Where the money goes when you buy a gallon of gas

An overview of the problems electric cars pose for funding road maintenance includes a breakdown of where the money for each gallon of gas goes:

About half goes to the drillers that extract oil from the earth. Just under a quarter pays the refineries to turn crude into gasoline. And around 6 percent goes to distributors.

The rest, or typically about 20 percent of every gallon of gas, goes to various governments to maintain and enhance the U.S. transportation’s infrastructure.

Currently, the federal government charges 18.4 cents per gallon of gasoline, which provides 85 percent to 90 percent of the Highway Trust Fund that finances most on highways and .

State and local government charge their own taxes that vary widely. Combined with the national levy, fuel taxes range from over 70 cents per gallon in high-tax states like California and Pennsylvania to just over 30 cents in states like Alaska and Arizona. The difference is a key reason the price of gasoline changes so dramatically when you cross state lines.

I would guess few drivers have a sense of where money at the gas station goes. Instead, they likely just react to increases or decreases in prices and when prices go up possibly grumble about who is being made rich.

Taxing drivers by mile “unwaveringly unpopular”

Recent surveys suggest Americans do not like the idea of having to pay per mile driven:

The Mineta Transportation Institute, which has polled the public on a variety of tax questions for the past seven years, found that the mileage tax was “unwaveringly unpopular.” In the latest survey, which covered 1,500 people and was released this month, the institute found that support ranged between 23 percent and 48 percent, depending on how the question was framed. More people liked the idea if the mileage tax varied by how much a car pollutes…

According to the latest Mineta survey report, authored by Asha Weinstein Agrawal and Hilary Nixon, which was presented this month at the Commonwealth Club of California, between 31 percent and 75 percent of people supported increasing the gas tax — the higher figure if it was dedicated to maintenance.

While majorities may dislike a tax per mile driven, it sounds like more support could be garnered depending on how the tax is structured. Require each car to be tracked by the government via GPS? Dislike. No breaks for smaller vehicles or more fuel-efficient cars? Dislike. The money collected via the new method of taxation funneled away from road maintenance? Dislike.

In other words, this is likely to happen in the coming years but there will be a lot of negotiations as well as attempts to make this more palatable to voters.

IL legislator drops tax by miles driven plan

Following up on last week’s post, it now appears Illinois will not have a new driving tax anytime soon:

The Illinois Senate president says he will not pursue a proposal to pay for road construction by taxing motorists by the miles they drive.

John Cullerton is a Chicago Democrat. He floated the idea last week because revenue from taxes on gasoline is declining. Cars are more fuel-efficient but they still wear out roads…

Cullerton posted on social media Friday that he intended the plan — which the Executive Committee aired on Wednesday — to spark debate about more efficient ways to fund road-building.

He says he “received a lot of constructive feedback” but will not pursue his plan.

Such a move was likely unpopular but withdrawing the idea doesn’t help the state move closer to the issue: how are roads going to be maintained and improved? Few people like to pay increased costs for infrastructure but they will certainly dislike it if the roads are not in good shape or major repairs cause headaches and future borrowing down the road.

With gas at a relatively cheap point, isn’t it time to at least consider raising the gas tax?

IL lawmaker considering tax by mile proposal

One influential Illinois legislator is looking into taxing drivers per miles driven:

A new proposal to pay for fixing Illinois’ roads could use devices to track how far Illinois drivers have traveled and tax them by the mile.

The plan from Senate President John Cullerton, a Chicago Democrat, is aimed at gasoline tax revenues that have fallen as drivers have bought more fuel-efficient cars…

Drivers, under the plan, could pick whether a device in their cars monitors their miles one of two different ways. Or they could choose to pay the 1.5-cent-per-mile tax on a base 30,000 miles traveled per year, if they have privacy concerns.

One device would track where specifically drivers go and not charge them when they travel out of state or on Illinois toll roads. The other would simply monitor the odometer reading, not tracking the rest of the information.

Illinois drivers would get a refund for gasoline tax costs paid at the pump, Cullerton said. Out-of-state drivers not registered here would pay those taxes as usual.

The article suggests this could come to a vote in a few days but I suspect it will take some time as there are a number of important details to work out. This has been considered elsewhere (see earlier posts here and here involving Oregon) but this seems like a quick move in Illinois. Gas tax revenue has dropped in Illinois in recent years.

These important details might go beyond the technical details and involve trust in politicians. Do Illinois residents trust their own government to (1) track the data properly and (2) refund gas taxes paid at the pump?

Mass transit use down in the Los Angeles area

It can be tough to get Americans to use mass transit. See the case of Los Angeles: billions have been spent in recent years and use is down.

The Los Angeles County Metropolitan Transportation Authority, the region’s largest carrier, lost more than 10% of its boardings from 2006 to 2015, a decline that appears to be accelerating. Despite a $9-billion investment in new light rail and subway lines, Metro now has fewer boardings than it did three decades ago, when buses were the county’s only transit option.

