The gas tax in Maryland

It often asserted that cyclists don't belong on the road because they don't pay the gas tax, or that they should start to pay for it like drivers do. Frequent commenter SJE points out that the Maryland DOT 2014 budget overview shows - again - how wrong this is. 

In 2012, gas tax brought in $734M, out of the total $2,830M revenue. MDOT spent $2,864M. So the 2012 gas tax covered 25.6% of MDOT expenditures. Barely a quarter. Its certainly not a golden good funding other activities, as some assert.

Does it even cover roads? Lets take out aviation, ports and WMATA costs (bikes are so small they don't even make it) which account for 31% of MDOT costs (see page 13). Lets say 33%. So, 25.6% of in the income divided by 66% of the costs: Gas tax therefore covers about 39% of road-related costs paid by MDOT.

Where does the money come from then?
Top source was "corporate income, registration, misc MVA fees" ($795M). "Titling taxes" were $632M. So the state is already not collecting most of its transportation income as a user fee (gas tax) but through various other taxes on other activities. You do far more to pay for the roads when you buy a car than through the gas tax.

Estimates for 2103 put the gas tax at 18% of MDOT revenue, and so the rise in gas tax is still not covering a whole lot of MDOT budget.

Car owners do cover the majority of the budget for MDOT, but as is often noted - most cyclists are also car owners. In fact the more a car owner users their bike instead of their car, the more the subsidize everyone else. And even non-car owning cyclists pitch in through other taxes (enough to cover their share of the road I suspect). 

 

Comments

[T]

Sort of. A 1/4 of the other from that DLS report is federal dollars. Bonding is 10% too. 5% is rental car fees/taxes. So if you remove those from the equation gas tax is roughly 50%. Not that I think they have a valid argument.

Drivers real argument should be with farebox recovery, that is the amount that mass transit users pay toward the actual cost of their ride.

Hypothetically, each biker who totally swears off driving (doesn't really happen) represents a small slight negative to the pie. They're also not utilizing the roads therefore the maintenance fee goes down some. However, each driver who switches to using mostly mass transit is removing gas tax dollars AND costing more since the majority of their ride is subsidized. So they end up being a double whammy.

Hence, smart drivers wouldn't argue with the cyclists and would rather demand farebox increases on par with gas tax increases as a matter of fairness. (The argument against the drivers is that their congestion is reduced therefore they should support it or the environmental impact costs).

[SJE]

T: why do you removed these other elements? Rental cars are complicated, but not the others: Marylanders pay federal taxes, and pay for the bonds too.

Transit is an issue worth raising and I agree that we should be smarter and more cost effective with our transit system. But do we subsidize transit more than subsidizing private road use? Metro trains have a higher cost recovery than the gas tax on private cars. Transit also has better positive externalities that justify some funding: like taking thousands of cars off the road.

[darren]

SJE - i haven't seen the report, but the Fed revenue is likely highway grant funding, which derives mostly from Fed gas tax. As such, i'd say it's warranted to exclude it, as it is a user fee that's paid, just not directly to the state.

I would NOT exclude bonding revenue from the mix, however. Every dollar bonded for roads takes a dollar from a state's capacity to borrow for other things (schools, parks, etc).

Demanding fare increases from transit riders simply shifts costs back to the roads, as higher prices beget lower ridership beget more road users beget higher direct and indirect costs of roads

[SJE]

Darren: It would be justified to take out Fed revenue if the Fed revenue was from a Fed gas tax. But the Fed tax also doesnt cover half the costs.

Regarding transit: you could save money by removing every other bus stop and focus on transit along main routes. People would have to walk a little more.

[T]

I wouldn't say we subsidize mass transit more than roads in total dollars, but in percentages of dollars in versus dollars out--we certainly do. And encouraging mixed used development at Metro facilities, ie, creating mass transit users sans cars, does not fit into the transportation funding model all that well. The gas tax really doesn't make a lot of sense the way it's structured.

It would probably make more sense to eliminate a fuel tax or greatly reduce it while increasing an income-based tax to cover the rest. That way the more income you have, the more money and presumably, the more use, but you divi it up how the population wants it rather than trying to create loss leaders out. Plus, you don't have to worry about the issue of vehicle efficiency's depleting your funding mechanism.

People get too caught up in the what they like versus what works the best. It's nice to have an underground Metro. It's also expensive and we're still not paying the true cost or even remotely close. So move to a system that either closes the cost gap or changes the funding model. Wallah.

[darren]

SJE, there's a bit of circularity problem with your assertion "Fed tax also doesnt cover half the costs". The "half" usually cited is systemwide, meaning that user fees from all sources only cover half the costs of entire surface transpo system.

Federal money for roads, received by the states, DOES come largely from the Federal gas tax (with some occasional help from the general fund).

[contrarian]

Hypothetically, each biker who totally swears off driving (doesn't really happen) represents a small slight negative to the pie.

This is only true if the roads are not capacity-limited. If congestion is to the point where each additional driver slows every other driver, then removing drivers improves the roads for everyone who remains. As does public transportation. I've read that the biggest political support for public transportation comes not from people who expect to use it, but from people who expect others will use it and traffic will improve.

On a different note, this is the first time I've seen titling taxes broken out. Note that in Maryland, the rate for motor vehicles, 6%, is exactly the same as the sales tax on bicycles.

[JimT]

@T Hypothetically, each biker who totally swears off driving (doesn't really happen) represents a small slight negative to the pie.

I'd say a tiny tiny tiny negative to the pie. The gas tax is now about 26 cents per gallon, so someone who buys 500 gallons spends about $1800/year and pays about $130/year in gas tax.

If they instead spent that $1800/yr on restaurant meals and parts at the local bike shop, they would pay an extra $108 in sales tax, so the gas tax is really only costing $22/yr.

[JimT]

@T: I agree with your point that mass transit gets a larger subsidy. On average nationwide, the subsidy is about 20 cents per mile. By contrast, drivers get a subsidy of about 2 cents per mile, if we assume that drivers pay for about half the cost of the roads.

This is a reasonable decision by government, because otherwise highway construction costs might be even greater or economies would suffer due to worsening transportation logistics; and the reduced air pollution is worth something as well.

Shifting the costs of transportation away from the users of transportation sends markets the wrong signal. If we rely less on the gas tax, the additional costs should instead be picked up by tolls, congestion fees, and VMT taxes. A wealthy person who walks everywhere may well pay a higher property tax for the priviledge of living in a place where she can walk everywhere, but she ought not be responsible for the roads on which others choose to rely.

[SJE]

Darren:
Thats a good point. It is hard to break it down with all the cost shifting. Do you have a source for that information regarding the Fed tax?
Simon

[JimT]

P.L. 112-141

The federal gas tax is about 19 cents per gallon.

Unlike the state gas tax, it does not replace a different sales tax so the revenues from the federal gas tax represent true payments rather than the accounting fiction of the state gas tax.