TAX AND FEE PAYMENTS BY MOTOR VEHICLE USERS FOR THE USE OF
HIGHWAYS, FUELS, AND VEHICLES
Report # 17 in the series: The Annualized Social Cost of Motor- Vehicle Use in
the United States, based on 1990- 1991 Data
UCD- ITS- RR- 96- 3 ( 17) rev. 1
Mark A. Delucchi
Institute of Transportation Studies
University of California
Davis, California 95616
madelucchi@ ucdavis. edu
www. its. ucdavis. edu/ people/ faculty/ delucchi/
August 2005
August 2006 rev. 1
i
ACKNOWLEDGMENTS
This report is one in a series that documents an analysis of the full social cost of
motor- vehicle use in the United States. The series is entitled The Annualized Social Cost of
Motor- Vehicle Use in the United States, based on 1990- 1991 Data. Support for the social- cost
analysis was provided by Pew Charitable Trusts, the Federal Highway Administration
( through Battelle Columbus Laboratory), the University of California Transportation
Center, the University of California Energy Research Group ( now the University of
California Energy Institute), and the U. S. Congress Office of Technology Assessment.
Many people provided helpful comments and ideas. In particular, I thank David
Greene, Gloria Helfand, Arthur Jacoby, Bob Johnston, Charles Komanoff, Alan
Krupnick, Charles Lave, Douglass Lee, Steve Lockwood, Paul McCarthy, Peter Miller,
Steve Plotkin, Jonathan Rubin, Ken Small, Brandt Stevens, Jim Sweeney, Todd Litman,
and Quanlu Wang for reviewing or discussing parts of the series, although not
necessarily this particular report. Of course, I alone am responsible for the contents of
this report.
ii
REPORTS IN THE UCD SOCIAL- COST SERIES
There are 21 reports in this series. Each report has the publication number UCD- ITS- RR-
96- 3 (#), where the # in parentheses is the report number.
Report 1: The Annualized Social Cost of Motor- Vehicle Use in the U. S., 1990- 1991:
Summary of Theory, Methods, Data, and Results ( M. Delucchi)
Report 2: Some Conceptual and Methodological Issues in the Analysis of the Social
Cost of Motor- Vehicle Use ( M. Delucchi)
Report 3: Review of Some of the Literature on the Social Cost of Motor- Vehicle Use ( J.
Murphy and M. Delucchi)
Report 4: Personal Nonmonetary Costs of Motor- Vehicle Use ( M. Delucchi)
Report 5: Motor- Vehicle Goods and Services Priced in the Private Sector ( M.
Delucchi)
Report 6: Motor- Vehicle Goods and Services Bundled in the Private Sector ( M.
Delucchi, with J. Murphy)
Report 7: Motor- Vehicle Infrastructure and Services Provided by the Public Sector ( M.
Delucchi, with J. Murphy)
Report 8: Monetary Externalities of Motor- Vehicle Use ( M. Delucchi)
Report 9: Summary of the Nonmonetary Externalities of Motor- Vehicle Use ( M.
Delucchi)
Report 10: The Allocation of the Social Costs of Motor- Vehicle Use to Six Classes of
Motor Vehicles ( M. Delucchi)
Report 11: The Cost of the Health Effects of Air Pollution from Motor Vehicles ( D.
McCubbin and M. Delucchi)
Report 12: The Cost of Crop Losses Caused by Ozone Air Pollution from Motor
Vehicles ( M. Delucchi, J. Murphy, J. Kim, and D. McCubbin)
Report 13: The Cost of Reduced Visibility Due to Particulate Air Pollution from Motor
Vehicles ( M. Delucchi, J. Murphy, D. McCubbin, and J. Kim)
Report 14: The External Damage Cost of Direct Noise from Motor Vehicles ( M.
Delucchi and S. Hsu) ( with separate 100- page data Appendix)
Report 15: U. S. Military Expenditures to Protect the Use of Persian- Gulf Oil for Motor
Vehicles ( M. Delucchi and J. Murphy)
iii
Report 16: The Contribution of Motor Vehicles and Other Sources to Ambient Air
Pollution ( M. Delucchi and D. McCubbin)
Report 17: Tax and Fee Payments by Motor- Vehicle Users for the Use of Highways,
Fuels, and Vehicles ( M. Delucchi)
Report 18: Tax Expenditures Related to the Production and Consumption of
Transportation Fuels ( M. Delucchi and J. Murphy)
Report 19: The Cost of Motor- Vehicle Accidents ( M. Delucchi)
Report 20: Some Comments on the Benefits of Motor- Vehicle Use ( M. Delucchi)
Report 21: References and Bibliography ( M. Delucchi)
There are two ways to get copies of the reports.
1). Most reports are posted as pdf files on Delucchi’s faculty page on the UC Davis ITS
web site: www. its. ucdavis. edu/ people/ faculty/ delucchi/.
2). You can order hard copies of the reports from ITS:
A. fax: ( 530) 752- 6572
B. e- mail: itspublications@ ucdavis. edu
C. ITS web site: http:// www. its. ucdavis. edu
D. mail: Institute of Transportation Studies, University of California, One Shields
Avenue, Davis, California 95616 attn: publications
For general information about ITS, call ( 530) 752- 6548.
ITS charges for hard copies of the reports. The average cost is $ 10 per report. You
can get a cost list before hand, of course. Or, you can have them send the reports
with an invoice.
iv
LIST OF ACRONYMS AND ABBREVIATIONS AND OTHER NAMES
The following are used throughout all the reports of the series, although not necessarily
in this particular report
AER = Annual Energy Review ( Energy Information Administration)
AHS = American Housing Survey ( Bureau of the Census and others)
ARB = Air Resources Board
BLS = Bureau of Labor Statistics ( U. S. Department of Labor)
BEA = Bureau of Economic Analysis ( U. S. Department of Commerce)
BTS = Bureau of Transportation Statistics ( U. S. Department of Transportation)
CARB = California Air Resources Board
CMB = chemical mass- balance [ model]
CO = carbon monoxide
dB = decibel
DOE = Department of Energy
DOT = Department of Transportation
EIA = Energy Information Administration ( U. S. Department of Energy)
EPA = United States Environmental Protection Agency
EMFAC = California’s emission- factor model
FHWA = Federal Highway Administration ( U. S. Department of Transportation)
FTA = Federal Transit Administration ( U. S. Department of Transportation)
GNP = Gross National Product
GSA = General Services Administration
HC = hydrocarbon
HDDT = heavy- duty diesel truck
HDDV = heavy- duty diesel vehicle
HDGT = heavy- duty gasoline truck
HDGV = heavy- duty gasoline vehicle
HDT = heavy- duty truck
HDV = heavy- duty vehicle
HU = housing unit
IEA = International Energy Agency
IMPC = Institutional and Municipal Parking Congress
LDDT = light- duty diesel truck
LDDV = light- duty diesel vehicle
LDGT = light- duty gasoline truck
LDGV = light- duty gasoline vehicle
LDT = light- duty truck
LDV = light- duty vehicle
MC = marginal cost
MOBILE5 = EPA’s mobile- source emission- factor model.
MSC = marginal social cost
MV = motor vehicle
NIPA = National Income Product Accounts
NOx = nitrogen oxides
NPTS = Nationwide Personal Transportation Survey
OECD = Organization for Economic Cooperation and Development
v
O3 = ozone
OTA = Office of Technology Assessment ( U. S. Congress; now defunct)
PART5 = EPA’s mobile- source particulate emission- factor model
PCE = Personal Consumption Expenditures ( in the National Income Product Accounts)
PM = particulate matter
PM10 = particulate matter of 10 micrometers or less aerodynamic diameter
PM2.5 = particulate matter of 2.5 micrometers or less aerodynamic diameter
PMT = person- miles of travel
RECS = Residential Energy Consumption Survey
SIC = standard industrial classification
SOx = sulfur oxides
TIA = Transportation in America
TSP = total suspended particulate matter
TIUS = Truck Inventory and Use Survey ( U. S. Bureau of the Census)
USDOE = U. S. Department of Energy
USDOL = U. S. Department of Labor
USDOT = U. S. Department of Transportation
VMT = vehicle- miles of travel
VOC = volatile organic compound
WTP = willingness- to- pay
vi
TABLE OF CONTENTS
ACKNOWLEDGEMENTS................................................................................................... i
REPORTS IN THE UCD SOCIAL- COST SERIES.................................................................. ii
LIST OF ACRONYMS AND ABBREVIATIONS AND OTHER NAMES .................................. iv
TABLE OF CONTENTS .................................................................................................... vi
17.1 INTRODUCTION..................................................................................................... 1
17.1.1 Background............................................................................................ 1
17.1.2 Overview of the report.......................................................................... 1
17.1.3 Previous studies .................................................................................... 2
17.1.4 The contribution of this analysis.......................................................... 3
17.1.5 The purpose of estimating user payments ......................................... 4
17.2 CLASSES OF TAXES AND FEES AS POTENTIAL USER PAYMENTS
TOWARDS MOTOR- VEHICLE INFRASTRUCTURE AND SERVICES ............................. 7
17.2.1 Classes A1 and A2: special taxes and fees targeted to
vehicles and fuels .................................................................................. 8
17.2.2 Class B: selective taxes .......................................................................... 8
17.2.3 Classes C1 and C2: general taxes and general- tax
subsidies................................................................................................. 8
17.2.4 Classes of government expenditures.................................................... 9
17.3 WAYS OF COUNTING TAXES AND FEES AS MOTOR- VEHICLE- USER
PAYMENTS............................................................................................................. 10
17.3.1 Way of Counting # 1: Targeted taxes and fees and
direct expenditures, FHWA method ................................................. 11
17.3.2 Way of Counting # 2: All targeted taxes and fees and
direct expenditures related to motor- vehicle use ............................ 12
17.3.3 Way of Counting # 3: All targeted and some
nontargeted taxes and fees, all direct and indirect
expenditures related to motor- vehicle use........................................ 12
17.3.4 Way of Counting # 4: “ Marginal Changes”....................................... 15
17.3.5 Tabulation of taxes and fees and ways of counting
them...................................................................................................... 16
17.3.6 Mapping the payment categories used here into the
FHWA classification ( Way # 1 of counting)....................................... 18
17.4 SPECIAL TAXES AND FEES LEVIED ONLY ON MOTOR FUELS,
MOTOR VEHICLES, DRIVERS, AND SO ON ............................................................. 19
17.4.1 FHWA- estimated federal, state, and local tax, license,
and toll payments by highway users................................................. 19
17.4.2 Interest earnings on payments invested to cover
highway and other capital.................................................................. 19
17.4.3 Highway- user revenue and road tolls dedicated to
nonhighway purposes ........................................................................ 24
17.4.4 Payments that go towards the cost of collecting and
administering motor- fuel taxes.......................................................... 24
17.4.5 Property- tax- like fees specifically related to motor-vehicle
use............................................................................................ 26
17.4.6 The amount extra that highway users would have
paid in 1991 had the October 1993 $ 0.043/ gallon
vii
increase in the Federal excise tax, and other increases
in state and local excise taxes, been in effect..................................... 30
17.4.7 The amount extra that would have been collected had
there been less, or no, tax evasion...................................................... 30
17.4.8 Air- quality and other environmental fees on motor
vehicles................................................................................................. 30
17.4.9 Environmental excise taxes on petroleum ........................................ 31
17.4.10 Gas- guzzler taxes, luxury taxes, CAFE fines, and
other minor taxes................................................................................. 32
17.4.11 Traffic fines and parking fines.......................................................... 33
17.4.12 Public parking fees and all parking taxes...................................... 37
17.4.13 Miscellaneous taxes and fees that I might count as
user payments for MVIS but that FHWA does not. ........................ 38
17.5 SELECTIVE TAXES AND FEES ON SOME COMMODITIES AND
ACTIVITIES, INCLUDING SOME RELATED TO MOTOR- VEHICLE USE ..................... 41
17.5.1 Background........................................................................................... 41
17.5.2 Severance taxes.................................................................................... 41
17.5.3 Selective property taxes on motor vehicles........................................ 44
17.5.4 Selective sales taxes on motor vehicles............................................... 45
17.5.5 Other selective taxes and fees related to the use of
motor vehicles or motor fuels............................................................. 46
17.6 GENERAL SALES, INCOME, AND PROPERTY TAXES LEVIED ON A
WIDE RANGE OF COOMMODITIES AND ACTIVITIES, INCLUDING
THOSE RELATED TO MOTOR- VEHICLE USE ........................................................... 47
17.6.1 Theoretical background...................................................................... 47
17.6.2. General sales taxes on retail sales of vehicles, fuels,
and parts; wholesale of vehicles and parts; and
automotive services............................................................................. 49
17.6.3. Corporate income taxes paid by motor- vehicle
related industries................................................................................. 58
17.6.4. Personal income taxes paid by employees in motor-vehicle
related industries.................................................................... 58
17.6.5. General property taxes paid on motor vehicles and
motor- vehicle garages, and by motor- vehicle related
industries.............................................................................................. 62
17.6.6 Tax expenditures ................................................................................. 69
17.6.7 The portion of sales- tax, corporate- income- tax , and
personal- income- tax payments that go towards
motor- vehicle related transportation services .................................. 72
17.7 SUMMARY OF RESULTS AND CONCLUSION .......................................................... 74
17.7.1 Review.................................................................................................. 74
