is estimated to be 0.8 for all levels of government in 2000. Preceding analyses have assumed that 2000 obligations from the HTF will equal 2000 HTF receipts. Because the overall ratio of user fees to expenditures is different in this table than in others, the interpretation of ratios of user fees to cost responsibility for different vehicle classes is somewhat different, and ratios for all levels of government in Table 13 cannot be directly compared to ratios in other tables where overall user fees and highway-related expenditures are equal. As noted above, Federal obligations in this table are not limited to funds from the HTF, but also include highway-related obligations financed from the General Fund, principally highway construction by other Federal agencies. Because obligations exceed highway user revenues in this table, revenue-cost ratios at the Federal level are lower for all vehicle classes than in other tables in this report that only include highway programs funded from the HTF.

For Federal and State programs combined, passenger vehicles, single unit trucks, and combinations all pay approximately their share of highway-related costs in the aggregate. Single unit trucks as a group pay slightly more than their cost responsibility while combinations pay slightly less than their highway costs overall. As for previous analyses of Federal equity ratios, there are significant differences in revenue-cost ratios for vehicles at different weights.

Differences in Federal and State user fee structures lead to differences in revenue-cost ratios for specific vehicle classes at the two levels of government. For instance, single unit trucks as a group pay less than their share of highway costs at the Federal level, but more than their share of costs at the State level. Differences are particularly large for the lightest single unit trucks that pay 2.2 times their cost responsibility on average at the State level, but pay Federal user fees that are much closer to their cost responsibility. At both the Federal and State levels the heaviest single unit trucks pay only half their highway cost responsibility when all highway program costs are considered. Whereas at the Federal level the heaviest combinations, those over 80,000 pounds, pay only about 60 percent of total cost responsibility, at the State level those vehicles pay approximately their proportionate share of highway costs. The relatively good equity ratios at the State for combination trucks registered at over 80,000 pounds can be attributed to the fact that a few States have more carefully tailored their tax structure to reflect cost responsibility and allow combinations to operate over 80,000 pounds while charging user fees related to their cost responsibility. A few States regularly adjust their tax structures to reflect cost responsibility, and these States tend to focus equity comparisons on heavy vehicles and equity between trucks and competing modes of transportation.

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