Demand for Benefit Taxation: Evidence from Public Opinion on Road Financing

23 Pages Posted: 5 Dec 2014

See all articles by Denvil Duncan

Denvil Duncan

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA); Institute for the Study of Labor (IZA)

John Graham

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Venkat Nadella

Independent

Ashley Bowers

Indiana University

Stacey Giroux

Indiana University

Date Written: Winter 2014

Abstract

Rising fuel economy standards for motor vehicles and higher road construction costs, coupled with infrequent adjustments to fuel taxes, have eroded the revenue base for road construction and repairs. We use survey data to determine whether the revenue‐enhancement measures being used by policy makers to address the revenue shortfall reflect the public's preferences regarding the distribution of road financing costs. In particular, we explore whether there is public support for the idea that road financing costs should be distributed in proportion to benefits received from roads; that is, the benefit principle. We find that public support for the benefit‐principle ranges from a low of 5 percent to a high of 34 percent, depending on the definition used. We also find evidence that people who support benefit‐principle financing are more likely to agree that the road mileage user‐fee is fair and also more likely to support revenue sources that satisfy the benefit principle. These findings suggest that a mix of revenue sources that vary in the extent to which they satisfy the benefit principle is a responsive political strategy. They also suggest that the low level of support for benefit‐principle financing is partly responsible for the unpopularity of mileage user‐fees. Policy makers who wish to pursue mileage user‐fees as a replacement for fuel taxes should make an effort to educate voters on the advantages of benefit‐based revenue sources.

Suggested Citation

Duncan, Denvil and Graham, John and Nadella, Venkat and Bowers, Ashley and Giroux, Stacey, Demand for Benefit Taxation: Evidence from Public Opinion on Road Financing (Winter 2014). Public Budgeting & Finance, Vol. 34, Issue 4, pp. 120-142, 2014. Available at SSRN: https://ssrn.com/abstract=2534191 or http://dx.doi.org/10.1111/pbaf.12046

Denvil Duncan (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

John Graham

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Venkat Nadella

Independent ( email )

No Address Available
United States

Ashley Bowers

Indiana University ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Stacey Giroux

Indiana University ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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