17.7.2 The results............................................................................................ 75
17.7.3 Payments versus expenditures, 1989 to 2002.................................... 76
17.7.4 Summary of results ............................................................................ 76
17.7.5 Conclusion ........................................................................................... 77
17.8 REFERENCES ........................................................................................................ 79
TABLE 17- 1. GOVERNMENT TAXES, FINES, AND FEES RELATED TO MVIS IN
THIS REPORT.......................................................................................................... 91
viii
TABLE 17- 2. RECEIPTS FOR HIGHWAYS, AS REPORTED BY FHWA, 1971- 2003
( 106 CURRENT $) .................................................................................................... 93
TABLE 17- 3. ADDITIONAL PAYMENTS FOR MOTOR- VEHICLE USE, NOT
COUNTED BY FHWA, 1971- 2003 ( 106 CURRENT $) .............................................. 97
TABLE 17- 4. FEDERAL TAXES ON MOTOR FUELS DEDICATED TO NONHIGHWAY
PURPOSES ( CENTS/ GALLON) ................................................................................ 99
TABLE 17- 5. ENVIRONMENTAL FEES ON MOTOR VEHICLES IN 1995 ................................... 100
TABLE 17- 6. ENVIRONMENTAL EXCISE TAXES ON PETROLEUM, 1991.................................. 101
TABLE 17- 7. GAS- GUZZLER TAXES, LUXURY TAXES, CAFE FINES, AND OTHER
MINOR TAXES, 1991 AND 2003 ( 106 $) ................................................................ 102
TABLE 17- 8. AN ESTIMATE OF NATIONAL TRAFFIC AND PARKING FINES,
BASED ON FINES AND FORFEITS RECEIVED IN LARGE CITIES AND
COUNTIES ( FISCAL YEAR 1991) ........................................................................... 103
TABLE 17- 9. ESTIMATE OF NATIONAL PAYMENTS OF TRAFFIC FINES
( EXCLUDING PARKING FINES), BASED ON FINES RECEIVED IN NEW
YORK, CALIFORNIA, AND TEXAS, 1990- 1991 ( BILLION $) ................................. 105
TABLE 17- 10. ESTIMATE OF NATIONAL PAYMENTS OF PARKING FINES, BASED
ON FINES RECEIVED IN LOS ANGELES CITY AND NEW YORK CITY,
FISCAL YEAR 1991 ( BILLION $)............................................................................ 107
TABLE 17- 11. SEVERANCE TAXES PAID ON OIL, GAS, AND COAL, AND OTHER
RESOURCES, FISCAL YEAR 1991 ( EXCEPT AS NOTED) ( MILLION $)..................... 110
TABLE 17- 12. DESCRIPTION AND AMOUNT OF SPECIAL TAXES ON MOTOR
VEHICLES, CALENDAR YEAR 1991 ( THOUSANDS OF DOLLARS) ......................... 113
TABLE 17- 13. OTHER SELECTIVE TAXES RELATED TO THE USE OF OIL AND
MOTOR VEHICLES, FISCAL YEAR 1991 ( EXCEPT AS NOTED)
( MILLION $) ......................................................................................................... 120
TABLE 17- 14. ESTIMATION OF TOTAL SALES OF MOTOR VEHICLES,
AUTOMOTIVE PARTS, AND FUELS AND LUBRICANTS, 1987a.............................. 123
TABLE 17- 15. SALES TAX PAID ON MOTOR VEHICLES, MOTOR- VEHICLE
SUPPLIES AND FUELS AND LUBRICANTS, AND AUTOMOTIVE
SERVICES, UNITED STATES, 1987- 2004............................................................... 125
TABLE 17- 16. SUMMARY OF FEDERAL, STATE, AND LOCAL TAX REVENUE,
1991 ( BILLION DOLLARS) .................................................................................... 129
TABLE 17- 17. FEDERAL CORPORATE- INCOME TAXES PAID IN MOTOR- VEHICLE
AND RELATED INDUSTRIES, INCOME- YEAR 1990 ............................................... 130
TABLE 17- 18. PERSONAL INCOME TAXES PAID IN MOTOR- VEHICLE AND
RELATED INDUSTRIES, 1990................................................................................ 133
TABLE 17- 19. NUMBER OF STATES IN WHICH PERSONAL PROPERTY IS SUBJECT
TO LOCAL GENERAL PROPERTY TAX................................................................... 140
TABLE 17- 20. ASSESSED PROPERTY VALUES IN THE U. S., 1986 AND 1991 ......................... 141
TABLE 17- 21. ESTIMATION OF GROSS ASSESSED VALUE OF MOTOR VEHICLES
SUBJECT TO PROPERTY TAX, 1986 AND 1991 ...................................................... 143
TABLE 17- 22. PAYMENTS BY MOTOR- VEHICLE USERS FOR THE USE OF
HIGHWAYS AND PUBLIC SERVICES RELATED TO MOTOR- VEHICLE
USE ( 109 $) ........................................................................................................... 145
A. YEAR 1991, WEIGHTED RESULTS.................................................................... 145
B. YEAR 2002, WEIGHTED RESULTS .................................................................... 147
C. YEAR 2002, UNWEIGHTED RESULTS AND WEIGHTS...................................... 149
ix
TABLE 17- 23. SUMMARY OF MOTOR- VEHICLE- USER PAYMENTS FOR AND
GOVERNMENT EXPENDITURES ON MVIS, UNDER THREE WAYS OF
COUNTING........................................................................................................... 152
FIGURE 17- 1 USER PAYMENTS AND GOVERNMENT EXPENDITURES, 1989- 2002 ................. 153
A. WAY # 1 OF COUNTING, LOW- COST CASE ..................................................... 153
B. WAY # 1 OF COUNTING, HIGH- COST CASE..................................................... 154
C. WAY # 2 OF COUNTING, LOW- COST CASE...................................................... 155
D. WAY # 2 OF COUNTING, HIGH- COST CASE .................................................... 156
E. WAY # 3 OF COUNTING, LOW- COST CASE ...................................................... 157
F. WAY # 3 OF COUNTING, HIGH- COST CASE ..................................................... 158
APPENDIX 17- A. 1: AN ESTIMATE OF NON- USER PAYMENTS TOWARDS
GOVERNMENT- PROVIDED MVIS ....................................................................... 159
APPENDIX 17- A. 2: CLASSIFICATION OF FINES AND PENALTIES IN
FHWA’S HIGHWAY STATISTICS ............................................................................ 162
17- A. 2.1 Present ( post- 1993) classification.................................................. 162
17- A. 2.2 Earlier ( pre- 1994) classification.................................................... 164
APPENDIX 17- A. 3: DISCUSSION OF INTERNALLY CONSISTENT
DESIGNATION OF “ LOW” AND “ HIGH” PAYMENTS ........................................... 165
APPENDIX 17- A. 4: THE AMOUNT EXTRA THAT USERS WOULD HAVE
PAID IN 1991 HAD POST- 1991 TAX INCREASES AND ANTI- TAX-EVASION
MEASURES BEEN IN EFFECT ................................................................. 169
17- A. 4.1 Background.................................................................................... 169
17- A. 4.2 The amount extra that highway users would have
paid in 1991 had the October 1993 $ 0.043/ gallon
increase in the Federal excise tax, and other increases
in state and local excise taxes, been in effect................................... 169
17- A. 4.3 The amount extra that would have been collected
had there been less, or no, tax evasion ............................................ 170
APPENDIX 17- A. 5: ALTERNATIVE ESTIMATES OF HIGHWAY USER
REVENUE DEDICATED TO NON- HIGHWAY PURPOSES ........................................ 171
17- A. 5.1 Background.................................................................................... 171
17- A. 5.1 Federal imposts on highway users, dedicated to
reducing the deficit ........................................................................... 171
17- A. 5.2 Federal imposts on highway users, dedicated to
mass transit ........................................................................................ 172
17- A. 5.3 Federal imposts on highway users, dedicated to the
LUST trust fund................................................................................ 172
17- A. 5.4 State imposts on highway users, dedicated to mass
transit.................................................................................................. 172
17- A. 5.5 State imposts on highway users, dedicated to other
nonhighway purposes ...................................................................... 173
17- A. 5.6 Local imposts on highway users, dedicated to
nonhighway purposes ...................................................................... 174
17- A. 5.7 Comparison of alternative estimates with Table 17-
3 estimates.......................................................................................... 175
1
17.1 INTRODUCTION
17.1.1 Background
Federal, state, and local governments spend over a hundred billion dollars per
year to build and maintain roads and provide a variety of services, such as highway
patrol, for motor- vehicle users ( see report # 7 in the UCD social- cost series). To pay for
these infrastructure and service expenditures governments do not charge motor- vehicle
users a single, explicit, comprehensive price for the use of roadways and motor- vehicle-related
services, but rather collect revenue from a variety of taxes and fees ranging from
road tolls to motor- fuel taxes to general- fund tax receipts. Some of these taxes and fees,
such as road tolls, function like prices on the use of public motor- vehicle infrastructure
and service ( MVIS); some, like sales tax receipts, are purely general taxes unrelated to
motor- vehicle use; and some, like fuel- excise taxes, may be said to be “ in- between” a
price on the use of MVIS and a general tax on all commodities.
For two reasons, many people care a great deal about the amount and kind of
government- levied taxes and fees used to pay for government- provided MVIS. First, the
taxes and fees affect how and how much motor vehicles and other transportation modes
are used, and hence are of interest to persons who want to encourage or discourage
motor- vehicle use, or maximize the economic efficiency of transportation choices, or
accomplish other social objectives1. Second, the taxes and fees affect how and how
much people pay for MVIS, and hence are of interest to people who care about the
fairness, or equity, of government patterns of taxation and expenditure. It is this
concern with equity that motivates comparisons of user payments for MVIS with
government expenditures for MVIS – a comparison which lies at the center of this
report.
Because public MVIS is very costly, on the one hand, and because not every one
uses and benefits from MVIS to the same extent, it is reasonable to feel that those who
use and benefit from public MVIS should pay the government for it, perhaps in some
relation to their extent of use or benefit2. ( Put another way, if MVIS were not very
costly, or if everyone used or benefited from MVIS more or less the same, then only
economists would care how exactly MVIS was paid for.) This feeling naturally leads
people to ask whether motor- vehicle users are in fact paying the government “ the right
amount” for government- provided MVIS.
17.1.2 Overview of the report
The objective of this report is to establish a reasonable framework for estimating
motor- vehicle- user payments towards government- provided MVIS, and then to
1Of course, interest in motor- fuel and motor- vehicle taxes and fees in general is quite broad. Analysts
have examined the optimal ( second- best) gasoline tax ( e. g., Parry and Small, 2001), the incidence of
federal and state motor- fuel taxes ( Chouinard and Perloff, 2003; Krupnick et al., 1993), the political
feasibility of raising fuel taxes ( Hammar et al., 2004), the history and disposition of gasoline taxes
( Puentes and Prince, 2003), and the implications of financing transportation projects from general fees
rather than user charges ( Goldman and Wachs, 2003).
2 For example, Kane ( 1983) notes that in cost allocation studies ( which are similar in motivation and
method to comparisons of costs and payments), “ the two generally used measures for allocating costs are
cost occasioning ( those who give rise to costs should be made to bear the costs) and benefits received
( those who receive the larger benefits of a road system should bear the larger cost of providing it)” ( p. 93).
2
estimate those payments and compare them with government expenditures.
( Government expenditures towards MVIS are estimated in Report # 7 and incorporated
here for comparison with user payments.) First, I argue that the purpose of estimating
tax and fee payments by motor- vehicle users is to determine whether users pay
governments a “ fair” amount. I thus emphasize at the outset that the debate is
primarily about equity, not directly about economic efficiency. I show that a simple
comparison of current tax and fee payments – however defined – with current motor-vehicle-
related costs ( however defined) tells us little about optimal pricing, optimal
revenues, optimal expenditures, or optimal use of public or private transportation
resources.
Next, I classify the various taxes and fees that one might count as user payments
according to the breadth ( or “ targetedness”) and disposition of the taxes and fees. The
breadth or targetedness of the taxes concerns whether the taxes and fees apply only to
motor- vehicle use, or to all commodities and services, or to something in between. The
disposition of the taxes or fees concerns whether or not they are dedicated to
government MVIS. With these considerations, I establish five classes of user payments
( A1, A2, B, C1, and C2).
I then present four ways one might tally up user payments ( and government
expenditures), the differences ( on the payment side) owing ultimately to different
notions about how taxes and fees ought to be related to actual motor- vehicle use in
order to “ count” as a user- payment towards government MVIS. These four “ Ways of
Counting” user payments treat the five different classes of taxes and fees differently3.
After further discussing the conceptual framework outlined above, I make
detailed estimates of all tax and fee payments to all levels of government in the U. S. in
a base year of 1991. ( I make less detailed estimates for other years from 1989 to 2002.) I
begin with a list of everything that by any criteria could be considered to be a possible
payment by motor- vehicle users. From this list of all ( or nearly all) possible payment
items I make estimates of user payments according to Way # 1, Way # 2, and Way # 3 of
Counting, and compare them with corresponding estimates of government
expenditures. ( Way # 4 of counting requires a formal macro- economic model, which is
beyond my scope here). Because the list of user payments estimated here is
comprehensive and detailed, the reader also can fashion his or her own tally of user
payments and compare them with government expenditures. ( Report # 7 in the social-cost
series presents detailed estimates of government expenditures for MVIS.)
