What if both trucks and cars are overpaying, and the government is stealing a free lunch?
Yes, this is right around the corner. Here is a link telling how it is being road tested in Minnesota:
I have written about this before. It will start with the premise of collecting tax by the mile rather than by the gallon of gas. But once started, there will be no end to the micromanagement of your driving by big brother. It will be like having a highway cop riding in your passeng
In the theoretical sense, the ultimate consumer of any product or service will generally be paying for all the costs incurred by the retailer, distributor/wholesaler, manufacturer, raw materials suppliers, shippers, etc., etc., etc. That is the nature of our economic system, not (IMHO) a description of a subsidy.
A subsidy is (generally speaking) a benefit provided, directly or indirectly, to a entity (or person or group) to supplement or supplant that entity’s costs, in pursuit or support of some political or social or governmental policy. A “Commuter Check” provided by an employer to an employee is a direct subsidy to the employee, to support the policy of encouraging transit use; the tax deduction allowed the employer for providing it, is an indirect subsidy supporting the same policy.
If General Fund monies are used to supplement Highway Trust Funds to build and maintain roads, it is a subsidy (direct or indirect?) to all highway users, benefitting the policy of enhanced mobility for both people and goods. Using Highway Trust Fund monies for General Fund purposes (as has happenned here in California) could be considered a negative subsidy to road users.
How the various levels of government choose to levy taxes, tolls, and fees is a strictly political decision, frequently associated with some policy consideration, but usually involving very little (if any) true analysis as to exactly what the payers of the taxes, tolls, and fees are directly receiving in return.
This humble analysis comes from some 30 years in the tax business, keenly watching how taxes are enacted, enforced, and collected – and what the taxpayers are getting back in return. We pay, and we get benefits. But trying to trace the $$ from one end to the other is utterly futile.
Just a brief data point to hopefully illuminate this discussion a little bit:
News reports around the Philadelphia, PA metro area today touted the start of construction of a major upgrade to US Route 202 between Swedesford Rd. (just north of Paoli, and about 5 miles west of King of Prussia, a northwestern suburban area), to the west and south towards West Chester as far as U.S. Route 30, encompassing a project distance of about 6 miles. The scope of work is to add a lane in each direction so that there are a total of 3 each way, plus a new interchange with the Pennsylvania Turnpike (I-76 there) in the vicinity of PA S.R. 29, and some other upgrades at Rt. 29. It’s supposed to take 4 years to complete - some 70,000 cars use 202 each day.
The estimated cost ? A quarter of a Billion dollars - that’s $250 Million, for a 50% expansion of only a short section of merely a single road. Allocating that amount over the 12 lane-miles included (2 directions x 1 lane x 6 miles) is a little over $20.8 million per lane-mile, or $3,945 per lineal foot, or about $328.80 per lineal inch, or about $2.28 per square inch (based on a 12 ft. wide lane); or, about $14.3 Million per acre of roadway surface !
[soapbox] The deep and bitter irony here, of course, is that Rt. 202 is paralleled the whole length of this road project by both the ex-PRR Main Line which now has both intensive SEPTA commuter service and moderate Amtrak Keystone Corridor service; and the former PRR’s 2-track (now just 1), very low-grade, now de-electrified “Trenton Cut-Off” which typically sees only 1 train a day (steel slabs from Conshohocken to Coatesville, I believe). At the northeastern (Swedesford Rd.) end, the Main Line is
Paul,
Why do you consider it a bitter irony? What is the alternate outcome that you would have expected?
There’s a huge and lengthy history involved here - of which I know and follow only a part, and about which a book should be written - but the crux of it is that a huge wad of money is now being blown on a short and small highway project that will be overloaded again when it opens. It appears that no or only a little consideration was given to spending/ investment on rail alternatives that - together with other similar restorations and new services - could be equally as effective and likely better than the usual “more roads” approach of PennDOT and the suburban counties. See generally the website of the Delaware Valley Association of Rail Passengers (DVARP) at: http://www.dvarp.org/index.html
For several decades the Trenton Cut-Off has been proposed as a ‘belt line’ or ‘rim’ for rail commuter service to tie together almost all of the radial ‘spokes’ of the many individual commuter lines from Philadelphia, as well as restoring PSGR service from the King of Prussia area northwestward to Reading, restoring service to nearby West Chester, and others further east. Also, an even better line that paralleled Rt. 30 further west was the ex-RDG’s Chester Valley branch, but that’s entirely gone and pieced apart now. This region is a huge hub for pharmaceutical research and manufacturing, and some electronics, too, as well as the traditional impressive line-up of universities and hospitals - and I’m told that K of P is a shopping Mecca second only to the Mall of America, etc. Almost all of them are next to or within easy reach of one or more active rail lines or corridors, generally with lots of capacity - but nothing is being done to promote, improve, or develop that.
