- Belfer Center for Science and International Affairs, Harvard Kennedy School Belfer Center Newsletter

Transportation Revenue Options: Infrastructure, Emissions, and Congestion

| Winter 2010-11

This recent discussion paper from the Energy Technology Innovation Policy (ETIP) research group is a summary of discussions from the Belfer Center's May 2010 workshop "Transportation Revenue Options," which brought together 27 transportation experts for a two-day workshop to discuss revenue-generating options such as higher fuel taxes, fees collected based on vehicle miles traveled (VMT), and congestion fees on major roadways.

The paper, by Edward Huang, former ENRP/ETIP research fellow, Henry Lee, director of the Environment and Natural Resources Program (ENRP), Jose Gomez-Ibanez, ENRP faculty affiliate, and Grant Lovellette, examines three main categories of user charges: charges based on fuel consumption, on distance traveled, and on congestion levels. It explores the financial and environmental advantages and disadvantages of each option and then discusses a number of pressing policy questions.

Policymakers have dealt with funding gaps in various ways, though rarely by raising gasoline taxes and other user fees, which is perceived as politically unpopular. Instead, despite growing budgetary problems, state and federal governments have reached into their general funds to fill this gap.  Some states have also issued bonds or raised sales taxes through local referenda approved by voters. As a result, an increasing share of transportation funding comes from nonusers and, to some extent, from future citizens who will have to repay the money borrowed to cover today's transportation costs.

Recognizing the tradition of the user fee principle, numerous studies have proposed alternatives to replenish transportation funds, such as raising gasoline taxes or, in light of rising fuel economy, charging motorists according to the number of miles they drive. Meanwhile, a growing number of stakeholders advocate funding options that also advance other objectives such as congestion fees or carbon taxes. While these other objectives are important, they inevitably complicate-and politicize-the debate on how to fund the nation's transportation infrastructure.

The current system of fuel taxes still has the potential to generate large sums of revenues while reflecting many of the infrastructure and environmental costs of driving, but this is only true if fuel tax rates can be indexed to reflect changes in inflation, fuel economy, and environmental externalities such as greenhouse gas emissions. In the long run, however, this system is unlikely to be sustainable and VMT fees will be needed as gasoline tax revenues decline.

The workshop determined that while changing policies is difficult, especially while the economy is weak, policymakers should take some initial steps, such as redefining the roles of federal and state governments and promoting research and demonstrations of VMT and congestion fees, to ensure that these options are well understood and, when chosen, ready to succeed.

See full text at: http://belfercenter.org/TransportationRevenue/

For more information on this publication: Please contact the Belfer Communications Office
For Academic Citation: Swanson, Amanda. Transportation Revenue Options: Infrastructure, Emissions, and Congestion.” Belfer Center Newsletter (Winter 2010-11).