102010 Dsc0747 Freeride

The Gas Tax is Too Damn Low

102010 Dsc0747 FreerideThe price of gasoline in the Twin Cities is very low right now, averaging $2.22 a gallon across the metro. Cheap gas is a short-term benefit to people who drive cars, but is horrible for just about everyone in the long term. Cheap gas incentivizes people to drive more miles, make more solo trips instead of carpooling or using transit, and buy less efficient vehicles. When the price of fuel is low, thousands of small decisions are made that all move us a little closer to the coming climate disaster.

That’s why I’m happy to see that Governor Tim Walz has put increasing the gas tax high in his agenda. A predictable set of opponents is lining up against any increase in fuel taxes, claiming that a few cents per gallon more will cripple our economy. This is a peculiar form of amnesia, forgetting that gas prices were as high as $4/gallon a few years ago and we somehow survived. We seem disproportionately sensitive to gas price increases, which is unfortunate: higher fuel prices would be a benefit to society even if we took all the money and buried it in the back yard of the governor’s mansion. Of course, it would be even better to put that money to constructive use, and catching up on highway and bridge repair is sorely needed.

After reading Pat Thompson’s thoughtful piece about the possibility of no-fare transit, I began to wonder what it would take to use gas tax revenue to make a bold improvement in our region’s transit system as well. When I dug up a few numbers and did the math, I found that we could buy an incredible public benefit for a modest increase in local fuel taxes. I’m neither an economist nor a transit planner, but I am a guy with a spreadsheet and a dream, so let’s dig up some numbers and throw them together.

Metro Transit’s total revenue in 2017 was $393 Million, and about 25% of that came from fare collection, so $98,250,000. If we made all bus and train service free, we’d need to make up 98 million somewhere else.

According to MNDot, each cent of gas tax results in about 30 million dollars in annual revenue [1]. I’m sure we’d suffer from diminishing returns from reduced demand if we raised that tax too high, but I think it’s reasonable to use that estimate if gas prices stay in the $2-4 range that we’ve seen in the past 10 years. Taxing drivers in greater Minnesota to pay for a metro-only benefit might be a hard sell, but as it so happens, the 7-county metro accounts for 48% of Minnesota’s vehicle miles traveled.

Let’s round up a bit to account for reduced driving and increased transit usage (excellent problems to have) and call it a 7 cent gas tax increase in the Metro to abolish fares. We get increased usage, better service (no need to wait for others to pay), no more maintenance cost of fare boxes, and we can set all the people who currently work in fare collection and enforcement to a more noble purpose. To me, this seems like a slam dunk. Many of the same lower-income people who would be hardest-hit by gas tax increases (fuel taxes are regressive, as are all sales taxes) would benefit the most from eliminating transit fares.

Applying that same 30-million-per-cent estimate, to close the $600 million statewide funding gap and abolish fares on Metro Transit would take a 20 cent per gallon increase statewide and a further 7 cent increase in the Twin Cities metro area. Right now that would bring gas prices to around $2.50 per gallon, still quite low compared to recent history in Minnesota or the present in other high-income nations. We could go much further – fund a BRT project every year for $40 million or so, double Metro Transit’s entire operating budget of $420 million, expand the intercity bus network across greater Minnesota – and still be under $3/gallon.

What’s the Point?

There are many details I’m glossing over, of course. A county-level fuel tax has never been done in Minnesota, as far as I can tell. A 1928 amendment to the Minnesota constitution requires fuel taxes to be dedicated to bridges and trunk highways – could we work around that in the short term by directing more of the Motor Vehicle Sales Tax to transit in the same amount as the increased fuel tax? You’d also have to do something to guarantee long-term funding so that our transit system doesn’t become a victim of its own success if people drastically reduce their car miles.

Setting aside those details for a moment, I think these numbers show that it’s wrong to treat a strong public transit system as an unrealistic fantasy. Buses and trains are public goods that help all of us (even if we don’t use them for our daily commute) and the funding is attainable without major sacrifice. We need to start to spread the message that transformational change in our transit system is possible and absolutely necessary to protect the next generation of humans in Minnesota and everywhere in the world. Given what we know about humanity’s role in global climate change, I think it’s irresponsible to describe no-fare public transit as “too expensive”.


Featured image credit: Metro Transit

[1]: That article doesn’t go into detail about how they got the $30 million figure, but it seems in line with Department of Energy data that Minnesota uses about 2.7 billion gallons (!) of gasoline annually. One billion (gallons) times one cent (per gallon) equals 10 million (dollars).