Road Finance Alternatives: An Analysis of Metro Area Road Taxes

Abstract

The average Twin Cities household paid about $500 in state and local taxes for roads in 1996. The total tax burden for the region was nearly $1 billion, with two-thirds coming from revenues that are fixed or hidden from the traveler's perspective. Tax alternatives that favor use-related charges can send travelers a clear price signal, ultimately encouraging more efficient travel behavior. Tax policy might have an effect on housing location decisions at the rural-urban fringe, where farmland development premiums are still small. Road tax policy will need to change in order to keep pace with higher construction costs.