17.1.3 Previous studies
U. S. national studies. Not surprisingly, there is a good deal of argument about
whether motor- vehicle users in the U. S. pay fully for government- provided MVIS. Lee
( 1994), MacKenzie et al. ( 1992), and others have argued that in the U. S., payments by
motor- vehicle users fall well short of outlays by the public for roads and related
services. But Beshers ( 1994) and Lockyer and Hill ( 1992) claim that in the U. S. road- user
tax and fee payments at least equal government expenditures related to motor- vehicle
3 Note too that the four Ways of Counting payments all presume that the amount of the payment from
any person should be related to the amount of motor- vehicle use. If instead one wishes to distinguish
only between people who don’t use motor- vehicles at all and people who do, and then doesn’t care how
the motor- vehicle users make their payments, then one would do a different analysis, which focuses on
motor- vehicle users versus non- users. Appendix 17- A. 1 presents an analysis of non- user versus user
payments.
3
use, and Dougher ( 1995) argues that road- user payments exceed related government
outlays by 50%. Morris and DeCicco ( 1996, 1997) revise Dougher’s ( 1995) accounting,
deducting general taxes from the revenue side and adding some motor- vehicle- related
services to the expenditure side, and find that revenues from users fall short of
government expenditures by 22%. Similarly, the most recent highway- cost allocation
study by the Federal Highway Administration ( FHWA) et al. ( 1997) indicates that
“ highway user fees” are about 20% below highway- related expenditures, for all levels
of government and all vehicle classes in the U. S. in 20004.
Studies of U. S. regions and of other countries. As one would expect, there are
genuine differences in payments versus expenditures from region to region in the U. S.
and from country to country, independent of differences in accounting frameworks.
Cameron’s ( 1994) accounting for Southern California in 1991 suggests that tax and fee
receipts related to motor- vehicle use easily exceed public- sector expenditures ( when
bus and rail receipts and expenditures are excluded from both sides of the ledger), but
Komanoff and Sikowitz’s ( 1995) accounting for New Jersey indicates that there, receipts
are only 77% off expenditures. Hanson’s ( 1992) accounting for Wisconsin in the early
1980s indicates that state and federal user fees are only about half of roadway
expenditures by all levels of government, and Ryan and Stinson’s ( 2002) accounting for
the seven- county Twin Cities metropolitan area of Minnesota in 1996 shows that user
taxes and fees ( which exclude general property taxes, general state aid, and special
assessments) provide about 60% of all revenue used for highways.
Newbery shows that in Britain the ratio of road- use taxes to road costs
( excluding accidents) was 1.4 in 1986 ( Newbery, 1988) and 1.9 in 1996/ 97 ( Newbery,
1998), mainly because of much higher fuel taxes in Britain than in the U. S. Booz Allen
Hamilton ( 2005) estimate a user- payment/ road- cost ratio of 0.70 for New Zealand in
2001 when interest charges on capital are treated symmetrically on the payment and
expenditures side, as in this report.
In the U. S., the disagreements about user payments versus expenditures result
from different opinions about what should count as a “ user payment” to the
government, on the one hand, and what should count as a government expenditure
related to MVIS, on the other. More specifically, the disagreements center around the
proper treatment of non- targeted taxes and fees on the payment side and indirect
government expenditures related to MVIS on the expenditure side. This report
illuminates this debate by providing an original, detailed, comprehensive accounting of
all possible user payments and delineating several ways of adding up and comparing
them with government expenditures.
17.1.4 The contribution of this analysis
As indicated in section 17.1.3, there have been a number of analyses of motor-vehicle-
user payments and government motor- vehicle- related expenditures. Our
analysis of motor- vehicle- user payments and government motor- vehicle- related
expenditures in the U. S. expands and improves upon this previous work in several
ways:
4 The FHWA cost allocation study estimated the ratio of user payments to allocated costs for different
vehicle classes in the year 2000, as follows: automobiles, 0.7, pickups and vans, 0.9, buses, 0.4,
combination trucks over 80,000 lbs, 0.7, all trucks, 0.8, all vehicles, 0.8.
4
1) We have a clearly delineated conceptual framework. We explain why people
are interested in motor- vehicle- related payments versus government
expenditures, and how the results of such analyses may be interpreted and
applied. We carefully construct four different Ways of Counting “ motor-vehicle
user payments” and “ government expenditures for MVIS” and make
estimates for three of these Ways.
2) We have a comprehensive accounting system: we have identified and
quantified all potentially relevant and significant categories of motor- vehicle-user
payments and government motor- vehicle- related expenditures. On the
payment side we quantify all conceivable targeted and non- targeted taxes
and fees, such as severance taxes on oil production, special property taxes on
motor vehicles, and general sales taxes on vehicles and fuels. On the
expenditure side we quantify all conceivable direct and indirect costs such as
the motor- vehicle- related costs of fire- protection services and the judicial and
legal system Report # 7 in the social- cost series).
3) Our estimates are built on original, detailed analyses of primary data, for a
base year of 1991. In all payment and expenditure categories we use primary
government data as opposed to estimates derived from the work of other
analysts. We use primary data for both our direct estimates of expenditures
and payments and for our estimates of the motor- vehicle- related share of
certain government expenditures. To estimate payments and expenditures for
years other than 1991, we use a combination of primary data ( for the most
important payment and expenditure categories) and extrapolation.
4) We have a rigorous estimation method that ensures that our estimates of
motor- vehicle- user payments are consistent with our estimates of
government motor- vehicle- related expenditures. Where possible, we use the
same primary data sources for both payments and expenditures; we apply
capital amortization principles and interest rates consistently to payments
and expenditures; and we develop a careful, comprehensive, internally
consistent definition of “ low- cost” and “ high- cost” cases, in which “ low cost”
means low expenditures and high payments.
17.1.5 The purpose of estimating user payments
Before we categorize and then estimate taxes and fees related to motor- vehicle
use, it will be useful to be useful to emphasize again that the purpose of the exercise is
to shed light on the fairness of patterns of government taxation and expenditure, not to
gain insight into the economic efficiency of government taxation or expenditure. To see
this more clearly, let us suppose that we estimate that motor- vehicle users pay $ X
annually for public MVIS that costs $ Y annually. ( Or, put in terms of marginal revenue
and expenditures, suppose we estimate that government receives $ X in marginal tax
and fee revenues as a result of some change in motor- vehicle use, and correspondingly
spends $ Y on infrastructure and services.) The pertinent contextual question here is:
what, if anything, does the difference $ X minus $ Y or the ratio of $ X to $ Y tell us? Does
the difference between $ X and $ Y represent economic inefficiency in some sense? For
example, if we changed user taxes and fees so that total payments equaled $ Y instead of
$ X, would we have insured the most economically efficient use of the transportation
system, or at least have increased the efficiency of use?
The answer to foregoing questions regarding efficiency is “ no, not necessarily”.
The difference between government revenues and government expenditures related to
5
MVIS has no straightforward relevance in an analysis of social costs or efficient pricing.
In the first place, it is not a condition of efficiency that a government recover from users
revenues equal to costs. In the second place, current user taxes and fees, of which the
motor- fuel tax is the largest, do not look anything like efficient ( i. e., marginal- cost)
prices, which means that changing the magnitude but not the structure of the current
taxes and fees ( which is all that we do when we demand simply that taxes and fees be
increased to cover costs) might decrease economic welfare as soon as increase it. As
discussed in Report # 1 and other sources ( Congressional Budget Office, 1992; Gillen,
1997; Booz Allen Hamilton, 2005), the relevant condition of economic efficiency is
marginal- cost pricing, which, when applied to highways and public MVIS would result
in a price and tax structure that would look nothing like the present charge structure5,
and which would not generate user revenues sufficient to cover government
expenditures.
The structure of present “ user” taxes and fees. Let us examine first this question
of the structure of present user taxes and fees more closely. None of the present
highway user taxes and fees were set to be marginal- cost prices6. Consider the most
prominent of the present user fees, the motor- fuel tax. The excise tax on motor fuel is a
charge per gallon consumed. The public service and infrastructure putatively being
charged for is highway construction and maintenance. But clearly there is little
correspondence between fuel consumption and “ consumption” of highway
infrastructure and services, and as a result the fuel tax is not a marginal- cost price on
highway use. The amount of highway that a driver “ consumes” depends on the type of
highway ( a freeway is orders of magnitude more costly per mile than a dirt road), the
amount and kind of driving, the weight and other characteristics of the vehicle ( a very
heavy truck causes much more road damage, and necessitates a much heavier road,
than does a light- duty automobile), and other factors. There may be some
correspondence between fuel consumption and wear and tear of the highways, because
the weight of a vehicle affects both its fuel consumption and the damage it causes to the
road, but neither relationship -- between weight and fuel economy, and between weight
and road damage -- is one of strict proportion. Many factors other than total weight
affect fuel economy and road damage, and as a result a heavier vehicle may have lower
fuel consumption and cause less road damage than does a lighter vehicle.
The upshot, as the FHWA ( 1982) notes, is that “ the relationship of the fuel tax to
ESAL- or PCE- related costs is negligible. To impose anything approximating efficient
highway user charges, new pricing instruments will need to be developed” ( p. E- 64)
5 An efficient highway- user charge would have two components: a variable- cost charge, equal to the cost
of wear of the highway per mile of travel, and a congestion charge, equal to the cost of delay imposed on
all other travelers as a result of an additional mile of travel by each. ( Of course, there also should be
charges for environmental externalities, but I do not call these “ highway user” charges.) The congestion
toll can be viewed as a “ capacity” charge, because the congestion creates “ pressure” on highway capacity,
and under certain conditions the congestion toll finances the optimal expansion of the highway.
Discussions of the relationship between optimal congestion tolls and optimal long- run capacity of
roads can be found in texts on transportation economics ( e. g., Mohring, 1976) or urban economics ( e. g.,
Mills and Hamilton, 1984), and in articles on pricing of infrastructure ( e. g., Keeler and Small, 1977;
Newbery, 1989; Gillen, 1997). For discussions of the related but broader issues of privatizing and pricing
highways, see for example Gomez- Ibanez et al. ( 1991) and Fielding and Klein ( 1993).
6Some road tolls, probably by coincidence, may be efficient prices. Similarly, some fines and producer
charges may be efficient ( equal to marginal cost), but again most likely only by coincidence.
6
( ESAL and PCE are measures of highway “ use”; see for example Hajek [ 1995]). The
Congressional Budget Office ( 1992) agrees, noting that “ fuel taxes... do not correlate
closely with the actual costs imposed by specific users” ( p. 15), a problem which has
“ led planners to seek taxes or charges that do” ( p. 11). Finally, Button ( 1993) remarks
that “ charges levied on road users relate very little to the costs of providing and
maintaining the infrastructure provided let alone to wider notions of optimizing its use
either from a purely traffic perspective or from a much wider social perspective” ( p. 99).
The same could be said about user fees other than the fuel tax; namely, that they
certainly are not set at marginal cost. Given, then, that the structure of current taxes and
fees is so different from an economically efficient structure, it is not possible to know a
priori the effect on economic efficiency of changing the magnitude but not the structure
of current taxes and fees.
The relationship between total costs and total payments. Moreover, it is clear that
with efficient pricing of highways and related services, price- times- quantity revenues
need not cover costs. For example, an efficient variable- cost charge for wear and tear
will cover the cost of highway maintenance and repair, but an optimal congestion toll
may or may not cover the optimal long- run capital cost of the highway. Indeed, the
congestion toll will cover the capital cost only if: a) the road is in fact congested ( even at
its optimal size, it need not be) 7, and b) the cost/ capacity- unit of the highway is
constant or rising with additional capacity8. If these conditions are not met, then there
will be a revenue shortfall or surplus. Ideally, any revenue shortfall will be made up by
inverse elasticity pricing or lump- sum transfers from individuals to the public sector
( see CBO [ 1992] for an accessible discussion of these measures). Importantly, from the
standpoint of efficiency the individuals who make the lump- sum transfers need not be
users. Thus, making payments equal to costs does not in itself necessarily improve
economic efficiency.
Summary. If our objective is to have efficient use of transportation infrastructure
and services, then we should set prices on the infrastructure and services equal to
marginal social costs. The exercise of adding up the revenues from the currently in-place
( and economically inefficient) taxes and fees on motor- vehicle use and comparing
7The optimal capacity of the road is that at which the marginal cost of providing an additional unit of
capacity is just equal to the total willingness to pay for the additional unit of capacity. If capacity can be
added in infinitesimal increments starting at zero, then generally, willingness to pay for additional
capacity will be greater than zero only if there is congestion. Thus, if all roads were perfectly malleable all
the way down to nonexistence, all ( are nearly all) optimally sized roads would have some congestion.
( There still would be exceptions: an optimally sized road for one user could not be congested.) But roads
are not perfectly malleable; they must be built in discrete units. The most important discrete jump is that
between no road and a one- lane road. Often it will be the case that the total willingness to pay for a one-lane
road will equal or exceed its cost, but that the resultant road never will be congested. In this case, a
congestion toll will generate no revenues, and the road capital cost will have to be financed by other
means.
8There has been much debate over whether cost/ capacity- unit for highways increases, decreases, or
remains constant with increasing capacity. Anderson and Mohring ( 1997) cite studies that found constant
cost, but Mills and Hamilton ( 1984) cite studies that found increasing or decreasing costs. If the
cost/ capacity is decreasing, then as discussed in Appendix B of Report # 1, the marginal- cost price,
multiplied by quantity, will not cover total cost.
7
the total with total government expenditures is not by itself directly relevant to the
exercise of setting efficient marginal social- cost prices9.
