CBO Studies Cost Effectiveness of Increasing CAFE Standards, Gasoline Taxes
(December 24, 2003) – The Congressional Budget Office (CBO) released a report, entitled The Economic Costs of Fuel Economy Standards Versus a Gasoline Tax, in which the Office examines three possible scenarios for reducing oil and gas consumption while reducing air pollution. For the purposes of the study, a 10-percent reduction in gasoline consumption was used as the benchmark for comparing the costs of the scenarios. Under the first scenario, CBO found that increasing fuel economy standards to 31.3 miles per gallon (mpg) for passenger cars and to 24.5 mpg for light trucks would cost consumers and producers an additional $3.6 billion (current CAFE standards require a fleetwide average of 27.5 mpg for cars and 20.7 mpg for light trucks). Under the second scenario, increased fuel economy standards were combined with credit trading; this scenario reduced the cost to consumers and producers by about 16 percent, to about $3.0 billion per year. Under the last scenario, CBO examined the cost effectiveness of increasing the gasoline tax, finding that this would achieve the 10-percent reduction in gasoline consumption at the lowest cost to consumers and producers, $2.9 billion per year, or 3 percent less than the cost of increased CAFE standards with trading and 19 percent less than the cost of increased CAFE standards without trading.

Although every state levies a gas tax and depends on it as an essential funding source to pay for transportation projects and programs, many citizens and professionals still find the gas tax confusing and contentious. The confusion results in part from differences in the state rules governing the imposition, rate, and administration of the tax. Further complicating the debate is the fragmented nature of the tax.

To help dispel this confusion and controversy, this paper undertakes to describe the use of federal and state gas taxes, and assess their impacts on state and local transportation systems and funding. To that end, the paper describes the history of the taxes, details the rules governing the use of associated revenues in every state, and assesses the flow and distribution of gas tax revenues at the federal, state, and local levels. At the end the paper considers various ways to improve the current use and distribution of gas tax revenues to support the development of more balanced, multi-modal transportation networks.

For many years, the mainstay of highway finance in the United States has been the motor fuel tax. This mechanism for assessing road user charges has certain advantages, perhaps the greatest of which is that the tax is roughly proportional to the distance traveled. Some would argue that it is functionally invisible because motorists generally respond to the total price of a gallon of fuel, not to the tax component of this price.

The times are changing. In an effort to help the U.S. become more energy independent and to improve the air quality in our cities, the auto industry and the federal government are working cooperatively to design a new generation of vehicles that are either hybrid-a combination of electric and conventional internal combustion power-or are powered by hydrogen fuel cells. Several auto manufacturers also are experimenting with internal combustion engines powered by hydrogen. Various prototype vehicles have performed favorably in early testing, and several hybrid vehicles already have entered the marketplace.

It will be a few years before vehicles with these new propulsion systems become prevalent enough to severely impair motor fuel tax revenues, but the day almost certainly will come. Thus, this is a propitious time to explore a new approach to assessing road user charges-one that will accommodate vehicles with any of the possible propulsion technologies. This research has been carried out to develop such a new approach.

This TCRP report is a valuable resource for people who are responsible for financing public
transportation capital projects. The primary objective of this primer is to identify and evaluate financing options for public transportation capital projects. Although the emphasis of the primer is on approaches that take advantage of access to the public capital markets, the document also addresses the tradeoffs of pay-as-you-go approaches versus approaches that borrow against future resources. The research results will be of particular interest to transportation agencies that plan and finance public transportation infrastructure, vehicles, and other capital projects. Other audiences for this report include policymakers, transit board members, and other transportation professionals.

The primer is organized to provide a wide-ranging audience with easy access to the information they need most regarding capital financing for public transportation. The primer includes descriptive sections that outline the basic financing approaches and structures available to transit systems, as well as sections that help system managers and public officials decide when it is most appropriate to apply alternative financing techniques.

The Oregon Innovative Partnerships Program (OIPP) is forming to develop transportation projects for solicitation of private sector proposals for partnership and to respond to proposals initiated by private firms and units of government. From September 2003 through mid-2004, the Innovative Partnerships Unit (IPU) will develop proposed administrative rules and operating procedures, determine how to identify eligible transportation projects, develop protocols for risk assessment and management, develop criteria for pre-qualifying potential partners, develop public involvement and outreach processes and integrate the IPU within ODOT. ODOT also will contract with an assortment of expert consultants to assist the IPU in development of projects and RFPs, evaluation of proposals, negotiation of public-private agreements and management of public-private initiatives.

