Take, for example, air travel. Airlines don’t simply look at whether their total revenue from passengers covers the total cost of jets, crews, and fuel (although the stock market pays attention to this). Airlines look at each individual flight and each route, and examine whether the fares paid usually cover the cost of providing that service—when not enough passengers use a route, they discontinue service (as many small market cities know all too well). While this calculus is routine and well-accepted in air travel and the private market, it’s absent when it comes to funding public roads.
The Frontier Group/U.S. PIRG study also significantly understates the economic cost of the transportation system. Their analysis looks only at how much is actually being spent to maintain and expand the current system. This is problematic for two reasons. First, there’s abundant evidence that the government isn’t spending enough to keep roads in good condition, which means there’s a growing hidden cost in higher future repair bills. These hidden costs are accumulating and not reflected in what users pay now. Second, nothing is being done to recognize the economic value of the existing road system: The replacement cost of the current road system—what it would take to rebuild the existing asset—is likely on the order of tens of trillions of dollars. Current road users get free use of that inherited, paid-for (but depreciating) asset. Again, this is unlike other forms of transportation: Just because United Airlines may have long since paid off the purchase price of a 737 doesn’t mean that they won’t charge flyers for for using that asset.
The bigger question is whether new roads—additional capacity—pays for themselves. Does the volume of traffic using a new bridge or additional lanes of freeway capacity pay for the road they use in their road taxes? New projects are so expensive—it’s roughly $100 million or more for a mile of urban freeway—that road users who pay the equivalent of 2 to 3 cents per mile of travel in gas taxes (depending on the tax rate and vehicle fuel efficiency) never contribute enough money for the public to recoup the costs of the new capacity.
The surprising evidence from road-pricing experiments is that the revenue gathered from tolled lanes often fails to cover the costs of even collecting the tolls and operating the toll-collection system—which means they never come close to paying for the roadway. (To be sure, tolling improves the efficiency of use of the freeway—traffic flows more smoothly, capacity is increased—but the tolls don’t pay for constructing, or even maintaining, the pavement). But again, the highly visible toll-collection mechanism, like the very visible gas tax, creates the illusion that user fees are paying the cost of the system.
As the public-transportation research organization TransitCenter demonstrated in a report, “Subsidizing Congestion,” the $7.3 billion federal tax break for commuter parking encourages additional peak-hour car commuting, which has the effect of causing greater congestion. The systematic under-pricing of roads has the same effect: Taxpayers subsidize car use through higher taxes, and also face greater congestion than they would if road users paid their way.