But even though we cannot say that efficiency requires that revenues from the
present tax and fee system equal government expenditures, we may say that fairness
demands it. ( Similarly, we also may demand that the government highway enterprise
operate with a balanced budget.) Exactly how users should pay is a matter of
judgment. In section 17.1, we mentioned that we will establish five different classes of
taxes and fees that might be counted as “ user payments,” and four different Ways of
Counting payments. In the following section we elaborate on these classes of taxes and
fees and Ways of Counting.
17.2 CLASSES OF TAXES AND FEES AS POTENTIAL USER PAYMENTS
TOWARDS MOTOR- VEHICLE INFRASTRUCTURE AND SERVICES
Motor- vehicle products and services are subject to a wide range of taxes and fees,
some of which are earmarked by the government to be spent on highways and related
motor- vehicle services, some of which are not. Beyond that, persons who use motor
vehicles pay general taxes, on items unrelated to motor- vehicle use ( e. g., sales taxes on
televisions), that provide general funds for motor vehicle infrastructure and services
( MVIS). Table 17- 1 lists all of the government taxes, fines, and fees that might be
considered to be related to the use of motor vehicles and fuels.
As mentioned in section 17.1.3, arguments about whether motor- vehicle users
“ pay their way” are in part arguments about which tax and fee payments ought to be
counted against government expenditures. Arguments about which taxes and fees
should count depend in part on the breadth or “ targetedness” of the tax or fee in
question: whether it applies only to motor- vehicle use, or to all commodities and
services in the national economy, or to something in between. Therefore, to begin to
address this question of whether motor- vehicle users “ pay their way,” we establish five
classes of possible user tax and fee payments for MVIS, distinguished in part according
to the extent to which they are targeted at motor- vehicle users:
• A1) special taxes and fees levied only on motor vehicles, motor fuels, drivers,
and so on, and used by government for motor- vehicle- related purposes;
• A2) other taxes and fees specifically related to motor- vehicle use;
• B) selective taxes and fees levied on a limited number of commodities ( broader
than the category “ motor- vehicles, motor fuels, drivers, etc.,” but not as broad as the
category “ all commodities”);
• C1) general taxes and fees on a wide range of commodities; and
• C2) general tax expenditures or subsidies.
9If current user charges had the incidence and structure ( but not magnitude) of correct marginal- cost
prices, and if it were true that optimal pricing of government- provided transportation goods and services
would generate user revenues at least equal to costs, then the difference between current user revenues
and current government expenditures would indicate the minimum amount by which user charges
would have to be increased in the aggregate. But even this would not be sufficient information, because it
would not tell us how much to increase which charges.
8
In the following sections of this report, we discuss our five classes of user
payments in more detail.
17.2.1 Classes A1 and A2: special taxes and fees targeted to vehicles and fuels
First, we distinguish special taxes and fees that are levied only on motor vehicles,
motor fuels, driving, parking, and other motor- vehicle activities and commodities, from
all other more general tax and fee revenues. In the class of special taxes and fees, which
we will designate class A, are such things as gasoline excise taxes, road tolls, and motor-vehicle
registration fees. These special taxes are distinguished from more general taxes
such as sales taxes on motor vehicles or televisions. One important feature of the tax
and fee revenues in class A is that they come from motor- vehicle users as opposed to
non- users, and presumably will change in proportion to changes in motor- vehicle use,
whereas the revenues from more general taxes ( classes B and C) may or may not come
from users and may or may not result from additional motor- vehicle use.
Within class A we may make a further distinction based on the classification of
the Federal Highway Administration ( FWHA). The FHWA is an important original
source of data on government expenditures and receipts for highway- related purposes
( e. g., FWHA, Highway Statistics, annual report). In its Highway Statistics annual report,
FHWA identifies a class of taxes and fees that according to its criteria are highway- user
payments for the highways ( see section 17.3.1 for details). Because the FHWA data on
expenditures and receipts are widely used, and because the FHWA classification of user
payments for the highways is used as the basis of some studies of highway costs versus
user payments, it is sensible to define here a separate class of taxes and fees that
corresponds to the FHWA class of “ highway user payments for the highways.” This is a
subset of our class A here – class A1. This leaves a variety of taxes and fees that are
specifically related to motor- vehicle use but that FHWA does not classify as highway
user payments for the highways. These compose our class A2. Examples of taxes and
fees in this class ( A2) are portions of fuel taxes and other user fees allocated specifically
for deficit reduction, mass transit, and other nonhighway purposes.
17.2.2 Class B: selective taxes
Next, we make two classes out of the broad category of taxes that are not specific
to motor- vehicles and motor fuels. The first ( class B) are certain taxes on the production
or use of motor vehicles and fuels that are part of a selective tax structure that focuses
on a limited range of commodities. The breadth of these selective taxes fall in between
the wide breadth of the general taxes of class C and the narrow breadth of the special
taxes of class A. Selective taxes include severance taxes on energy production and
certain property taxes and sales taxes on motor vehicles. Because selective taxes and
fees apply to commodities other than motor vehicles and motor fuels, albeit not to all
commodities, one might decide that selective taxes and fees are meant to be more like
general tax payments towards a range of government services as opposed to user
payments for specific things like MVIS. And as is the case with general taxes of class C,
the relationship between changes in motor- vehicle or motor- fuel use and net changes in
revenue from selective taxes and fees is not immediately clear ( this observation being
pertinent to Way # 4 of counting).
17.2.3 Classes C1 and C2: general taxes and general- tax subsidies
General taxes on the production and use of motor vehicles and motor fuel
include: corporate and personal income taxes in businesses related to motor- vehicle and
9
motor- fuel production and use; general sales taxes on vehicles, fuels, and related items;
and property taxes on vehicles and roads. By definition the general taxes of class C are
part of a broad tax structure that covers many and in some instances virtually all
commodities. Because these taxes apply to most commodities, and not just to motor
vehicles and fuels, they may be considered to be taxes for a wide range of general
government services rather than user payments for specific things like government-provided
MVIS.
In this class of general taxes we include estimates of government “ tax
expenditures” related to motor- vehicle use. Tax expenditures ( also called “ tax
subsidies”) represent a loss of government tax revenue due to a particular commodity
being taxed at less than a prevailing or average rate. Tax subsides can be estimated in
several categories: corporate income taxes paid in motor- fuel and motor- vehicle
industries; general state and local sales taxes paid on vehicles, fuels, parts, and
automotive services; and general state and local property taxes foregone on
development displacement by roadways. Corporate income- tax subsidies and general
sales- tax subsidies are estimated in report # 18 in our social- cost series and are applied
in this report. Property- tax subsidies related to roadways are estimated in this report.
17.2.4 Classes of government expenditures
On the expenditure side of the ledger, there are arguments about precisely which
government expenditures ought to be attributed to motor- vehicle use and hence
compared with motor- vehicle user tax- and- fee payments. Some types of expenditures
( e. g., for highways) are obviously directly related to motor- vehicle use, but other types
( such as judicial- system costs for prosecuting car thieves) are related to motor- vehicle
use only indirectly, and hence arguably could not be counted as government
expenditures on MVIS. This suggests that it is useful to make a general classification of
expenditures according to how directly they are related to motor- vehicle use:
• A1. Direct expenditures ( FHWA basis)
A1.1 Annualized cost of highways, including on- street parking and embedded
private- sector contributions, but excluding collection expenses, leaking
underground storage- tank ( LUST) costs, extra maintenance and repair costs
A1.2 Highway law enforcement and safety as estimted by FHWA
• A2. Other direct expenditures ( not in FHWA)
A2.1 Collection expenses, LUST costs, extra maintenance and repair
A2.2 Annualized cost of municipal and institutional offstreet parking
A2.3 Deduction for embedded private investment in roads
• B. Indirect expenditures
B. 1 Other police- protection costs ( not estimatd by FHWA) related to MV use
B. 2 Fire- protection costs related to MV use
B. 3 Emergency- service costs of MV accidents included in police and fire costs
B. 4 Judicial and legal- system costs related too MV use
B. 5 Legal costs of MV accidents included under judicial and legal- system costs
B. 6 Jail, prison, probation, and parole costs related to MV use
B. 7 Regulation of air, water and solid- waste pollution related to MV use
B. 8 Energy and technology research and development related to MV use
B. 9 MV- related costs of other government agencies
B. 10 Military expenditures related to the use of Persian- Gulf oil by MVs
B. 11 Annualized cost of the Strategic Petroleum Reserve
10
These expenditure items are discussed in detail in Report # 7.
17.3 WAYS OF COUNTING TAXES AND FEES AS MOTOR- VEHICLE- USER
PAYMENTS
In this section we establish four different Ways of Counting user payments and
government expenditures for MVIS. The four Ways count classes of payments ( A1, A2,
B, C1, and C2) and classes of expenditures ( A1, A2, and B) differently, to wit:
User payments Government expenditures
Way # 1,
Targeted taxes
and fees; direct
expenditures
( FHWA
method)
Only taxes and fees that are
specifically targeted to highway
users and are actually used by
government for highways are
counted as user payments. ( This
is similar to the method used by
the FHWA.)
Comprises: class A1.
Only direct government
expenditures on highways ( e. g.,
capital, repair, highway patrol)
are counted as government
expenditures for MVIS. ( This is
similar to the method used by
FHWA.)
Comprises: class A1.
Way # 2
All targeted
taxes and fees;
all direct
expenditures.
Same as Way # 1 plus a few
targeted user payments that
FHWA excludes.
Comprises: class A1 and Class
A2.
Same as Way # 1 plus some direct
expenditures related to motor-vehicle
use that FHWA excludes.
Comprises: class A1 and Class
A2.
Way # 3, All
targeted and
some
nontargeted
taxes and fees;
all direct and
indirect
expenditures
Same as Way # 2 plus some
portions of selective and general
taxes and fees not targeted
specifically to motor vehicles or
motor fuels
Comprises: class A1, Class A2,
Class B, and some of Class C.
Same as Way # 2 plus
government expenditures related
indirectly to the production and
use of motor vehicles and motor
fuels.
Comprises: class A1, Class A2,
and Class B.
Way # 4
Marginal
changes in user
payments;
marginal
changes in
expenditures
Whatever net additional revenues from taxes and fees the government
gains as a result of some marginal change in motor- vehicle use is
counted as user payments against whatever net additional
expenditures the government makes as a result of the change.
Not formally estimated here.
11
As we discuss these ways of counting, it is important to keep in mind that our
purpose here is to decide what will be included in our tally of “ user payments towards
MVIS,” a tally which is to be compared with our estimates of government expenditures
for MVIS for the purpose of answering the question of whether motor- vehicles make
“ fair” contributions towards public motor- vehicle related costs. Note also that while I
do discuss Way Counting # 4, I do not actually make any estimates of costs under this
Way.
17.3.1 Way of Counting # 1: Targeted taxes and fees and direct expenditures, FHWA
method
User payments. Way # 1 of counting user payments adopts the FHWA’s relatively
restrictive criteria for determining what counts as a user payment for government-provided
MVIS. Specifically, it counts only taxes and fees that are specifically targeted
towards motor- vehicle users and that are actually applied by government towards
MVIS. Thus, it does not count anything that FHWA deems to be a “ nonuser” charge or
anything that is not specifically dedicated for MVIS.
The FHWA, which in the Highway Statistics annual report tabulates revenues
and expenditures related to highway use, counts a tax or fee as a user payment for
highways if it meets two criteria. First, the tax or fee must qualify as a “ highway user”
charge, and second, it must not be specifically allocated for nonhighway purposes. The
FHWA ( Highway Taxes and Fees, How They are Collected and Distributed, 1991) elaborates
on the distinction between highway- user and nonuser charges:
In recent years, the distinction between highway- user taxes and other State taxes that are
dedicated for highways has become more difficult to determine. For example, the advent
of the variable motor- fuel and motor- vehicle tax ( ad valorem or percentage) requires a
closer look a the specific mechanics of the tax in order to classify it as a highway- user or
nonuser tax. Although the language of the enabling legislation may be similar among
these taxes, the classification of a tax as a highway- user tax is dependent upon the
placement of the tax burden. Thus, if the tax is applied to a broad spectrum of
commodities ( even if a given portion is dedicated to highways), it is considered by
FHWA to be a nonuser tax... Conversely, if a tax is exclusively ( or substantially) targeted
to highway users, it is included [ as a highway- user tax]... ( p. i)
Others have suggested similar criteria. For example, the CBO ( 1992) suggests
that “ if the revenues go to a general fund, the tax should not be considered a user tax”
( p. 16- 17). This idea goes back at least 40 years to Zettel ( 1961), who noted:
Admittedly, it is not easy to devise a completely satisfactory definition of a user charge.
Perhaps the best generalization is that a user charge is an impost bearing upon the
ownership or use of a motor vehicle which is over and above the general tax obligations
of the user. It is helpful to add that the user charge should have no clear counterpart in
the general tax structure ( p. 6).
With its second qualification – that a highway- user charge not be allocated
specifically to nonhighway purposes – FHWA excludes as a payment for highways all
highway- user revenues allocated for deficit reduction, mass transit, and other
nonhighway purposes. They also do not count the cost of collecting highway- user
imposts as a highway- related cost, or the payments that are allocated to cover collection
expenses as a payment by highway users for highways. By contrast, under Way # 2,
12
which we discuss next, we ignore earmarking for non- highway purposes and thus
count the entire highway- user tax as a user payment for MVIS.
