Thursday, June 16, 2011

Subsidizing Transportation

Hop into your car. Get behind the wheel, start 'er up, and pull away.

You're in control. You're the classic (cliched?) free American, out there on the open road, going where you please, alone with your thoughts or whatever radio program/CD/podcast/app you chose. Yeah, you have to obey the speed limit (sort of) and stop at red lights and stop signs. For the most part, though, you're independent, sovereign, autonomous. Right?

Wrong. Actually, what you are is: government-subsidized.

The car owner, driver, or even passenger is as dependent on government largesse as is the Midwestern grain farmer (and quite a few Vermont dairy farmers) or the welfare recipient. No automobile driver or passenger pays the total cost of his or her ride.

If auto users did pay the full costs of building, maintaining, and protecting roads as well as for what economists call the "externalities" of their transportation system, gas taxes and/or vehicle registration fees would be much higher, or more roads and bridges would charge tolls, or some combination of the above.

This may come as a surprise, but the Vermont Agency of Transportation knows all this, and is thinking about (though not yet proposing) taking some of those steps.

The reason it might be a surprise is that for decades, state transportation departments have been essentially highway departments, singing praises of the highway. Now Vermont's Transportation Agency envisions a state in which "people will have to use their cars less."

So said Deputy Transportation Secretary Sue Minter, who acknowledged that one way to get people to use their cars less is to have them pay more for using them. She said the Agency wants more Vermonters to take the bus to work, more kids to walk or bike to school (partly to fight the growth in childhood obesity), and is even "looking at selling roads and bridges to the private sector."

Watch the full interview with Deputy Transportation Secretary Sue Minter

That last one is not about to happen. Neither is charging tolls on the new Champlain Bridge when it opens later this year. But the very fact that Agency officials thought about tolls, and that Minter volunteered the information, indicates that the state's top transportation officials are aware that the status quo of subsidizing car use may not be sustainable.

Not that the status quo is necessarily undesirable. This report is an explanation, not an expose. If there is an "enemy" in this account, "he is us," in the famed words of Walt Kelly's Pogo. Most adults drive, so most taxpayers are subsidizing themselves. Event those who neither drive nor ride buy goods trucked to the store over the public highways. To say that government subsidizes those highways might say nothing more than that government helps organize and pay for our entire economic system.

It does, loath though some are to acknowledge this reality.

Still, if heavily subsidizing auto traffic is not a malicious conspiracy, it is a policy choice, and one peculiar to the United States. In other prosperous countries, the driver/car-owner pays far more for the privilege.

In Germany, for instance, it costs more than $2,000 just to get a drivers license. Applicants first have to complete driving lessons offered by private schools. In Vermont, an adult need only pass a driving and written test. Applicants under 18 do have to take driving lessons, but they are offered – free – in many high schools. German license fees and auto sales taxes are also higher, and gasoline taxes are higher in almost every other "first world" country than in the U.S.

The Germans, according to a 2009 study done for the Brookings Institution Metropolitan Policy Program, set their policies deliberately to encourage the use of public transportation and discourage driving. It works, according to the study. American policy-makers don't actually say that they follow the opposite path to encourage more auto use. But it seems to work out that way.

In the view of some experts, though, it may not be able to work out that way for long.

"I don't think it's sustainable," said Justine Sears, lead author of the Vermont Transportation Energy Report released annually by the Vermont Clean Cities Coalition and the University of Vermont's Transportation Research Center, where Sears is a research specialist. "It's expensive. It's inconvenient, and it's the number one cause of greenhouse gas emissions."

Sears acknowledged, though, that "there's a tension that exists" in Vermont between her vision of sustainability and many a Vermonter's dream of living "in some farmhouse ten miles from town." But, she said perhaps people who do that "should be paying a truer cost."

Watch the full interview with Justine Sears.

The exact true - as opposed to "truer" - cost of the auto subsidy, either in the aggregate or per car-owner, is all but impossible to determine. But in the aggregate it is surely in the tens of billions of dollars nationally. More than 15 years ago, a study by the World Resources Institute, limited only to the cost of highway construction and maintenance, estimated that the general revenue subsidy exceeded $20 billion.

By that standard, Vermont would appear to be a low-subsidizing state. Through user fees - the state gasoline tax and license and registration fees -Vermont drivers pay for the entire cost of building, maintaining, and patrolling the state's highways. In fact, they pay more than the entire cost, also financing the aviation, railroad, and public transportation functions of the Agency of Transportation.

