Transportation Subsidy Facts

Published by NARP in 1992

Using the narrowest possible definition, highways enjoyed a subsidy in 1993 of $5.8 billion from all levels of government: the net result of $20.5 billion in non-highway-user payments going to roads, and these non-highway uses of highway user payments: $5.0 billion for transit, $9.8 billion for other purposes. (The $20.5 billion—up from $18.3 billion in 1990-includes $4.8 billion property taxes & assessments $4.5 bill.; $12.7 billion general appropriations; and $3.0 “other taxes and fees”.) (Source: Federal Highway Administration.)

FHWA excludes highway-related costs of police and fire depts., emergency medical service providers, city/county prosecutors, and tax losses from land paved for automotive purposes. “A full accounting of the manifold subsidies the automobile receives, plus the environmental and health costs it entails, might cool the passion felt for cars ....In the U. S., total subsidies may surpass $300 billion each year—an amount equal to all personal auto-related expenditures. A preliminary, conservative estimate puts the subsidy at some $2,400 for every passenger car. If these expenses were reflected in retail fuel prices, a gallon of gasoline might cost as much as $4.50. Furthermore, other, less quantifiable costs of the auto system are disregarded in conventional analyses as mere ‘externalities.’ An environment tax, assessed either on automobiles or fuels, would help internalize these costs.”—Michael Renner, Rethinking the Role of the Automobile, page 48, Worldwatch Institute, June 1988.

Railroad passengers paid the U.S. Treasury (“general funds”) $2.0 billion in ticket taxes 1942-62. [Rail freight shippers paid $3.1 bill. in federal freight waybill taxes 1942-58]. (These sums would be far larger if stated in 1994 dollars!) The Senate Commerce Committee’s Doyle Report (“National Transportation Policy,” 6/26/61) cited this tax as “one of the factors under Federal control which favors the growth of private transp. and makes the preservation of public service more difficult.”

Federal aviation subsidies through mid-1988 totaled $32.8 billion (adding figures in the next two bullets). This excludes spin-off benefits to airlines from the military aero-space research program; the airports’ tax-free bonds; and the costs of unnecessary damage to the environment and our trade deficit caused by overdependence on short-distance flights and neglect of high speed rail. (The national Amtrak system averages just half the airlines’ fuel consumption per passenger-mile.)

Air passengers also paid the federal passenger ticket tax (originally imposed as a war emergency measure), but the federal government was busily investing in air facilities at almost five times the rate at which air ticket tax revenues were being collected. “Airport and airway development costs incurred prior to the assessment of user charges in 1971 have been treated as sunk costs, none of which have been or will be paid for by air carriers and other system users ....these sunk costs total $15.8 billion.”—Study of Federal Aid to Rail Transportation, U. S. Department of Transportation, January 1977 (under Pres. Ford). (Air passengers paid no federal ticket tax 1963-70.)

Based on the FAA’s estimate “that private-sector users are responsible for about 85% of FAA’s spending for aviation programs,” the Congressional Budget Office (CBO) concluded that private-sector air users “have received a general fund subsidy of $17 billion, which is equal to the difference between the private-sector share of FAA spending and aviation-related excise taxes since the start of the trust fund.” CBO special study, The Status of the Airport and Airway Trust Fund, December 1988.

If air users “paid for all the costs” they cause, the air trust fund “would be running a deficit of more than $1 bill. annually.”—Victor S. Rezendes, Assoc. Dir.—Transp. Issues, General Accounting Office, 5/11/89 Senate Approps. Subcomm. testimony.

Airports “need” tax-free bonds:“It is inconceivable that a modern airport, which under the existing tax code includes such public service accommodations as terminals and their related retail stores, runways, hangars, loading facilities, cargo buildings, parking areas and maintenance bases, as well as appropriately sized inflight meal facilities, hotels and meeting facilities, could be provided on any adequate scale by taxable financing.”—Robert J. Aaronson, (then-)Dir. of Aviation, Port Auth. of NY & NJ, in Aviation Week & Space Technology, 9/16/85.

Federal tax policies favor driving over public transit. Employer-provided parking, whether offered at reduced rates or free, was untaxed until 1992; now only the value above $155 a month is taxed. In contrast, all employer-provided transit fares were taxed until the Tax Reform Act of 1984 established a modest $15 a month tax-free allowance limit, along with the “cliff” provision under which the entire amount was taxable if the Employer offered a penny over $15. The IRS administratively raised the limit to $21 in 1991; the 1992 energy law raised the limit to $60 and eliminated the cliff.  Ed Note—in 2007, the transit tax-free figure is now $120.00.

Largely because of low federal and state taxes, the pump price of gasoline is lower in the U.S. than in most other countries.

[Price including tax, Tax itself]
(Averages, first half of 1992, with nat’l and local taxes—from API, IMF in NY Times 10/18/92.)

U. S.—$1.22, $0.34
United Kingdom—$3.21 $2.21
Japan—$3.55, $1.63
Germany—$3.65, $2.59
France—$3.65, $2.80
Italy—$4.74, $3.56

In 1/92, NY State’s tax was an above-average $.30 a gallon—$.08 excise, $.14 gross receipts and roughly $.08 sales. (Sales tax is 7% of pump price minus fed tax.) Some misleading state tax tables show only the excise tax.

The U. S. spends more of its gas taxes on roads than do many other countries. Netherlands and Great Britain spend about 25%-most other European countries about 33%—of road fees on roads. (U.S. DOT, Nat’l Transp. Strategic Planning Study, 3/90 p. 6-10.)