With reference to our classes of user payments, Way # 1 of counting comprises
class A1 user payments.
Interest component of user payments. Note that we make one important
modification to the FHWA estimates of user payments: our estimates of payments and
expenditures include an interest charge, whereas the FHWA’s do not. This is discussed
in detail in section 17.4.2.
Government expenditures. For consistency with Way # 1 of counting user
payments, our Way # 1 of counting government expenditures towards MVIS also adopts
FHWA’s relatively restrictive accounting. FHWA counts only what it considers to be
direct expenditures related to the use of highways: highway construction, highway
maintenance and repair, and the highway patrol ( see Report # 7).
17.3.2 Way of Counting # 2: All targeted taxes and fees and direct expenditures
related to motor- vehicle use
User payments. Under Way # 2, we count all direct tax or fee payments that
FWHA counts ( class A1) plus some payments that FHWA excludes solely because they
are earmarked for what FHWA considers to be nonhighway purposes. The addtional
taxes and fees counted under Way # 2 but not Way # 1 include: highway- user tax
revenues and tolls tax dedicated to what the FHWA refers to as “ nonhighway
purposes;” some motor- vehicle license fees ( such as in- lieu- of- property- tax fees)
dedicated to highways; some of what the FHWA considers to be “ nonuser imposts
dedicated to the highways;” air- quality or emission- control fees paid with vehicle
registration; some environmental excise taxes; gas- guzzler taxes, luxury taxes, and other
minor charges; parking and traffic fines; and parking taxes ( Table 17- 1). With reference
to our classes of user payments, Way # 2 of counting comprise class A1 and class A2 user
payments.
Government expenditures. Under Way # 2 of counting expenditures, we make a
few adjustments to the FHWA- based estimate of expenditures that constitutes Way # 1
of counting. First, we exclude certain private- sector contributions to highways, on the
grounds that they are not actually government expenditures, whereas FHWA includes
them. Second, we include all costs related to collecting and administering highway user
taxes and fees, because they are direct costs of highways, whereas FHWA excludes
them. Finally, we include costs of municipal and institutional parking, because these are
related to motor- vehicle use, whereas FHWA doesn’t count them as “ highway” costs.
17.3.3 Way of Counting # 3: All targeted and some nontargeted taxes and fees, all
direct and indirect expenditures related to motor- vehicle use
User payments. Under Way # 3, we count a tax or fee as a user payment towards
government MIVS if it is specifically related to the production or use of motor vehicles,
motor fuels, etc., and if one cannot argue convincingly that the tax or fee by its nature
must be considered to be a charge for services or goods unrelated to motor- vehicle use.
The “ nature” of the tax or fee is determined by its relation to other taxes and fees, the
presence or absence of similar taxes and fees on non- motor- vehicle goods and services,
and general social conventions.
Because all of the taxes and fees in class A1 and A2 are specifically related to
motor vehicle use, and because there is to my mind no convincing reason to treat them
as charges for goods or services unrelated to motor- vehicle use, I count them here,
13
under Way # 3, as user payments towards MVIS. These taxes and fees include all of the
payments that FHWA counts as user payments for the highways ( see section 17.3.1),
plus several that they do not: highway- user tax revenues and tolls tax dedicated to what
the FHWA refers to as “ nonhighway purposes;” some motor- vehicle license fees ( such
as in- lieu- of- property- tax fees) dedicated to highways; some of what the FHWA
considers to be “ nonuser imposts dedicated to the highways;” air- quality or emission-control
fees paid with vehicle registration; some environmental excise taxes; gas- guzzler
taxes, luxury taxes, and other minor charges; parking and traffic fines; and parking
taxes ( see Tables 17- 2 and 17- 3).
What is not immediately clear under this Way of counting is whether or not user
payments of selective or general taxes ( classes B and C), such as the sales tax on motor
vehicles, should count as a payment towards expenditures on MVIS, or whether they
should be disallowed on the grounds that they ought to be considered to be general
payments for other government goods and services. Consider first tax and fee payments
in class B: selective sales and excise taxes on motor- vehicle and related goods and
services; selective property taxes on motor- vehicle goods and services; severance taxes
on natural resources; and other special taxes on petroleum and motor- vehicle
businesses. These taxes and fees are not targeted only to motor vehicles and motor
fuels, and are not dedicated to highways, but neither are they as broad- based as the
most general taxes and fees. They are in some sense related to motor- vehicle use, albeit
indirectly. Thus, one reasonably might consider them to be user payments, but just as
reasonably might not. Therefore, I do the analysis both ways: in a “ low- cost” ( high-payment)
case, I lump these payments with the specific taxes of class A, and in a “ high-cost”
( low- payment) case, I lump them with the general taxes of class C. ( See appendix
17- A. 3 for a discussion of “ low” and “ high” as regards user payments in this analysis.)
Next we consider class C1: general sales taxes, property taxes, and so on, that are
paid on motor vehicles and fuels but that are part of a broad tax structure that covers
many commodities. Because these are part of a general tax structure, it seems more
reasonable to view them as supporting a wide range of government services rather than
as specifically related to motor- vehicle use. However, one might argue that a small
portion of the general taxes paid on vehicles and fuels ends up effectively funding
MVIS in particular: namely, the portion of the general tax payment that, after being
mixed into the general fund, on average goes back towards funding any government-provided
MVIS costs not covered by specific user payments. I estimate this portion and
count it as user payment for MVIS. This ends up being a very small amount because
only a small portion of government- provided MVIS is not funded by specific user
payments, and only a small fraction of general funds go towards government- provided
MVIS10.
10 In the cost spreadsheet, this method of estimating the portion of a “ general tax” that ends up funding
MVIS is applied to any part of any tax and fee payment of Table 17- 1 that is not counted in the first
instance as a user payment for MVIS. Put another way, every tax payment treated in this report is
designated in the first instance either as a specific tax for MVIS or else as a general tax. If it is designated a
general tax, then every tax or portion thereof so designated is treated according to method detailed in
section 17.6.7.
Formally, the amount of any tax or fee payment counted towards MVIS is equal to the fraction
counted towards MVIS in the first instance plus the portion of the remainder that, as a “ general tax,” ends
up funding MVIS after being mixed into general funds:
TFmv
l = GRmv
i " Wmv
i + 1 # Wmv
( ( i ) " Tu)
14
Finally we consider general tax expenditures or subsidies ( class C2), which are
tax payments that exceed or fall short of a baseline “ fair” amount. It turns out that
motor- vehicle users get considerable tax subsidies, mainly in the form of property taxes
foregone on development displaced by public roadways ( see Report # 18 in the social-cost
series). I think it is reasonable to do the accounting either way – to count all of these
subsidies, or to count none of them, as user payments. Hence, in the high- cost ( low-payments
case), I count tax expenditures ( subsidies) against user payments, but in the
low- cost ( high- payments) case, I ignore them.
Because general tax payments ( and to a lesser extent tax expendtitures) related to
motor- vehicle use are quite large, the extent to which they are counted as a payment for
motor- vehicle use has a major impact on the comparison of payments with
expenditures. Indeed, a significant part of the large differences among past studies
( section 17.1.3) is due to different treatment of general taxes. For this reason, we focus
more closely on the treatment of general taxes in section 17.6.
Government expenditures. Under Way # 3, we count any government expenditure
related directly or indirectly to the use of motor vehicles. We begin by identifying every
general government expenditure category that might have a component related to
motor- vehicle or motor- fuel use:
• highway construction, maintenance, and administration
• municipal and institutional offstreet parking
• highway law enforcement and safety
• other police protection
• fire protection
• courts
• prison, probation, and parole
• regulation and control of pollution
• research and development of motor- vehicles and motor- fuels
• other government- agency costs
• military expenditures related to the use of Persian- Gulf oil
• the Strategic Petroleum Reserve ( SPR)
The estimation objective then is to estimate the public- sector costs that would be
saved in each of the above expenditure categories in the long run if motor- vehicle use
and the motor- vehicle infrastructure were eliminated. I will call this saved resource cost
the “ motor- vehicle- related” cost, or MVC. In most public- sector expenditure categories,
MVC is estimated simply as the total annualized cost in the entire expenditure category,
multiplied by the fraction of the total cost that would be saved were motor- vehicle use
eliminated ( call this fraction ΔACM). It is necessary to estimate ΔACM because,
obviously, nobody keeps separate motor- vehicle accounts in the expenditure data for
fire protection, police protection, and so on. The estimation of MVC, ΔACM, and other
parameters is documented fully in Report # 7 in the UCD social- cost series.
where TFmvi is the amount of tax and fee payment type i that ends up being counted as a
payment for MVIS and all of the other terms are defined for equation 17- 18.
15
17.3.4 Way of Counting # 4: “ Marginal Changes”
In this Way of Counting we define user payments and government expenditures
related to MVIS to be the net additional ( or “ marginal”) tax and fee payments to
government and the net additional government expenditures that are generated by
some additional ( marginal) production and use of motor vehicles and fuels, relative to
some base- case scenario. Underlying this Way of Counting is the notion that marginal
changes in public MVIS should be self- financing. Suppose, for example, that some
policy or investment results in an increase in miles of roadway, vehicles, vehicle- miles
of travel, fuel- use, highway- related services, and so on. We can in principle estimate the
additional governmental expenditures for this additional MVIS. But we also can
estimate ( in principle) the net additional governmental tax and fee revenue that
actually results from the macroeconomic changes engendered by the additional
production and use of vehicles, fuels, roads, parts, services, and so on. We then might
consider it fair if the net additional revenue – which is additional with respect to some
counterfactual or baseline scenario and net of changes in tax revenue from all sectors –
is approximately equal to the additional government expenditures on MVIS.
Put another way, under Way # 4 we believe that the production and use of motor
vehicles and fuels should generate marginal net revenues that cover marginal
government MVIS costs, regardless of what marginal- cost pricing would dictate, so that
society does not “ distort” mode choice by “ subsidizing” some choices more than
others11. From this perspective, we argue that it is not fair if the net additional tax- and-fee
revenue generated by the additional use of mode M equal or exceeds the additional
governmental expenditures related to mode M, but the net additional revenue from the
additional use of motor vehicles is less than the additional government expenditures on
MVIS.
In the following paragraphs we discuss qualitatively how one might estimate
marginal tax revenues from motor- vehicle production and use. However, we do not
actually develop or apply any formal macroeconomic models that would allow us to
estimate changes in marginal revenues associated with particular changes in motor-vehicle
use.
Estimating marginal tax revenues from motor- vehicle production and use. In
order to estimate marginal revenues and compare them with marginal expenditures,
one must determine the relationship between changes in motor- vehicle use and changes
in government revenue from different kinds of taxes and fees. To do this, one would
compare tax and fee revenues given one level of vehicle use, fuel use, roadway, etc.,
with tax and fee revenues at some baseline ( lesser) level. At both levels, the tax and fee
rates and incidences would be assumed to be the same, as would be incomes,
employment, and general economic indicators, but not necessarily specific patterns of
expenditures. In the following elaboration, let us designate the baseline level of motor-vehicle
use “ I”, and the higher level of motor- vehicle use ( more vehicles, fuels, roads,
drivers, etc.) “ II”.
11 Although this might look like a misguided argument about efficient pricing, it need not be; it can be
offered solely as one’s view of what is fair, regardless of what is efficient. I put the terms “ distort” and
“ subsidies” in quotes because they are borrowed from the language of economic efficiency but are used
in the context of equity, not efficiency. There is no rule ( apart from the rule of avoiding confusion!) that
says that equity criteria must not borrow any ideas from economic efficiency.
16
It is immediately clear that at level II we would have more revenue from the
taxes and fees levied only on vehicles, fuels, etc. ( the class- A items from above) than we
would have at level I. This is because these taxes and fees are levied only on motor-vehicle
goods and services, and hence would change in proportion to the change in
motor- vehicle use. Thus, if one assumed that the policy or investment that led us from
level I to level II affected only motor- vehicle and motor- fuel production and use, then it
would be relatively straightforward to estimate the marginal revenues, because only
taxes and fee receipts related to the production and use of motor vehicles and motor
fuels would change. However, if one took a more realistic macro- economic view, in
which changes in economic activity in one sector ( such as motor- vehicle use) could
affect economic activity in other sectors, then a policy or investment aimed at motor-vehicle
use would end up affecting tax and fee receipts from other sectors as well.
In this broader, more realistic macro- economic view, we know that if people
bought more motor vehicles and motor fuel at level II than at level I, yet still had the
same income and consumption patterns, then they might buy less of something else at
level II than at level I. Hence, if the policy or investment that took us from motor-vehicle-
use level I to level II resulted in more revenue from sales taxes and property
taxes on motor vehicles, and more revenue from income taxes on motor- vehicle
production, then it probably would result in less tax revenue due to the reduced
purchases in other sectors.
Would the increased revenue from taxes on motor vehicles be more or less than
the decreased revenue from taxes on the items that would have been bought? The
answer depends on what exactly would have been bought, and how these other items
would have been taxed compared with how motor- vehicles would have been taxed.
Without further analysis, no generalizations are possible. For example, it is possible that
the additional purchases of motor vehicles would displace the purchase of items for
which there was no sales tax, but it also is possible that they would displace the
purchase of items taxed at a higher rate on average than would be motor- vehicle sales.
In sum, changes in motor- vehicle use would change receipts of general taxes on
the production and use vehicles and fuels, but also might have countervailing effects on
receipts of general taxes on other commodities. The net effect cannot be determined by
first principles; it must be modeled. I do not attempt such modeling here, and hence do
not make a formal estimate of user payments under Way # 4.
