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Virginia's Transportation Needs Shortchanged by Flawed Federal Program

Virginia’s Transportation Needs Shortchanged by Flawed Federal Program

August 1, 2002

Escalating levels of road use now make traffic congestion in the Washington area third worst in the nation. How to address the problem has been a source of debate for years. The solution now recommended by many state officials and the business community is a half a percent increase in the sales tax in northern Virginia, and a full percent increase in Hampton Roads to fund more road and rail projects. On November 5, residents in both locations will vote for or against the increase. Both sides are gearing up for a fight between now and then.

Before frustrated Virginia commuters commit themselves to higher taxes, they might want to have their elected officials take a closer look at how the federal highway program mistreats the Old Dominion. Doing so will reveal opportunities for fundamental reform that can send substantially more federal highway money to Virginia at current tax rates. One promising reform – called “turn back” – would devolve the federal program to the states by allowing each to keep the federal fuel tax revenues raised within their borders rather than sending them to Washington. If enacted, this reform would guarantee that federal fuel taxes paid by Virginia drivers will no longer subsidize motorists in the wealthy states of the North, or the special interests that divert fuel taxes to other purposes.

For the most part, the predominant share of public spending for roads and transit comes from the fuel tax motorists pay every time they fill their tank with gasoline. In Virginia the price of each gallon of gas includes a state fuel tax of 17.5 cents and a federal fuel tax of 18.4 cents. The Virginia tax stays in the commonwealth for local transportation purposes, but the federal tax first goes to Washington before a portion is returned to the state. In the case of Virginia as well as twenty-nine other mostly southern states, the amount of money returned in 2000 was less than the taxes paid. The other twenty states, mostly in the North and West, got more back than they paid in.

Between 1992 and 1996, Virginia received only an eighty-three percent share of what it paid into the highway trust fund, while Massachusetts got back two and a half times its contribution. Several other southern states fared even worse than Virginia, receiving less than eighty percent of their contribution. All the states in the northeast, however, received paybacks exceeding the fuel taxes they paid.

Although federal legislation passed in 1998 was supposed to lessen these disparities, the effort fell short, and southern states still subsidize highway spending in the North. In 2000, Virginia received back only eighty-nine percent of its contribution to the program, and the missing eleven percent was a costly loss. Had Virginia received back as much as it paid in that year, it would have had an extra $95 million dollars for roads, and an extra $80 million in 1999. With annual deficiencies like this stretching back over the past decade, is it any wonder our roads are so inadequate?

Obviously, a more equitable program would eliminate much of the need for an increase in the sales tax. Given how poorly Virginia fares under the federal law, perhaps a more useful endeavor for Senator John Warner would be to restore to Virginia its fair share of the federal money, rather than promote an increase in a regressive tax to compensate for his inaction on a problem that has existed for much of his twenty-four years in the U.S. Senate.

A second congestion-causing flaw in the federal program that burdens Virginia is the diversion of the federal fuel tax revenues to purposes other than roads. When the trust fund was created in 1956, all federal fuel taxes were spent on the interstate highway system, but by the early 1980s as the system neared completion, the federal fuel tax was increased with more and more of it siphoned off into non-highway programs such as mass transit and other uses of little value to motorists.

Although motorists contribute almost twenty percent of their fuel taxes to transit programs, this diversion leads to even greater regional inequities because seventy-five percent of transit ridership occurs in just seven metropolitan areas. As a result of these competing claims on the trust fund and the diversion of federal highway money from the South to the North, Virginia motorists are getting back as little as 58 cents in general purpose highway money for every tax dollar they send to Washington.

The enactment of turn back legislation will rectify this persistent inequity and allow each state to spend its gas tax revenues on the transportation priorities of its own choosing, not Washington’s.

It also allows states to do so unencumbered by costly federal regulations that try to force a one-size-fits-all program on a diverse nation. And most importantly, the fast growing southern and western states would keep their fair share of the funds, and end the traffic congestion that past inequities, and Senators asleep at the wheel, have helped create.