Tom Stinson, assistant professor, and Barry Ryan, research fellow, Department of Applied Economics, examined the possible effects of novel taxation strategies to fund road construction and maintenance at a TRG research presentation on December 7. Their analysis looked at how household tax payments would be altered by changing the way state and local governments pay for the costs of maintaining a road network. The impetus for Stinson and Ryan's research comes from the ongoing trend of households and jobs moving away from the center city and into the less-densely populated suburban and exurban areas. As this change continues, questions are being raised about the suitability of current taxation models to maintain an increasingly vital infrastructure component.

Under the current system, much of the public money for road funding comes from property taxes, income taxes, and sales taxes. The income and sales taxes can have a large impact in real dollars on a household budget, yet these taxes are unrelated to travel, where you live, or what you drive. The portion of property taxes earmarked for transportation funding, which Stinson and Ryan determined currently averages around $220 for the average metro-area household, are directly related to home location but unrelated to vehicle type or amount of travel.

Two significant vehicle-related revenue sources exist: vehicle registration fees and the motor vehicle fuels excise tax (gas tax). Registration fees are unrelated to housing location, earnings or amount of travel; gas tax is directly related to travel amount but unrelated to home value or income/sales tax liability.

Stinson and Ryan envisioned a state in which much of the tax funding for roads is transferred from property, income, and sales taxes to other sources more directly dependent on road use. Elements of such a system could include an increase in the motor vehicle fuel tax from $.20 to $.50 per gallon, or the replacement of the gas tax with a three cent per mile Vehicle Mileage Tax (VMT), which could effectively shift the tax liability from gas consumption to road-mileage consumption, and would hopefully act as an incentive to utilize fuel-efficient vehicles. At the same time, property taxes allocated to road costs would be reduced by half, as would vehicle registration fees.

The researchers stressed that the problem of road funding amounts to a "zero-sum" equation: whatever percentage of funding is removed from one revenue source must be made up by another source. Novel taxation strategies like the Vehicle Mileage Tax would face significant barriers to implementation, possibly even requiring new monitoring and verification technologies be installed on individual vehicles to ensure accuracy.

To illustrate the potential tax impacts of their system, Stinson and Ryan showed the results they obtained by applying the new tax strategies to several representative taxpayers of various demographic characteristics; the results demonstrated that changes which only marginally affect one type of road user may have a noticeable economic impact on another type. Following their presentation, Stinson and Ryan engaged in a lively discussion with audience members concerning implementation of such a tax system.