17.3.5 Tabulation of taxes and fees and ways of counting them
We now can present the classes of tax and fee payments in this analysis and the
different Ways of counting taxes and fees as user payments towards MVIS in a table
that shows whether or not and how each class of tax and fee payment is counted as a
motor- vehicle user payment under each Way of counting. Each cell in the following
table answers the key question pertaining to each Way of counting of tax and fee
payments, for each of class of tax and fee payment:
17
Way of
counting ---->
Key question
Class of taxes
and fees↓
# 1
Targeted taxes
and fees,
FHWA basis
Are these
revenues from
targeted users
and actually
used for MVIS?
# 2
All targeted tax
and fee
payments
Are these
directly
targeted to
motor- vehicle
users?
# 3
Targeted and
non- targeted
payments
Are these
reasonably
counted as
payments for
MVIS?
# 4
Marginal
Changes in
payments
How do net tax
revenues change
when motor-vehicle
use
changes?
A1. Special
taxes and
fees levied
only on
highway
users and
used by
government
for MVIS
Yes Yes Yes Assume net
revenues
proportional to
changes in MV
use
A2. Other
special taxes
and fees
related to
motor-vehicle
use
but not
counted by
FHWA as
highway-user
charges
No, either
because not
actually used for
MVIS
Yes, directly
targeted to
motor- vehicle
users, even
though the
revenues might
not actually be
applied to
highways
Yes, because
directly related
to motor- vehicle
use, even though
the revenues
might not
actually be
applied to
highways
Assume
disposition of
revenues is
irrelevant;
hence, assume
net revenues
proportional to
changes in MV
use
B. Selective
taxes and
fees levied on
fuels,
vehicles,
drivers, etc.
No, because not
targeted to users
or not used for
MVIS, or both
No, because not
targeted
directly or
specifically
enough to
motor- vehicle
users
Maybe; treat like
class A in one
case, and like
class C1 in
another
Unclear a priori;
depends on
economic
activity in the
baseline vs. the
motor- vehicle-change
scenario
C1. General
( broad-based)
taxes
and fees of
fuels,
vehicles, etc.
No, because not
targeted to users
and not used for
MVIS
No, because not
targeted to
motor- vehicle
users
No, except for
very small
portion of
general taxes
that on average
make up any
funding shortfall
Unclear a priori;
depends on
economic
activity in the
baseline vs. the
motor- vehicle-change
scenario
18
C2. General
corporate-income
tax,
sales tax, and
property- tax
expenditures
or subsidies
No, because not
targeted to users
and not used for
MVIS
No, because not
targeted to
motor- vehicle
users
Maybe; count in
high- cost ( low-payments)
case,
ignore in low-cost
( high-payments)
case
Unclear a priori;
depends on
economic
activity in the
baseline vs. the
motor- vehicle-change
scenario
All four Ways count special tax and fee payments that are levied only on motor
fuels, vehicles, etc. and that are actually used for highways ( class A1). The most
restrictive Way, # 1, counts only this class of tax and fee payments. By contrast, Way # 3
counts several additional specific taxes and fees as user payments for MVIS, and in its
low- cost scenario even counts selective taxes and fees as user payments for MVIS.
Neither Way # 3 nor Way # 1 count general taxes and fees ( class C), with a minor
exception in the case of Way # 3 ( see section 17.3.3). Way # 4, “ Marginal Revenues,”
requires macro- economic modeling or assumptions about economic activity in order to
determine how marginal revenues from selective and general taxes change with
changes in motor- vehicle use.
As mentioned in section 17.1.1, our four Ways of Counting payments presume
that the amount of the payment from any person should be related to the amount of
motor- vehicle use by the person. In Appendix 17- A. 1 we present analysis of user
payments when we relax this assumption and distinguish only between people who
don’t use motor- vehicles at all and people who do, with no concern for how the motor-vehicle
users make their payments.
17.3.6 Mapping the payment categories used here into the FHWA classification ( Way
# 1 of counting)
Because the FHWA’s classification and estimates of user payments are widely
used in this report and by many other researchers, it is useful to map the payment
categories used in this report into the FHWA schema, which is the same as our Way # 1
of counting. This mapping also will help readers understand that the payment
categories are mutually exclusive, exhaustive, and internally consistent.
As discussed in section 17.3.1, the FHWA considers two criteria in its
classification of taxes and fees: whether the charge is targeted specifically to highway
users, and whether it is dedicated specifically to highways. We combine these two
criteria combine to create four logical possibilities for classifying a tax or fee:
i) targeted to highway users and dedicated to highways;
ii) targeted to highway users but not dedicated to highways;
iii) not targeted to highway users but dedicated to highways;
iv) not targeted to highway users and not dedicated to highways;
These categories can be used as a basis for organizing the tax and fee payment
categories used in this report:
19
FHWA category

i) Targeted to users
and dedicated to hwys
ii) Targeted
to users, not
dedicated to
hwys
iii) Not targeted to users,
dedicated to hwys
iv) Not
targeted to
users, not
dedicated
to hwys
Payment category road tolls,
user
imposts for
highways,
interest
Interest on
payments
user taxes and
fees dedicated
to
nonhighway
purposes
other
imposts
environ-mental
taxes,
fines, etc.
selective
taxes and
fees
general
taxes and
fees
Section in this
analysis
17.4.1 17.4.2 17.4.3, 17.4.4,
17.4.5
17.4.13 17.4.8 to
17.4.12
17.5 17.6
Table in this
analysis showing
FHWA
classification
17- 2, cols.
b, c
17- 2, col. l 17- 3 Table 17-
2, col. f
Table 17-
2, cols. g,
j, k
Table 17-
2, col. d
Table 17- 2,
col. e
Table in this
analysis showing
our treatment
17- 2, cols.
b, c
17- 3, col. j 17- 3 ( 17- 4 for
background)
Table 17-
2, col. f
Tables
17- 5 to
17- 10
17- 11 to
17- 13
Tables 17-
14 to 17- 21
Note that these categories follow the FHWA’s definitions of what is “ targeted to
highway users” or “ dedicated to highways.”
We now turn to our actual estimates of user payments. In the following sections I
present estimates of receipts and user payments for highways. After estimating
individual payments we tally the payments according to Way # 1, Way # 2, and Way # 3
of counting and compare the payment tally with government expenditures.
17.4 SPECIAL TAXES AND FEES LEVIED ONLY ON MOTOR FUELS, MOTOR
VEHICLES, DRIVERS, AND SO ON
17.4.1 FHWA- estimated federal, state, and local tax, license, and toll payments by
highway users
User payments in this category are the sum of FHWA- estimated “ road tolls”
( column c of Table 17- 2) and “ highway user imposts for highways” ( column b of Table
17- 2). In 1990 these road tolls and highway user imposts for highways were about $ 44
billion, which was about 59% of the total $ 75 billion in receipts for highways from all
sources ( Table 17- 2).
17.4.2 Interest earnings on payments invested to cover highway and other capital
The FHWA includes investment income from the highway trust fund under
“ miscellaneous receipts” in Highway Statistics Table HF- 1 and under “ investment
income and other receipts” in its Table HF- 10. Recently, the trust fund, including the
portion dedicated to mass transit, has been earning about $ 1.5/ billion per year in
interest on investments ( FHWA, Highway Statistics 1991, 1992). In general, investment
income should be counted as a payment by highway users, because the investment
principal -- including the principal dedicated to mass transit -- comes mainly from
charges on highway users ( Table 17- 2). However, because I am using a different
accounting method than is FHWA ( annualization of capital [ me] versus current annual
20
expenditures [ FHWA]), I estimate investment income – or, what is the same, interest --
differently. The difference is that I impute interest to all user payments invested in
highway capital, whereas the FHWA counts only interest actually earned by investing
funds before they are used to pay for highway capital. Put another way, I treat user
payments as if they were an investment in highway capital, whereas the FHWA treats
them as if they were an annual expenditure.
The FHWA method is appropriate for its accounting method, which reports
annual capital expenditures as opposed to the annualized cost of the entire capital
stock. ( The difference between these two is that the latter includes an interest charge
whereas the former doesn’t.) Since FHWA reports annual capital expenditures without
an interest component, it is appropriate for it report annual user payments without an
interest component. By contrast, I estimate the annualized capital cost of the entire
capital stock. With this method, the total capital value of the infrastructure is amortized
over its life at an appropriate interest rate, and then, in turn, user payments are properly
viewed as being invested in the highway infrastructure, and hence as earning a rate of
return equal to the interest rate at which the capital value of the stock is amortized ( see
Booz Allen Hamilton [ 2005] for a similar discussion).
In sum, we may compare annual expenditures on highways with annual receipts
from highway users, or we may compare the annualized value of the capital stock with
the annualized value of the user payments that go towards capital expenses. If annual
user payments cover annual capital expenditures, then the annualized portion of user
payments towards capital must equal the annualized cost of the capital covered by the
payments12.
Our method of annualizing user payments is to multiply payments toward
capital outlays by an annualization factor. The annualization factor ( AF) is the ratio of
payments with an interest component to payments without an interest component. The
AF used here is the same one used to annualize capital expenditures in Report # 7. The
use of the same AF in the capital- cost analysis of Report # 7 and the user- payments
analysis here makes our estimate of annualized payments towards capital expenditures
equal to annualized capital expenditures.
We estimate annualized user payments in two parts: the actual annual payment
plus the interest component, where the interest component is equal to equal to the
annual payment multiplied by the annualization factor minus one.
To derive the AF, we begin with the standard formula for amortizing
( annualizing) the value of capital stock. Amortization converts a current capital value
into a stream of annual amounts whose present value equals the current capital value of
the stock for particular assumptions about the interest rate and the life of the capital.
( By example, mortgage payments annualize the value of a house.) Formally:
!
AC = RV "
i
1 # ( 1+ i) # t
where:
12 Newbery ( 1998) compares annual road- user taxes with the annual interest on the capital value of the
roadway. I do not think that this method is right: it omits the depreciation of the actual stock itself on the
one hand, and the parallel investment interest that should be imputed to user payments on the other.
21
AC = annualized cost of capital stock ($/ year)
RV = current replacement value of capital stock ($)
i = the discount rate (%/ year)
t = the life of the capital: the number of periods that the capital provides services
without major reinvestment ( years)
For a system, like the highway system, that is constantly being worn out and
replaced, we estimate the replacement value on the basis of annual capital expenditures
and the life of an expenditure. If the system is neither losing nor gaining capital stock
over time, we can assume:
RV =
ACE
ARF
and ARF =
1
t
where:
ACE = annual capital expenditures ($/ year)
ARF = annual capital replacement factor: the fraction of the total capital stock
that is replaced each year by the annual capital expenditure ACE
In other words, if a capital expenditure has a life of t, then in steady state every
year 1/ t of the system is replaced at a capital expenditure of ACE. With this, we have:
Therefore :
AC = ACE " t "
i
1 # ( 1+ i) # t
Now we can define the annualization factor AF:
AF "
AC
ACE
AF = t #
i
1 $ ( 1+ i) $ t
where:
AF = the annualization factor
The annualized cost also can be expressed as an annual “ principal” payment
component plus an annual interest component. Using the nomenclature above:
AC = ACE + AIC
22
where:
AIC = annual interest on annual capital ($/ year)
We now express the interest component, AIC, in terms of the known parameters.
From the definition of the annualization factor we know:
AF " ACE = AC
With this, we set up and solve for AIC:
ACE + AIC = AC = AF " ACE
AIC = AF " ACE # ACE
AIC = ACE " ( AF # 1) eq. [ 17- 1]
I use equation 17- 1 to estimate interest payments ( AIC) accruing to user
payments that go towards capital expenditures. The annualization factor ( AF) and the
annual capital expenditures ( ACE) are as estimated in Report # 7. For the calculation
here, our estimate of ACE includes the motor- vehicle- related portion of government
capital expenditures for highways, police protection, fire protection, corrections, the
judicial and legal system, pollution control and regulation, and energy R &. ( However,
it does not cover interest on government capital expenditures on military equipment
related to motor- vehicle use.) On the basis of data presented in Report # 7, I assume that
these other capital expenditures are 4% to 6% of capital expenditures for highways13.
An objection to this method? One might argue that for the purposes of
calculating AIC for user payments the term ACE in equation 17- 1 should exclude the
value of any capital currently in place that was not paid for by user fees. In this
historical rather than prospective view, one would point out that even though present
13 In the cost model, the value of ACE used is the lower of: total user payments that could be applied
towards capital expenditures, and actual estimated capital expenditures. This is done in order to account
for the theoretical possibility ( which turns out not to obtain in any year) that total annual user payments
might be less than annual capital expenditures. In this context, I have somewhat arbitrarily designated
“ total user payments that could be applied towards capital” to be all motor- vehicle tax and fee receipts
counted by the FHWA ( e. g., in Table HF- 10 of Highway Statistics) less C & A expenses and amounts
placed in the LUST fund: columns b and c of Table 17- 2 plus columns b through i of Table 17- 3 less
collection expenses and LUST fund amounts estimated in Report # 7. I exclude collection expenses and
LUST fund amounts because I assume that user payments must be used to cover these before they can be
used to cover capital costs.