I’m sure that few if any of the rail services around here ‘pay their own way’ out of the farebox alone, and that too needs to be addressed. But the area has a dense multi-modal n
So – let’s talk about the federal and state roads. The federal tax on diesel fuel is 24.4 cents per gallon and has not been raised since October 1, 1997. The federal tax on gasoline is 18.4 cents and has not increased since the same date. State tax varies but the average for all the states for diesel fuel currently is 19.2 cents, slightly less than gasoline, which is 20.6 cents. The Highway Trust Fund (HTF) has been broke for a long time. Billions have been transferred from the General Fund to the HTF and billions more will need to be transferred in the future. (Yes, some $11 billion each year is transferred to the “transit account” for subsidies to mass transit, and fuel tax has been used for deficit reduction in the past – but let’s save that for a later discussion). Since the federal fuel tax has not been raised in 14 years, it has not kept up with inflation in materials and labor costs. The Federal Highway Administration (FHWA) calculated the cost allocations for various vehicles in 1997 and updated this in 2000. It showed that trucks do not cover their cost of road damage, and that the heavier the truck, the less it paid. This was 11 years ago, and since then all costs have gone up while diesel fuel tax has not.
Welcome Freight Guy.
You make great sense. However, I would like to point out that Adam Smith had this figured out in the 18th Century --make the intercity roads tollways and charge by weight transported His writing was before the American Revolution.
The government is involved. They consistantly try to change economic reality. They just as well pass a law that water will run uphill. They screw things up and their supporters deride those of us whoe disagree as “free market types.” It ain’t gonna’ change and we gotta’ just live with it
Entitites such as the ethanol and trucking crowds want their own subsidies and their own tariffs. If the American People suffer, they’ll make up facts to justify their posistion. So, bring on your own facts. What you say will be true, but it will also be irrelevent. Things ain’t gonna’ change.
Lets not forget 2 things when you do a Highway involving a Govermemtn Entity. One the Prevaling Wage act. That means your Labor Costs are triple what they NORMALLY ARE since they are based on what a Union Person in New York City Gets that has been on the Job for 30 Years. 2 your Goverment requires you to use the Cheapest stuff out there instead using Quality materials that way when it does fail they can have someone ELSE come in and Fix it for an OUTRAGOUS Amont.
Around here there is a Very good Flat roofing Company Non Union place. Well he got the bid to the school my kids go to. HEstated because it was a State job and he had to use the Precvailing Wage Act that the Unions had passed to make sure they could get some contracts his bid for the contract was 50 grand HIGHER for this roof than it would have been without the PWA. Now that tell you where alot of the HTF money is going right into the UNIONS pockets.
How many times do you see a construction zone and there will be only one truck working in it yet there is 4 flaggers at 40 Bucks and hour that is WHAT they get paid under the PWA. A laborer is 30 an Hour a Backhoe or Bobcat operator is over 60 an HOUR Yet again your like raise Fuel Prices again with them hovering close to 4 Bucks a gallon. Here is an Idea Repeal the PWA and see how much FURTHER the HTF would go if we did not have to pay to outragous Wages.
Ken: The notion of a totally user-fee road system is technically possible, but so is changing the current fuel tax structure so that trucks pay something closer to the true cost of building and maintaining roads that can handle their weights, which have increased greatly during the Interstate era of the past 50 years. BTW, I thought you were proud of being a “FMT.” [Be careful about using ideological terms.] In a philosophical vein, as long as you are celebrating the great Adam Smith, let’s not forget the also great David Hume, born 300 years ago.
Ed,
The federally funded (USDA-RD) project I’m currently working on, the wages are broken down by the county of the work performed. Since I’m not in NY, they’re not paid NY wages. That being said, I’ve told many laborers I’ll trade paychecks this Friday. The upside, I still get one in winter while many don’t.
Thanks for the welcome!
I responded back from the email notification but I guess it didn’t go to this post, hmmmmm… I’ll have to figure out how this works.
Yes the early days of toll roads allowed for a pay-for-what-you-get operation plus a little bit of profit for the owner. All that has changed. I agree with you - I think government is in the way - instead of a fair market system, government actions cause unbalance in the transportation system and it doesn’t work fairly. Government laws, taxes, and fees complicate everything to the point that people are confused about who pays for what and what the issues are. Also, the power of the highway lobby is very strong. Much stronger than the railroad lobby unfortunately. But the most power rests with the shippers. People think it is the trucking lobby that want bigger and heavier trucks. Yes they are huge when united, but the shippers matter more. The trucking industry is currently divided on the argument of increasing truck size and weight. The American Trucking Associations (ATA) wants the max gross weight for trucks increased to 97,000 lbs, while the Owner Operators Independent Drivers Association (OOIDA) wants the weight to stay where it is at 80,000 lbs. But the shippers what bigger and heavy trucks and they want the taxpayers to pay for the majority of road maintenance. If the trucks are made to pay for the road maintenance, the shippers
Ed, thanks for bringing up the prevailing wage act. There areso many facets to this subject. But I don’t see that paying a fair wage is harming the Highway Trust Fund (HTF) in a major way. I’ll provide some information from government sources and you can go check for yourself.
