Peak Tax Will Hit Before Peak Oil
Regular reader “Brian” posted the following comment to a recent post:
Before peak oil, however, there will be the phenomenon of “peak tax.” Oil demand will certainly outpace oil supply, but even sooner, fuel taxes will not be able to keep up with road building demand.
Folks love new and maintained highways, but they don’t want higher taxes to pay for them. Even if gas prices stay around $2 per gallon in the near future, fuel tax receipts can’t keep up with the American appetite for more lane miles per person.
I hadn’t really given much thought to the issue of transportation funding being tied to fuel taxes but he makes a very good point. Each year we keep building more new roads and bridges, meanwhile our aging roads and bridges need maintenance. Labor and material costs continue to rise. Yet funding for all this is dependent upon using more gasoline.
As we encourage more people to walk, bike, scoot, take the bus or light rail, carpool or to drive more efficient vehicles the less money we are going to have for road building projects. Unless, of course, people start driving more miles. But the pattern is clear, fuel taxes are not keeping pace with road maintenance/building expenses. Something must change.
Either the fuel tax rate must go up or expenses must go down, or some combination of both. Raising the tax rate seems difficult politically. So does lowering costs.
Like today, the City of St. Louis will remain the most compact jurisdiction in the region in the year 2030. St. Louis County trails with the remaining counties at low densities. At one time these low density counties had the bulk of their population concentrated in cities such as East St. Louis IL, Belleville IL or Hillsboro MO. Along with the rest of the country these counties have spent the last 50+ years spreading themselves out in sprawling cul-de-sac subdivisions and strip centers anchored by big box developments.
But let’s look at density from another perspective. I created the chart shown to the left from population and miles of roadway figures supplied by the East-West Gateway Council of Governments.
More density means you have more people to pay for the infrastructure that is in place, roads in this case. As fuel use flattens out or decreases we’ll need to find other ways to tax ourselves to pay for our roads and bridges. The more people sharing the costs the better. The City of St. Louis, St. Louis County and parts of St. Clair County (East St. Louis) can increase population without the need to create new miles of roads. The other areas are adding population but also adding more and more miles of roads.
This process of continuing to build more and more roads and expensive bridges at such low densities is not sustainable forever. The burden of maintaining this sprawl will be disastrous to our region. We should be investing today in repopulating the City of St. Louis, St. Louis County’s inner-ring suburbs and the close-in municipalities in metro East Illinois. Before everyone jumps to the comment section to tell me people want suburbia and an SUV, I just don’t believe it.
Yes, on the surface that is certainly true. But the American public has been brainwashed over the last 50 years to the point most of our population lives in suburbia and they don’t know anything else. The success of New Urbanist developments, like New Town at St. Charles, across the country as well as renewed interest in cities says to me people are seeking alternatives. The process of vacating cities for sprawl was gradual and took a couple of generations.
Government policy around housing, lending, and roads had much to do with the rise of suburbia. The question is will we as a region be wise enough to see the writing on the wall and change our policies around housing, lending and roads to return to a more sustainable development model? I certainly hope so.
– Steve
The problem with transportation tax policy it is largly a state and federal issue. The feds charge about 18 cents a gallon as does Missouri (total 36-cents +-). About two cents of the federal tax is set aside for transit. None of the Missouri fuel tax is set aside for transit.
With suburbanization, compact areas end up subsidizing the roads demanded for sprawl since that is where the demand is. At least in states like Illinois it is a bit more equalized since a part of the taxes on suburbanites and rural areas flows back to the cities in support of transit. Also, it is another reason why toll roads might make sense in Missouri.
Steve,
Something about your comments just didn’t add up in my mind.
It took a while, but I think I figured it out. I perhaps you and/or someone else is mistakenly believing that the revenues for road construction and maintenance come exclusively from fuel tax revenues.
Oh, how I wish it were so! We Amerikans enjoy the cheapest driving in the world only because the priveledge is subsidised (sp?) by the Federal goverment – by paying for these things from general tax revenues (ie sales taxes, property taxes, etc). The price of a gallon of gasoline does not reflect the true costs of burning that fuel.
It is my personal belief that taxes on fuel should reflect ALL of the expenses of chosing that fuel – it should cover road repairs/construction, health costs, environmental clean ups, everything.
Sure, gas would cost $5/gal or more. Boo effin’ hoo.
But it sure would effect everyone proportionaltely. Use less, pay less. Make more educated choices – such as smaller, lighter cars, or motorcycles/scooters which incidentally cause less wear and tear on infrastructure and less recources to construct to begin with. Vehicles which use MORE fuel such as Hummers, giant SUV’s and 18-wheelers also consequently cause proportional wear & tear on infrastructure.
I guess my point is that the taxes we already pay are artificially low, and that needs to change before it all implodes (and it will, sooner than later). The vast majority of Americans simply will never change unless there is a sudden and REAL impact in the one and only place they care about – their own pockets. Obviously by my afternoon commute, $3/gal+ this summer wasn’t nearly enough.
More taxes, fewer large SOV’s on the road, and get the frieght back onto the RAILWAYS where it belongs.
That’s all I have to say about that!
[REPLY – I didn’t mean to imply that fuel taxes were the sole means of paying for road construction. I agree with all your points that through other taxes we subsidize sprawl. I think it is Texas that does vehicle registration based on the vehicle weight. The heavier vehicle pays more. I like the idea of tracking odometer readings and charging taxes based on miles traveled. Thanks for adding your views! – SLP]
Another thing to think about is the increasing fuel efficiency of automobiles. As more cars hit the road, demand increases for wider throughfares. If more hybrid vehicles are purchased then less fuel will be consumed per person even as demand for more roads continues. If every car got 50 mpg there won’t be as much fuel tax being collected and therefore less money going into the highway trust fund which pays for a good chunk of our roads today.
The highway trust fund is going to have to be fixed considering all of the maintainance that will be needed to keep all our recently built interstates smooth and the new bridges standing. Just now MoDOT is embarking on a $535 million reconstruction of I-64 one of the oldest interstates in town. How much will it cost to reconstruct I-270 or I-44 when they will require it? Will there be enough money left to pay for it?
I have a feeling there will be a lot more toll roads in the future.