Note that the use of annual capital expenditures ( ACE) in equation 17- 1 ensures consistency in
our treatment of interest on capital expenditures and interest on payments towards capital expenditures:
the same quantity, ACE, is used in the interest- on- expenditures calculation in Report # 7 and the interest-on-
payments calculation here. Note too that the quantity ACE does not include private contributions to
highways; it is public- sector investment only.
23
payments cover present capital expenditures, there must have been a time when current
capital outlays exceeded current user payments, if only because parts of the system had
to be built before there were any users at all to pay for it.
It is true that there was a time when capital expenditures exceeded user payments, but
that was over 60 years ago. In almost every year since 1940, total highway- user
payments, as defined narrowly by FHWA14, have exceeded total Federal, state, and
local capital outlays, and recently by a large margin ( FHWA, Highway Statistics
Summary to 1995, 1997; FHWA, Highway Statistics, annual) 15. From 1921 to 1940, current
capital outlays did exceed current user payments. However, capital outlays for
highways after 1940 swamped outlays before. In constant 1991 dollars, annual capital
outlays for highways, and payments by highway users, look something like this16:
1921- 1940 1921- 2003 1941- 2003 1971- 2003
Total constant- dollar capital outlays
for highways over period ( 109 1991 $)
235 2,060 1,830 1,220
Total constant- dollar user payments
for highways over period ( 109 1991 $)
137 2,820 2,700 1,920
Ratio of payments to capital outlays 0.59 1.37 1.47 1.56
It is clear, then, that the bulk of all highway capital ever put in place, and essentially all
of the present capital, was paid for in the same year that it was put into place.
In conclusion:
14Note that here we compare expenditures on highway capital with receipts from highway users; we do
not compare all public capital related to motor- vehicle use with all payments related to motor- vehicle
use. For this purpose, highway- user receipts are FHWA net receipts of motor- fuel and motor- vehicle
taxes and fees excluding amounts devoted to collection expenses ( as reported in Table HF- 10 in the
FHWA Highway Statistics series) – columns b and c of Table 17- 2 and columns c through h of Table 17- 3.
( Here we do not count imposts used to cover collection costs on the grounds that only user imposts left
over after C & A costs have been covered may be considered to be available to be applied to highway
capital.) Highway- user receipts here do not include air- quality and other environmental fees on motor
vehicles, environmental excise taxes on petroleum, gas- guzzler taxes, luxury taxes, traffic fines or parking
fines, parking taxes, other special taxes and fees, severance taxes paid on oil and gas, special property
taxes, selective sales taxes, potential revenues from better collection efforts, or any portion of any general
tax used for highways.
On the capital- expenditures side of the ledger, we count only highway capital; we do not include
expenditures for police, fire, judicial, legal, correctional, regulatory, or other public capital related to
motor- vehicle use. Data and analysis in Report # 7 indicate that all of this other motor- vehicle- related
capital expenditure is 5- 10% of the outlay for highway capital.
A comparison of expenditures for all public capital related to motor- vehicle use with all user
payments would be similar to the comparison of highway capital with highway- user payments.
15In 1954, highway- user payments were 93% of capital outlays, and in 1955, they were 97% of capital
outlays.
16Current dollars from 1959 to 2003 were converted to 1991 dollars using the GDP implicit price deflators
( available on the Bureau of Economic Analysis web site, http:// www. bea. doc. gov). Current dollars from
1921 to 1959 converted to 1991 dollars assuming 3.06%/ year change in the GDP implicit price deflator.
24
• Today, highway- user payments easily exceed capital outlay for the highways.
• The present highway system was in fact financed out of current revenues over
the past six decades.
17.4.3 Highway- user revenue and road tolls dedicated to nonhighway purposes
The FHWA does not count as highway- user payments the portions of motor- fuel
excise taxes, motor- vehicle taxes, and road tolls that are dedicated to mass transit
( including the Mass Transportation Account of the Highway Trust Fund), reducing the
federal deficit, the Leaking Underground Storage Tank Trust Fund, and other
nonhighway purposes. ( Table 17- 4 shows Federal motor- fuel taxes dedicated to
nonhighway purposes, in $/ gallon.) Under Way # 1 of counting, I follow this
convention. However, under Way # 3 of counting I do count these as payments for
motor- vehicle use. Table 17- 3 shows the user payments that are excluded from Way # 1
of counting but included in Way # 3 of counting.
My reasons for counting the payments in Table 17- 3 under Way # 3 are as
follows. To the motor- vehicle user, the portions of the motor- fuel tax that are earmarked
for deficit reduction, the leaking- storage- tank fund, mass- transit, and other nonhighway
purposes are indistinguishable from the potions dedicated to highways. Indeed, to the
motor- vehicle user, the entire price of gasoline is a cost of motor- vehicle use. Moreover,
I do not know of another commodity that is federally taxed specifically to provide
revenue to reduce the deficit or support mass transit, and I see no way in which motor-vehicle
users have a special obligation to reduce the deficit or finance mass transit.
( Federal expenditures on highways do contribute to the deficit, because expenditures
exceed user revenues dedicated to the highways, but this actually is a reason to count
the deficit tax on gasoline as essentially a user charge for the highways.) For these
reasons, under Way # 3 of counting, I treat highway- user revenue dedicated to
nonhighway purposes the same as highway- user revenue dedicated to the highways.
Consequently, I count the entire gasoline tax ( except that most of the sales tax is
excluded; see below) as a payment by motor- vehicle users for motor- vehicle use ( Table
17- 3).
These amounts, which as noted above add to the amounts that FHWA counts as
user payments, are estimated on the basis of data in FHWA’s Highway Statistics ( various
years) and Highway Statistics, Summary to 1995 ( 1997). Details are provided in the notes
to Table 17- 3.
As a check on the estimates of Table 17- 3, we have used different FHWA data
( i. e., data other than that reported in Tables HF- 10 and HF- 210) to make an alternative
estimate of highway- user payments dedicated to non- highway purposes. This
alternative estimate is discussed in Appendix 17- A. 5. In most cases the alternative
estimate is within 10% of the Table 17- 3 estimate.
17.4.4 Payments that go towards the cost of collecting and administering motor- fuel
taxes.
Public agencies incur costs to collect and administer funds related to the use of
motor vehicles. These collection and administration ( C & A) costs are real resource costs
of motor- vehicle use, and as such are estimated in Report # 7. However, C & A costs also
are relevant in our analysis here of user payments because the FHWA’s accounting
convention is different from ours: what the FHWA reports as receipts for highways
( shown in Table 17- 2 here) is equal to total receipts less C & A costs, whereas what we
wish to know is total receipts including any amounts applied towards C & A costs.
25
Thus, our estimate of motor- vehicle- user payments here will be equal to FHWA’s
estimate of receipts net of C & A costs ( as shown in Table 17- 2) plus whatever C & A
costs the FHWA has excluded from its estimates of highway- user receipts17.
Our task, then, is to estimate and report in Table 17- 3 the highway- user receipts
that the FHWA has excluded from its estimates of receipts for the highways ( in Table
17- 2). Information on the collection and administration ( C & A) costs excluded is
provided in FHWA’s Table HF- 10 ( Highway Statistics, various years) and HF- 210
( Highway Statistics: Summary to 1995, 1997) ( available at
www. fhwa. dot. gov/ policy/ ohpi/ hss/ index. htm). The FHWA information, and my
treatment of it, is as follows:
Federal government State government Local governments
Total receipts
( including any
amounts
applied to C &
A costs)
Reported in Tables
HF- 210 and HF- 10.
Reported in Tables
HF- 210 and HF- 10.
Not reported. See cells
below.
Receipts
applied to C &
A costs
Zero: a footnote to
Tables HF- 210 and
HF- 10 says that
federal C & A costs
are paid out of
general funds.
Reported in Tables
HF- 210 and HF- 10.
Not reported. A footnote
to the “ collection
expenses” line in Table
HF- 10 says that “ local
motor- fuel and motor-vehicle
tax data are
reported net of collection
expenses” 18
Highway- user
receipts ( net of
amounts
applied to C &
A costs)
Reported in Tables
HF- 210 and HF- 10;
equal to total
receipts less
amounts applied to
C & A costs
Reported in Tables
HF- 210 and HF- 10;
equal to total
receipts less
amounts applied
to C & A costs
Reported in Tables HF-
210 and HF- 10.
Treatment in
this analysis
Since highway- user
receipts ( in Table 17-
2) equal total
receipts, no
adjustment to Table
17- 2 data is
Add FHWA-reported
amounts
applied to C & A
costs ( see column
b of Table 17- 3), to
arrive at total
Estimate receipts applied
to C & A costs ( see
column i of Table 17- 3
and discussion below);
add to reported net
highway- user receipts to
17 Note that our method ensures a comprehensive and symmetrical accounting: on the one hand we
estimate all user payments, without any exclusion of payments applied towards C & A costs, and on the
other we estimate all C & A costs, including some that the FHWA does not estimate [ Report # 7].
18 This is what the footnote to Table HF- 10 says from 1996 on. Prior to 1996, the Table HF- 210 footnote
says that “ data for local government expenses are not available.”
26
necessary receipts arrive at total receipts
To estimate the C & A costs that local agencies deduct from the receipts reported
to FHWA, I simply multiply reported net local receipts by an estimated ($- C & A)/($-
receipts) factor, the factor being estimated on the basis of the reported state receipt and
C & A costs:
!
CA
LOCAL, Y =
CAF
Y " NREC
LOCAL, Y
1 # CAF
Y
CAF
Y =
CA
STATE, Y
TREC
STATE, Y
where:
CALOCAL, Y = motor- vehicle- revenue collection and administration costs of local
governments paid for out of local motor- vehicle- user revenues, in year Y
($)
CAFY = dollars of C & A cost per dollar of total receipts, in year Y ( about 0.06 in
most years)
NRECLOCAL, Y = local motor- vehicle- user revenues net of C & A costs, in year Y ($)
( HF- 10 of Highway Statistics and HF- 210 of Highway Statistics: Summary to
1995, 1997)
CASTATE, Y = motor- vehicle- revenue collection and administration costs of state
governments paid for out of local motor- vehicle- user revenues, in year Y
($) ( Table HF- 10 or Table DF of Highway Statistics and HF- 210 of Highway
Statistics: Summary to 1995, 1997)
TRECSTATE, Y = total state motor- vehicle- user revenues available for distribution,
including amounts used for C & A costs, in year Y ($) ( Table DF of
Highway Statistics)
Note that we use the form with 1- CAF in the denominator because CAF is
defined with respect to total revenues including amounts used for C & A but is being
applied to local revenues net of amounts used for C & A.
17.4.5 Property- tax- like fees specifically related to motor- vehicle use.
As indicated in section 17.3, there are a variety of taxes and fees that are
specifically related to motor- vehicle use and that one might reasonably I count as
payments by users for MVIS, but that FHWA does not. These are discussed in sections
17.4.3 to 17.4.13 of this report. In this subsection we focus on a particular subcategory,
property- tax like fees on motor vehicles. All of these are assessed at the state level, and
have different forms and names from state to state. In this subsection I discuss several
different kinds of property- tax fees in several states:
i) license fees assessed “ in- lieu” of a property tax on motor vehicles
( California, Washington, Arizona, Massachusetts);
ii) motor- vehicle “ impact” registration fee ( Florida);
iii) specific ownership tax ( Colorado);
27
iv) personal property tax ( many states, but focus on Virginia here).
Information on these property tax- like fees comes from several sources,
including FHWA’s Highway Statistics, Table S- 106 of FHWA’s Highway Taxes and Fees
1991, “ Provisions Governing the Allocation for Highway Purposes of Certain State
Taxes, Fees, and Appropriations ( Other Than Highway user Revenue),” and the
Census’ State Government Tax Collections 1991 ( 1992).
i) In- lieu fees. In California, a motor- vehicle owner pays several fees at the time
of registration: a flat registration fee of $ 27, a $ 1 fee for the California Highway Patrol
( statewide), a $ 1 abandoned- vehicle fee ( statewide), a $ 1 auto- theft fee ( statewide), a $ 1
SAFE fee ( in most counties), an air quality fee of $ 1 to $ 6 ( the amount varies from
county to county), and a vehicle- license fee ( in lieu of property taxes) of 2% of the value
of the vehicle. All these fees are billed on one form ( the vehicle license fee is separately
identified), and paid in one lump- sum payment to the Department of Motor Vehicles
( California Department of Motor Vehicles, 1993). I assume that FHWA counts all of
these fees except the vehicle license fee as highway- user payments for highways.
Regarding the license fee, FHWA counts this as a highway- user payment, but one that
is allocated for nonhighway purposes, not highway purposes ( FHWA, Highway
Statistics 1991, 1992; FHWA, Highway Taxes and Fees 1991, 1991) 19. Therefore, under Way
# 3 of counting in this analysis, the California vehicle license fee ( which amounts to
more than $ 2 billion annually [ Table 17- 12] -- nearly half of the total nonhighway
allocation of all state highway user fees) is already included in our estimate of highway
user revenue dedicated to nonhighway purposes ( estimated in section 17.4.3 and shown
in Table 17- 3).
In Washington, a “ vehicle excise tax” is collected annually in lieu of a property
tax on motor vehicles. The tax is 2.22% of the value of the vehicle, which is taken to be
the Manufacturer’s Suggested Retail Price when the vehicle is new, and some
depreciated value in subsequent years. There also is a flat annual registration fee of
$ 23.85 ( Washington Department of Motor Vehicles, 1993). The vehicle excise tax and the
registration fee are billed on the same form and paid together in a lump- sum payment.