Prevailing wage is a tool to pay standard wages (comparable to a typical “union” wage) to keep contractors from scalping people on wages so they can keep their cost low and hope they can get the winning bid. The prevailing wage law prevents that. All contractors bid on a project knowing that they will have to pay the prevailing wage. But it is not the outrageous New York City pay for everyone. It is the “prevailing wage” it is public information and is available on the Internet. See for yourself, go to Wage Determinations OnLine.Gov http://www.wdol.gov/dba.aspx#8 You can enter the individual state and the job classification. Try it, I just did. Look for highway construction. In Ohio, for highway construction, the rate for a Laborer, Class 1 is $27.48 per hour plus $8.75 in fringes. In Alabama it is less, for a highway backhoe operator the hourly wage is $13.24.
Government doesn’t require “the cheapest stuff out there”. No, not at all. Actually government contracts require that the materials meet exacting specifications. And
The PWA requires that all workers be paid is if they are members of a UNION workforce even if they are NOT ONE. My township had to replace the Sewwage system in the area I live. Well the Cost was close to 15 Million dollars to do that. Yet one of the Non-Union workers in the area I talked to stated without the PWA since this is a Goverment Project it could have been done for 9 million and done faster. The crew that got the job all the Supervisors are sure as hell riding in NEW Pickups and all their Equipment aka Bobcats and such was Brand new when they started on this job.
Also the repairs they are doing to the road are nothing more than freaking Sackcrete for the Concrete and cold patch for the Blacktop and that is all they are using.
freight guy: Interesting post and welcome. One thing I wonder about in road construction is this. If the weights were less than the 80K per truck, would that mean that roads could be built and maintained more cheaply, with less steel reinforcement, thinner layers of crushed stone base and thinner layers of concrete or asphalt? I wonder where that fits into the equation of user-pay for trucks? The above question also could apply to the rails, where the weights per axle have increased, requiring more expensive track, both to build and maintain.
freight guy and Mike - Thanks for a good summary of the Federal Davis-Bacon Act a/k/a Prevailing Wage Act. For 13 years I worked for a trackwork company that did a fair number of projects subject to it, and well as quite a few that weren’t - and was a project manager/ administrator for both kinds, including subcontractors, etc. - and for the last 11 years have worked for an engineering company that also handles both kinds of projects. As Mark Twain said about his premature obituary, those stories are often “greatly exaggerated”. I don’t have the time to write and post a detailed rebuttal, so thanks for yours. The worst I’ve seen is about a 50% differential in the pay rates, but the labor costs are usually heavily diluted by all the other costs - materials, subcontractors, outside/ off-site trucking, equipment rentals, surveyors, bonds, insurance, supervision, home office and other overheads, and of course contractor’s profit, etc., plus the owner’s engineering, legal, and financing costs, etc. - that the differential is usually more like only 10 to 20% of the total project cost. Sometime I’ll explain how the “Law of Unintended Consequences” acting on Prevailing Wage projects has facilitated the contractors going non-union or ‘open shop’, esp. for military contracts behind security fences . . .
- Paul North.
The idea of being exempt from property taxes has merit but a few pitfalls. Property taxes are levied on a county or city/school district basis. Exempting the rail lines would place an undue burden on local entities. A subsidy by comparison is normally paid by the state or feds with minimal impact on the local economy.
The problem of taxing railroads in many communities and school districts was that 1) they thought the railroad was a cash cow and found everything marked railroad taxable and at as high a rate as possible, and 2) when railroads scaled back from two to one track or to no track at all, when the major yard and or shops were closed, or the depot closed and demolished, there was nothing left to tax. And like any other industry, a railroad company is going to look for loopholes, grants, easments, lower assessment, and exemptions wherever and whenever they can. A single track running a mile or two through a town or township that doesn’t use utilities, maintains its property (to stated use level and for public safety), has no need for any of the normal taxing district services has an arguement about paying taxes the same as a factory or warehouse that uses roads, water, sewer, lights, etc.
Based on this logic, I should be exempt from paying property taxes to my local school districts since I have no children currently attending school.
And that, indeed, is the danger of giving private enterprise lots of tax exemptions, etc. The question that arises, as in this case, is if the From Here to There Railroad Company is as equal a landowner as Mr. and Mrs. John Doe and vice versa or equal to the local Whatever We Make factory as a landowner and taxpayer? (Business/commercial property is usually taxed at a higher rate than residential, of course.)