Altogether, the user fees – plus a smidgen from a jet fuel tax and railroad leases – will bring an estimated $273.4 million into the state's "T-Fund" for the coming fiscal year (2012), according to Neil Schickner, the transportation expert at the Legislature's Joint Fiscal Office.

From that total, roughly $25 million is transferred to the Education Fund, and another $25 million to the Department of Public Safety. But that doesn't mean motorists are subsidizing schools or cops. Schools spend $53 million on buses, and the Department of Public Safety's State Troopers patrol the highways.

The T-Fund does not send any money to the courts, though a substantial (if uncountable) percentage of the time and expenses of the court system are spent on traffic cases.

But, along with some $322 million from the Federal Government (mostly from the federal gasoline tax), the Fund does finance all the costs of the Agency of Transportation.

So even taking into account the $4 million from the General Fund for the operating expenses of the Interstate rest areas, how does it work out that the general taxpayer is supporting the cars, trucks, and the roads on which they travel? If anything, it would seem to be the motorists who are subsidizing the other modes of transportation.

But only on the state level. Local government in Vermont also spends millions to keep the cars and trucks rolling. According to the U.S. Census Bureau's most recent Census of Governments State and Local Finances, in 2006-07, Vermont's localities spent more than $161.1 million of their own taxpayers money plowing, smoothing, sanding, salting, and clearing roads.

That seems like an awful lot of money. But Steven Jeffrey of the Vermont League of Cities and Towns said it made sense.

"Our municipal property taxes bring in $330 million," he said, "and about 60 percent of town expenses are for roads."

There's a certain amount of equity here. The owner is paying to be able to get to and from his own property. Still, it is general revenue going to support the road system.

Then there are the externalities.

An externality is what economists call a cost which is not covered by the price of a product, and which is borne by people who had nothing to do with making, selling, or buying the product. When it comes to motor vehicles, the biggest externality by far is air pollution. The car buyer, of course, pays the cost of the pollution controls in the car. But beyond that, state and federal government spend billions to reduce air pollution.

Not in Vermont, where not one penny of the cost of controlling air pollution from motor vehicles comes from the General Fund, according to Tom Moye, chief of the Mobile Sources Section of the Department of Environmental Conservation's Air Pollution Division.

But because auto-caused air pollution can only be reduced, not eliminated, another externality is the cost of treating those who get sick from the pollution that oozes through the government regulatory systems, plus the lost productivity stemming from those illnesses.

Trying to figure out exactly how much all this costs is close to impossible. Dr. Austin Sumner, the epidemiologist for Vermont's Health Department, said the most common health consequence of air pollution is asthma. Over the ten-year period ending in 2006, he said, the cost of asthma hospitalizations in Vermont "when asthma was the primary diagnosis," was about $23 million. Where asthma was just part of the diagnosis, it was more than $300 million.

But he said it would be "grossly wrong" to assign all that cost to air pollution in general, much less the percentage of the state's air pollution that comes from auto emissions. The root cause of asthma, he said, may be genetic.

But it would seem to be about as wrong to deny that motor vehicle emissions contribute to the cost of treating asthma. There is a "growing body of evidence," Dr. Sumner said, that "diesel exhausts may actually contribute to the development of asthma."

Then, of course, there is global warming, which has been called "the greatest example of market failure" ever, with incalculable costs to both the public and private sectors. Cars and trucks are not the only cause of greenhouse gas emissions, but Sue Minter said "the transportation sector is the largest contributor."

OK, now pull over and park.

In most of Vermont, parking is free. That means it's subsidized. The driver is using a piece of public property which has a financial value but for which the driver does not pay. The worker who parks for free at her job site enjoys untaxed employee compensation. Back in 1989, a California scholar estimated that failing to tax this benefit cost governments at all levels $85 billion.

In Vermont, even some of the paid parking does not cover its costs. Steve Goodkind, who heads Burlington's city parking operation, said fees at the city garages cover the operating expenses, but not the capital costs of building the garages. The parking fee does not help amortize that capital investment. Taxes do.

Bon voyage.


  1. finally thoughtful reporting of real issues
    we need to start factoring in the true cost of our decisions in order to make rational choices

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