The FHWA counts the Washington vehicle excise tax as highway- user payment, but one
that is allocated for nonhighway purposes, not highway purposes ( FHWA, Highway
Statistics 1991, 1992; FHWA, Highway Taxes and Fees 1991, 1991). Therefore, under Way
# 3 of counting in this analysis, the Washington vehicle excise tax is already included in
our estimate of highway user revenue dedicated to nonhighway purposes ( estimated in
section 17.4.3 and shown in Table 17- 3).
Arizona charges a flat annual registration fee of $ 8.25, plus a $ 1.50 air quality fee
( statewide), plus a motor- vehicle license tax of 4% of the assessed value of the vehicle20.
19The FHWA includes the in- lieu fees paid in California and Washington as “ state registration fees” in
Table MV- 2 of Highway Statistics, but writes in the notes to Table MV- 3 that these fees are allocated for
nonhighway purposes. ( However, the total in- lieu amount collected in Washington, shown in Table MV-
2, exceeds the amount of money allocated in Washington for nonhighway purposes.) The “ highway- user
tax revenues” of summary Table HF- 1 in Highway Statistics specifically exclude amounts allocated for
nonhighway purposes; hence, the in- lieu fees are not counted as highway- user tax revenues in HF- 1.
20 A portion ( 31.5%) of the license tax is dedicated to the state’s Highway- User Revenue Fund ( FHWA,
Highway Taxes and Fees, How They Are Collected and Distributed 1991, 1991). The portion of the license tax
that is dedicated to highways presumably is included in the FHWA’s estimates of receipts for highways,
most likely under the “ property tax” column, but possibly under the “ other imposts” column of Highway
28
In the first year, when the vehicle is new, the assessed value of the vehicle is 60% of the
factory list price. This assessed value is then reduced by 15% per year. The fees and the
license tax are billed on the same renewal form ( Arizona Department of Motor Vehicles,
1993).
The FHWA does not count the Arizona license tax as highway- user revenue.
Although the FHWA lists a “ vehicle license fee ( in lieu tax) in Arizona” in Table MV-
106 ( which shows motor- vehicle and motor- carrier receipts for the highways) in the
1991 version of Highway Taxes and Fees, it also shows a “ motor- vehicle license tax” in
Arizona in Table S- 106, which shows “ other than highway- users revenue” ( FHWA,
Highway Taxes and Fees 1991, 1991) ( Table 17- 12 here). For three reasons, I believe that
the FHWA does not classify the Arizona license tax as a user charge, and hence does not
count receipts from the tax among the highway- user revenues reported in Highway
Statistics. First, the description of tax in Table S- 106 matches the description of the tax
provided by the Arizona Department of Motor Vehicles ( 1993). Second, the tax is not
listed in Table MV- 106 in the corrected 1995 version of Highway Taxes and Fees. Third,
my comparison of the receipts reported by the Bureau of the Census ( State Government
Tax Collections 1991, 1992) with the user payments counted by the FWHA ( Highway
Statistics 1991, 1992) suggest that the FHWA does not count the Arizona special
property tax as a user payment21.
A separate question is whether the Census’ “ special property tax” shown in
Table 17- 12 for Arizona is in fact the Arizona in- lieu license fee. The Census describes
this tax as applying to “ public utilities – motor carriers” ( Table 17- 12), which certainly
does not seem to be the same thing as an annual motor- vehicle license tax. Also, the
amount shown by the Census ( about $ 100 million – Table 17- 12) is considerably less
than one would calculate based on the information presented above ( e. g., $ 100/ vehicle
multiplied by nearly 3 million vehicles is almost $ 300 million/ year). I assume that the
Census’ special property tax shown in Table 17- 12 is not the same as the vehicle license
in- lieu fee, and so count them both: the special property tax shown by the Census ( Table
17- 12 here) is counted in section 17.5.3 as a selective property tax, and the nearly $ 300
million/ year estimate for the in- lieu fee is counted in this subsection as an in- lieu fee.
Massachusetts charges a 5% sales tax at the time of purchase, and afterwards an
annual excise tax -- in lieu of a property tax -- of 2.5% of the National Auto Dealers
Association Blue- Book trade- in value ( for light- duty vehicles). The excise tax is charged
on motor vehicles only, and is collected independently of the vehicle registration, which
is collected by the states. The tax revenues go to municipalities, which may use them as
they wish. The excise tax is not included in FHWA’s Highway Statistics or Table S- 106 of
Highway Taxes and Fees 1991 ( FHWA, 1991), which suggests that it is not included in
Tables 17- 2 or 17- 3 of this report. Now, the Census’ State Government Tax Collections
does report a vehicle excise tax as a special property tax in Massachusetts, but the
amount of revenue it shows as being collected from this tax ( about $ 400,000/ year; see
Table 17- 12) seems at least two orders of magnitude smaller than what one would
Statistics ( see Table 17- 2 here). In any event, because I do not count as user payments any of the property
taxes or “ other imposts” reported by FHWA, there is no possibility of double counting when I add in the
Arizona license tax as user payment.
21I do not understand why FHWA considers the Arizona fee to be “ nonuser” when it is functionally
identical to the California and Washington fees. All of them are a value- based motor- vehicle registration
fee in lieu of a property tax.
29
expect given a rate of 2.5% of trade- in value. ( For example, 2.5% multiplied by, say,
$ 2,000/ vehicle and about 3.5 million LDVs in Massachusetts results in $ 175
million/ year.) Nevertheless, I assume that the vehicle excise tax/ special property tax
reported by the Census and shown in Table 17- 12 here is the only such property- tax or
property- tax- like fee on motor vehicles in Massachusetts, and count it as a “ special
property tax” ( section 17.5.3., Table 17- 12, item B2 in Table 17- 22) and not as an in- lieu
tax here.
ii) “ Impact fee” in Florida. The first time an owner registers a vehicle in Florida,
she pays a $ 100 registration fee and a $ 35 dollar title fee. Every year, including the first
year, the owner pays a license fee, which is a function of the weight of the vehicle, and
in some counties an emissions fee or air- pollution- control fee ( about $ 1.00) ( Florida
Department of Motor Vehicles, 1993). The registration fee, title fee, and license fee are
included in the revenues reported in FHWA’s Highway Statistics. However, if an in-migrant
to Florida brings a vehicle into the state, he or she also pays a $ 295 “ impact fee”
or “ road- user fee” the first time he or she registers the vehicle in the state of Florida.
This fee does not apply to vehicles bought from Florida car dealers. The FHWA believes
that the intent of the fee is to reduce the number of vehicles in the state. This fee is not
included in Highway Statistics or in Table S- 106 of Highway Taxes and Fees 1991, 1991).
Because the impact fee is specifically aimed at motor- vehicle use, I think that it
should be counted as a payment by motor- vehicle users for motor- vehicle use under
“ Way # 3” of counting. Because the Census’ State Government Tax Collections 1991 ( 1992)
does not identify an “ impact fee” or “ road- user fee,” I must estimate it in this section.
According to the Statistical Abstract of the United States 1992 ( Bureau of the Census,
1992), annual immigration to the South is about 4% of the total population in the South.
Florida probably receives the lion’s share of Southern immigration -- probably 5 to 7%
of the state population annually. However, many of the immigrants are retirees who do
not bring a vehicle into the state. Based on this, I assume that the Florida impact fee
applies to 5% of the total registered fleet, and thus generated about $ 160 million in 1991.
iii) Specific ownership tax ( Colorado). Colorado charges a specific ownership tax
of $ 0.50/ personal vehicle, for the operation of a statewide distributive data processing
system for processing motor- vehicle registration and title documents ( FWHA, Highway
Taxes and Fees 1991, 1991). Because this ownership tax listed in FHWA’s Table S- 106
( Highway Taxes and Fees 1991), which shows what FHWA considers to be nonuser
charges dedicated to highways, it probably is included as a property- tax or “ other-impost”
receipt in FHWA’s Highway Statistics ( see Table 17- 2 here). Because the tax is
not shown as a special property tax in the Census State Government Tax Collections 1991
( 1992), I must estimate it here. At $ 0.50/ vehicle, the tax probably amounts to around $ 1
million ( compared, for example, to over $ 2 billion for the California in- lieu tax), which
is insignificant in my accounting. I ignore it.
iv) Personal property taxes. In many states motor- vehicles are assessed a
personal property tax. Where these are clearly general property taxes, they are
discussed in section 17.6.5. Here, I discuss one specific personal property tax for which I
obtained data from state authorities.
Virginia charges a $ 10 title fee and 3% sales tax on new vehicles, an annual
weight- based registration fee, and an annual personal property tax. The personal
property tax is assessed on boats and planes as well as on motor vehicles. The rate
varies from county to county. Importantly, this tax is not billed with the state with
registration fee; it is billed separately by, and paid to, the counties ( Virginia Department
of Motor Vehicles, 1993). The personal property tax apparently is not dedicated to
30
highways, because it is not included in Highway Statistics or in Table S- 106 of Highway
Taxes and Fees 1991, 1991). The Census’ State Government Tax Collections 1991 ( 1992) also
does not show a special motor- vehicle property tax in Virginia. On the other hand, the
Census’ Census of Governments does show a general property tax on motor vehicles in
Virginia ( Table 17- 21). Because the Virginia tax is a normal property tax, not an in- lieu
tax charged with the vehicle registration or even a “ special” property tax in the Census’
accounting, I do not count it here and instead treat it as a general property tax and
assume that it is included with the amounts estimated for Virginia in Table 17- 21.
Summary of treatment of property- tax- like fees.
California in- lieu fee: included already in Table 17- 3 amounts, so not added
here.
Washington in- lieu fee: included already in Table 17- 3 amounts, so not added
here.
Arizona in- lieu fee: not included in Table 17- 3 or Table 17- 2, so estimate
separately here: assume $ 100 dollars/ vehicle in 1991, increasing at 2% per year,
multiplied by FHWA- reported vehicle registrations in Arizona ( Table MV- 2 of Highway
Statistics; use actual registrations for 1991 and 2003, interpolate for other years).
Additional special property tax on motor carriers shown in Table 17- 12 and counted
separately in section 17.5.3.
Massachusetts vehicle excise ( in- lieu) tax: probably not included in Table 17- 3
or Table 17- 2; count as a “ special property tax” ( section 17.5.3, Table 17- 12, item B2 of
Table 17- 22) and not as an in- lieu fee here.
Florida impact fee: not included in Table 17- 3 or Table 17- 2, so estimate
separately here: assume $ 295 dollars/ vehicle in 1991, increasing at 2% per year,
multiplied by FHWA- reported vehicle registrations in Florida ( Table MV- 2 of Highway
Statistics; use actual registrations for 1991 and 2003, interpolate for other years).
Colorado specific ownership tax: not included in Table 17- 3 or Table 17- 2, but
estimated to be trivial; ignored.
Virginal personal property tax: count as general property tax included with
estimates of Table 17- 21.
17.4.6 The amount extra that highway users would have paid in 1991 had the October
1993 $ 0.043/ gallon increase in the Federal excise tax, and other increases in state and
local excise taxes, been in effect
This amount no longer is counted. See Appendix 17- A. 4.
17.4.7 The amount extra that would have been collected had there been less, or no,
tax evasion
This amount no longer is counted. See Appendix 17- A. 4.
17.4.8 Air- quality and other environmental fees on motor vehicles
Some states assess a small fee with the vehicle registration, to fund air- quality
planning and control activities. Others charge fees for emissions inspections, disposal of
tires, and other environmental impacts or programs. Clearly, these fees are viewed as a
price of motor- vehicle use -- often, they are paid with the annual vehicle registration fee
-- and in my view are reasonably attributable to motor- vehicle use. I count them as user
payments for MVIS under Way # 3 of counting.
It appears that some but not all of these fees are counted as highway- user revenue in the
FHWA’s Highway Statistics. My task is to estimate the fees that FWHA does not but in my
31
judgment should include as highway- user revenue -- payments by motor- vehicle users ( under
Way # 3 of counting) -- for 1991.
Table MV- 106 of Highway Taxes and Fees 1991 ( 1991) and Highway Taxes and Fees 1995
( 1995) lists the disposition of state motor- vehicle and motor- carrier receipts considered to be
highway- user revenue. Table 17- 5 shows all of the environmental fees listed in the 1995
version of Highway Taxes and Fees, and indicates with an asterisk (*) those that are not listed in
the 1991 version of MV- 106. It is likely that at least some of the fees not listed in 1991 simply
did not exist in 1991. However, the California fees, at least, did exist in 1991, and in my view
should have been counted as highway- user revenue. ( The FWHA now agrees, and includes
the California fees in the 1995 version of Table MV- 106 in Highway Taxes and Fees.) I suspect
that some of the other fees not listed in 1991 actually did exist in 1991 and should have been
counted as payments by motor- vehicle users. I assume that in 1991, 20% of the 188 million
vehicles registered in the U. S. paid an environmental fee that I would consider a user payment
under Way # 3 of counting but that FHWA does not. If the average fee in 1991 was $ 1.50, then
the total additional receipts were $ 60 million, a quite minor amount nationally. I assume that
the average fee per vehicle increased by 2%/ year from the 1991 value, but that the fraction of
vehicles subject to an air quality fee that I would count as a user payment but that FHWA
doesn’t remains at 20%.
17.4.9 Environmental excise taxes on petroleum
Environmental excise taxes are taxes on petroleum products and certain
chemicals to finance the Hazardous Substances Trust Fund ( Superfund) and the Oil
Spill