Most other agencies fare no better. In Orange County, bus ridership plummeted 30% in the last seven years, while some smaller bus operators across the region have experienced declines approaching 25%. In the last two years alone, a Metro study found that 16 transit providers in Los Angeles County saw average quarterly declines of 4% to 5%…

The decline suggests that Southern California policymakers are falling short of one of their longtime goals: drawing drivers out of their cars and onto public transportation to reduce traffic congestion, greenhouse gases and the region’s reliance on fossil fuels…

Southern California certainly isn’t alone. Public transportation use in many U.S. cities, including Chicago and Washington, D.C., has slumped in the last few years. But the question takes on new significance in Los Angeles County, where politicians and transportation officials are considering whether to seek another half-cent sales tax increase in November that could raise $120 billion for major transportation projects, including several new rail lines.

Cheap gas is not helping. I’ve been thinking in recent days that if there was any time to increase gas taxes to provide needed money for roads and other transportation projects, now is the time.

More broadly, most Americans seem to want to drive themselves when they can. Even though the total costs of owning a car add up, driving offers status and freedom. In a society where those are two key values, mass transit may not be able to compete when there isn’t the kind of density found in New York City or San Francisco.

Drivers pay less than what the roads cost

One report suggests the gap between what drivers pay and what roads cost continues to grow:

A report published earlier this year confirms, in tremendous detail, a very basic fact of transportation that’s widely disbelieved: Drivers don’t come close to paying for the costs of the roads they use. Published jointly by the Frontier Group and the U.S. PIRG Education Fund, “Who Pays for Roads?” exposes the myth that drivers are covering what they’re using.

The report documents that the amount that road users pay through gas taxes now accounts for less than half of what’s spent to maintain and expand the road system. The resulting shortfall is made up from other sources of tax revenue at the state and local levels, generated by drivers and non-drivers alike. This subsidizing of car ownership costs the typical household about $1,100 per year—over and above the costs of gas taxes, tolls, and other user fees…

There are good reasons to believe that the methodology of “Who Pays for Roads?” if anything considerably understates the subsidies to private vehicle operation. It doesn’t examine the hidden subsidies associated with the free public provision of on-street parking, or the costs imposed by nearly universal off-street parking requirements, which drive up the price of commercial and residential development. It also ignores the indirect costs that come to auto and non-auto users alike from the increased travel times and travel distances that result from subsidized auto-oriented sprawl. And it also doesn’t look at how the subsidies for new capacity in some places undermine the viability of older communities…

The problem with the subsidies currently propping up driving is that they’re often hidden: If they were made more explicit, policymakers would likely rearrange their priorities. The problem of pricing roads correctly is one that will grow in importance in the years ahead. It’s now widely understood that improvements in vehicle fuel efficiency and the advent of electric vehicles is eroding the already inadequate contribution of the gas tax to covering road costs. The business model of companies such as Uber and Lyft likewise hinges on paying much less for the use of the road system than it costs to operate. The problem is likely to be even larger if autonomous self-driving vehicles ever become widespread—in larger cities it may be much more economical for them to simply cruise “free” public streets than to stop and have to pay for parking. The root of many existing transportation problems—and the problems to come—is that the prices are all wrong.

Americans like their cars and policies have reflected that for decades. But, owning the “average” car is not cheap – there are a number of expenses that many drivers would say consume a decent amount of their budget. The real issue may not be increasing the gas tax – and with gas as cheap as it is right now, this would be as good a time as any to fix that – or limiting subsidies. The real goal may need to involve having less need for cars and roads. Having electric cars might help society in some ways but it doesn’t solve the problem of paying for roads (see the pilot programs for a per-mile driven tax). Electric cars may enable sprawl to go on for decades.

In the end, perhaps we need to figure out to build and maintain roads more cheaply…or we are left with two options I imagine a lot of people (not necessarily the same ones) will dislike: getting cars off the road or upping the cost of driving by quite a bit.

Testing a pay-per-mile tax in Oregon

Looking for more revenue, Oregon is starting a test program of paying for miles driven rather than gasoline used:

The program is meant to help the state raise more revenue to pay for road and bridge projects at a time when money generated from gasoline taxes are declining across the country, in part, because of greater fuel efficiency and the increasing popularity of fuel-efficient, hybrid and electric cars.

Starting July 1, up to 5,000 volunteers in Oregon can sign up to drive with devices that collect data on how much they have driven and where. The volunteers will agree to pay 1.5 cents for each mile traveled on public roads within Oregon, instead of the tax now added when filling up at the pump…

Private vendors will provide drivers with small digital devices to track miles; other services will also be offered. Volunteers can opt out of the program at any time, and they’ll get a refund for miles driven on private property and out of state…

Drivers will be able to install an odometer device without GPS tracking.

For those who use the GPS, the state and private vendors will destroy records of location and daily metered use after 30 days. The program also limits how the data can be aggregated and shared. Law enforcement, for example, won’t be able to access the information unless a judge says it’s needed.

 

I suspect a number of governments will be interested in how this test works out. One big hurdle to overcome would seem to be privacy, though government tracking of vehicles may not be far off anyhow (through cell phones, insurance company monitoring devices, black boxes, toll booths/devices, license plate readers, etc.). The argument about deincentivizing electric or hybrid cars doesn’t really hold up because these vehicles still use the roads and add to the maintenance burden. Yet, ultimately this will be about revenue: is this a better model for bringing in the money needed for roads?