“Highways Are Subsidized, So Trains Should Be Too”

Transit advocates often argue that highways are subsidized, so therefore transit deserves subsidies as well. It is true that some roads and streets are subsidized, sometimes for good reason and sometimes not. But whatever the reason, subsidies to roads per passenger mile are insignificant compared with subsidies to transit.

Table HF-10 from the Department of Transportation’s annual Highway Statistics report summarizes highway funding and subsidies. Highway critics look at the bottom line (which in 2012 was $221 billion spent on roads) and compare it with the amount of highway user fees spent on roads ($105 billion) and conclude that the difference is all subsidy.

There are three flaws in this approach. First, some of the costs of highways are paid for out of bond sales and interest earned on accumulated user fees. Since most of those bonds will be repaid out of user fees, neither they nor the interest on user fees should be counted as subsidies.

Instead, the table clearly shows that “other taxes and fees,” including income, property, and other taxes, totaled to just $69 billion in 2012, not the $116 billion you would get by subtracting $105 billion from $221 billion. Thus, subsidies cannot be greater than $69 billion.

But subsidies to highways are not even $69 billion. This is because billions of dollars of user fees are diverted each year to transit and other purposes. The table shows that total user fees collected in 2012 were $142 billion. About $11 billion went to pay the costs of collection, but $26 billion went to subsidize transit and other non-highway programs. This $26 billion should be deducted from the $69 billion in general funds going for roads.

Finally, in recent years Congress has deliberately spent more out of the Highway Trust Fund that it has collected in federal gas tax and other revenues. This has forced Congress to replenish the trust fund with about $70 billion in general funds. This didn’t happen in 2012, but the 2010 table HF-10 shows $14.7 billion in general funds going to the Highway Trust Fund. However, if Congress weren’t diverting 15.5 percent of gas taxes to transit, and allowing states and cities to divert as much as 15 percent more to transit, these replenishments to the general fund would not have been necessary. So, in the years in which they took place, they should not be counted as subsidies to highways.

The next result for 2012 is that about $43 billion in general funds were used to subsidize roads. A careful examination of table HF-10 reveals that almost all of this is at the local level; federal and state highway programs pretty much pay their way after deducting diversions of user fees from general funds spent on roads. A case could be made that at least some of the local subsidies are reasonable. Since property owners benefit from having access to the road network, it might make sense to have their property taxes contribute to road maintenance.

Still, it would be far better if all transportation users paid for the facilities they use rather than be subsidized. Ending the $43 billion annual subsidy should be a goal of transportation activists.

While the transit industry has set fares roughly equal to the cost of driving, the subsidies to transit per passenger mile are far greater than to driving. In most cities, subsidies to commuter rail and heavy rail are far greater than to buses, but the data for these modes is skewed by the dominance of New York City.

The $43 billion in subsidies to highways is about the same as annual subsidies to transit. According to the APTA Public Transportation Fact Book, in 2012 transit agencies spent $39.7 billion on transit operations and $18.2 billion on transit capital improvements for a total of $57.9 billion. Fares covered just $14.2 billion, leaving $43.7 billion to be covered by taxpayers. APTA also says that transit carried 57.1 billion passenger miles in 2012, for a subsidy of 83 cents per passenger mile.

By comparison, Americans traveled nearly 2.6 trillion vehicle miles in cars and light trucks in 2012. At an average occupancy of 1.67 people per car, that represents more than 4.4 trillion passenger miles. The highways also supported nearly 15 million vehicle miles of buses, 21 million vehicle miles of motorcycles, and nearly 270 billion vehicle miles of heavy trucks carrying more than 1.3 trillion ton-miles of freight. Even if all the costs of highways were counted solely against cars and light trucks, the $43 billion subsidy averages less than a penny per passenger mile.

On a per-passenger-mile basis, then, subsidies to transit are at least 85 times greater than subsidies to driving. While we would like to end all subsidies, until they are gone there is no way that an 83-cent-per-passenger-mile transit subsidy can be justified on the basis of highway subsidies that are less than a penny per passenger mile.