Measures to improve pricing:
Refining user fees
Incorporating new vehicle technologies in the user fee structure
Measures to direct spending more effectively:
Improving project selection and reducing project costs
Developing alternatives for transit finance
Redefining federal, state, and local government responsibilities
This list includes the short-term reform options in the state finance studies reviewed in Chapter 1, as well as proposals from other sources that have gained prominence. It was noted in the introduction to Chapter 5 that proposals from these sources tend to concentrate on particular aspects of the finance structure rather than on comprehensive reform. The descriptions in this chapter organize the proposals, somewhat arbitrarily, into three categories according to their main objectives: measures to increase available funds (including accelerating spending with debt financing), to improve pricing (that is, adjusting existing user fees to better match the costs of travel), and to guide spending more effectively to the best uses. In practice, many of the proposed actions could serve multiple purposes. For example, reducing tax evasion increases revenue but also is necessary for fairness and public acceptance and to maintain the integrity of the fee structure.
The subsections below describe the intent of each proposal and review available information about the possible consequences of implementing it, in order to identify those that appear to be practical and beneficial. Inclusion of a proposal in this list is not intended as an endorsement. Committee recommendations with regard to some of the proposals are presented in Chapter 7.
Tax administrators have long recognized that a substantial amount of motor fuel excise tax revenue is lost to tax evasion. In a survey (Denison et al. 2000), state tax administrators reported their estimates that 5 percent of state gasoline tax revenues and 10 percent of diesel revenues are lost to evasion. Common evasion techniques reported were bootlegging fuel across state lines to take advantage of rate differences, taking advantage of the lower federal tax rate on gasohol by falsely labeling gasoline or a blend with less than 10 percent ethanol as gasohol, counterfeiting documentation of tax payments, and abusing tax exemptions (for example, exemptions for off-road and agricultural use). Diversion of aviation fuel (which pays a lower federal excise tax rate than diesel fuel for motor vehicle use) for use in diesel trucks is also recognized as an important evasion method. It reduces federal revenue by $900 million per year according to one estimate (Peters 2002).