Motor Fuel Taxation And Economic Development: A Regional Approach

Without doubt, the motor vehicle is central todaily life in the United States. In 2003 the nation’sfleet of autos, trucks, and buses numbered 231.4million. There was nearly one auto for every twoAmericans. In order to service this vehicle fleet,governments at the federal, state, and local levelshad constructed 3.97 million miles of public roads by2003, almost 23.7 percent of that mileage in urbanregions (Federal Highway Administration, TablesVM-1 and MV-1).This enormous fleet of vehicles and extensivenetwork of streets and highways permits an unprec-edented degree of mobility in the contemporaryUnited States. In 2003 vehicles logged 2.89 billionmiles of travel, the equivalent of more than 6 millionround trips between our planet and its moon. Alongthe way, those vehicles burned 169.6 billion gallonsof gasoline and diesel fuel (Federal HighwayAdmin-istration, Table MF-21).Mobility of people and freight carries a high pricetag, however. In 2001, the private cost of operatingan automobile (fuel, depreciation, maintenance, andso on) ranged from 20 cents to 50 cents per mile(Harrington and McConnell 2003: 21). There arealso numerous external costs associated with thenation’s dependence on motor vehicles to transportdrivers, passengers, and cargo. Soil and ground-water contamination from leaking fuel storagetanks is a widespread problem, for example: TheU.S. Environmental Protection Agency has con-firmed nearly 449,000 leaks from undergroundtanks, many of them at gas stations. The operationof vehicles results in highway fatalities and injuries,noise pollution, and urban road congestion. In 2000more than 40,000 people died in traffic accidentsand 3.1 million people were injured. Road congestionled to 3.7 billion hours of travel delay in 85 metro-politan areas during 2003 alone.Motor vehicles also emit a wide variety of com-bustion products into the atmosphere. Several ofthose emissions contribute to health problems at thelocal and regional level. In the presence of heat andsunlight, two types of auto emissions contribute tothe formation of ground-level ozone. Hubbell et al.(2005) estimate that if all locations in the UnitedStates were to comply with the EPA eight-hourstandard for ozone exposure, there would be 800fewer premature deaths, 4,000 fewer hospital ad-missions, and 900,000 fewer school absences peryear.Another category of external cost associated withvehicle emissions is reduced atmospheric visibility.A 2001 study of house prices in four Californiacounties found that, after controlling for ozone andsuspended particle concentrations, a one-mile im-provement in average visibility was associated witha 3 percent to 8 percent increase in sales price.Visibility is an environmental amenity that peoplevalue and are willing to pay for.These and other empirical studies suggest thatthere are significant external costs at the regionaland local levels associated with the use and storageof motor vehicles. Two surveys of empirical esti-mates suggest that these external costs could totalas much as 66 cents per vehicle mile (Harringtonand McConnell 2003: 23). This implies that theexternal costs of motor vehicle transport could besubstantially higher, at the margin, than the privatecosts incurred by the operators of those vehicles.