As well as the gas tax has served the road needs of Oregonians in the past, it will soon become a declining revenue source. The Road User Fee Task Force is charged with the duty of designing a new revenue collection system for road funding to ultimately replace the gas tax. Oregon will be well served in finding a solution to this concern before it becomes an emergency.

Provides $500 million for 173 construction projects that will improve pavement conditions, increase lane capacity and improve bridges throughout Oregon. Many projects are already under way, and all OTIA projects will be delivered during the eight-year life of the program.

OTIA was passed by the 2001 Oregon Legislative Assembly and is funded through bond proceeds derived from increased DMV fees. Projects were selected with extensive input from local communities and other stakeholders.

A complex partnership between many governmental bodies, continually influenced by numerous private, corporate, and civic interests, finances our nation’s transportation system. But the nature of the partnership is changing. Originally offset by a variety of user fees, such as tolls and fuel taxes, the burden of financing transportation programs is gradually being shifted to local governments and voter-approved initiatives. This shift to local transportation taxes raises interesting issues for public policy. This brief dissects the arcane and complicated system of transportation funding by describing the relationships that define the federal,state and local roles. It summarizes the most pressing problems facing the transportation network, and argues that expanded reliance on user fees remains the most promising way to promote equity and efficiency in transportation finance.

The New York City Independent Budget Office has prepared an excellent primer on tax increment financing (TIF). The primer describes how TIFs work, key feature of the laws that authorize them, the types of project they support, reasons for their popularity, and a review of how they have worked in locations around the country. The report concludes with a discussion of the use of TIF for financing the proposed extension of the Number 7 subway line in New York City.

This policy brief summarizes the extent of funding and program authority metropolitan areas are currently afforded under TEA-21. This brief does so by examining the evolution of metropolitan transportation decision making and the role of metropolitan areas under current law. In the end, it argues that federal transportation law needs to expand existing funding sources and decision making to allow metropolitan areas to fulfill the promises of previous reform efforts and to maintain a transportation system that works for 21st century metropolitan America.

This report by the New York City Independent Budget Office investigates the implementation of tolls on the four East River Bridges and nine Harlem River Bridges owned and maintained by the city. The possibility of tolling these bridges has come and gone with varying degrees of intensity for the past few decades. Sometimes the primary motivation has been the management of traffic congestions, other times – such as the Bloomberg Administrations 2002 proposal – it has been fiscal. The report answers the following questions:

1. How much revenue would be generated
2. Who would pay? Who would bear the burden of tolls, by place of residence and household income
3. What are the options for exempting city residents? How much revenue would be foregone if city residents were exempt?

This study reviews and analyzes new transportation financing options that may provide the Commonwealth of Kentucky with innovative ways to supplement or leverage funds from traditional sources. The need for the study stems from Kentucky’s growing challenge to fund its transportation needs with the current stream of taxes and fees. The examination focuses on selected financing options suggested by the Federal Highway Administration, including the TE-045 Program, SIBs, GARVEE Bonds, grant anticipation tools, the TIFIA program, and public-private partnerships. While most of these options are designed to address highway improvement, the study also considers how these innovations might be applied to transit, freight, and intermodal projects, thereby connecting the roadway system to other transport modes.

The ECMT's Group on Fiscal and Financial Aspects of Transport has assessed the gap between current structures and levels of taxation and an efficient ideal that includes the internalization of the external costs of transport. This was done by modeling an efficient set of charges and taxes in five countries for comparison with charges actually in vigor.

ECMT has also developed a methodology, and analyzed data on 16 countries, for making meaningful international comparisons of national systems of transport taxes and charges and their relation to taxes on labor and capital investment, focusing on road haulage. This enables the impact of taxation on the competitiveness of haulage industries to be assessed. An interactive data base is available on this site.

The results of this analysis, together with the work modeling optimal transport charges is presented in the publication "Reforming Transport Taxes."

In a major step toward improving Highway finance data quality, the Office of Highway Policy Information (HPPI) of the Federal Highway Administration (FHWA) has recently introduced a "Smart Input Tool" to collect data currently reported by the States on FHWA Forms 531 and 532. The "Smart Input Tool", which has been successfully piloted in several States in 2002, is the first step in a "Highway Finance Smart System". The system will incorporate data quality principles and technology through the entire data process. States are expected to submit their Forms 531 and 532 for Highway Statistics 2002 using this new tool. HPPI is providing training for States to make a smooth transition to the "Smart Input Tool".

This report contains selected information on toll facilities in the United States. The information is based on a survey of facilities in operation, financed, or under construction as of January 1, 2003.