Value Capture as a Policy Tool in Transportation Economics: An Exploration in Public Finance in the Tradition of Henry George

American Journal of Economics and Sociology, The, Jan, 2001 by H. William Batt

Enormous environmental externalities also result from our over-dependence upon cars, especially in air pollution and in the emission of greenhouse gases. The consequences of [SO.sup.2], [CO.sup.2], and ozone are no longer a matter of debate; they are scientific fact. Despite frequent headlines about replacing the internal combustion engine, all the realistic substitutes also ultimately rely upon fossil fuel power; solar powered cars are far in the future, if at all, and also fail to deal with any transition. Even further, there are the costs of highway crashes. Public pleas for people to drive safely are not likely to change the reality that people are fallible, and that every person driving his or her own car simply multiplies the probabilities of accidents. Just the costs of crashes--nothing else--represents a figure equal to 8 percent of the American Gross Domestic Product. [9] Finally, driving is no longer regarded as fun. There was a time when most people drove cars for pleasure; today people resent the ir having to drive so much and often see driving as a burden. [10]

III

Mechanisms of Interstate Highway Finance

THE INTERSTATE HIGHWAY SYSTEM was from the beginning almost entirely financed by the imposition of an ad valorem tax on motor fuel. With the passage of that act, the tax (on both gasoline and diesel fuel) was raised from 2[cts.] to 3[cts.] per gallon, and would continue at that rate until 1978 when it was raised to 4[cts.]. [11] In addition, a tax was levied on tires, initially at 8[cts.] a pound, gradually increasing further over the years. No distinction was made in the funding mechanism with regard to capital cost debt service or operating costs, and charges for negative externalities were never even considered. Over the years, there have been instances when the Highway Trust Fund was overflowing with money; other times, it has failed to cover even basic costs. In recent years, there has been a general recognition that maintenance has not been addressed in a timely way and has led to a general deterioration of the roads and bridges that are part of the system. This can be interpreted in one of two ways: ei ther that the public has chosen to address more pressing priorities, or that the initial capital construction has overextended the nation's capacity to maintain it.

The local and state share amounted to a token contribution, as most state and local highway revenues, regardless whether they were dedicated or not, were directed to the non-interstate network of roads. The result of having funding provided by a government source distant from its application site was that it provided an incentive to bias projects in favor of highway construction. Had the financial arrangements for the project insisted upon a greater share for local and state authorities, there would have been less inclination for highway interests to override other local considerations. As it was, highway transportation advocates easily prevailed over competing claimants when public policy decisions were called for. This is well illustrated by the controversies that arose in areas where competing concerns were manifest. [12] The interstate network was completed first in areas where land could quickly and easily be acquired and where construction could proceed without difficulty. Although the network was pron ounced as completed in the early 1980s, certain extensions still continue to be carried out to this day. Yet roads continue to be congested, and all the problems associated with motor vehicle transportation--the sprawl development, the pollution, the evisceration of the urban cores, and the inordinate expense of this mode of travel--have failed as yet to foster a full national debate about the wisdom of this half-century-old decision.