Vehicle & Road Use Fees

Background

The state is facing a major problem with transportation funding. First, roads and bridges have not been maintained adequately for many years, so there is a considerable backlog. The gas tax has been returning decreasing amount of income relative to miles driven because of fuel efficiency improvements. Construction costs have gone up considerably. As the population grows, the transportation needs grow with it. And voters are unhappy with all the different methods of payment, some of which are pretty regressive.

Both the Seattle Climate Action Plan and the King County Strategic Climate Action Plan have some form of vehicle usage pricing as a core part of the strategy. This is useful because it provides an incentive for people to figure out alternatives to driving, and with the revenue dedicated to better transit, walking, and biking, it also makes the alternatives more appealing. Once people drive less, then they are also likely to feel safer about walking and biking, so it's a virtuous circle.

Current Taxes and Fees

Federal, state, and local government pay a tremendous amount to build and maintain roads and bridges for use by automobiles and trucks. Some of this is paid for by various forms of usage fees, and some comes from general revenue. The usage fees we currently have include:

  • Federal and state gas tax

  • State vehicle sales tax

  • "Car tabs" –State and local excise tax & registration fees

  • Parking taxes

Gas tax. The gas tax has a federal and a state component. The Federal tax on gasoline is 18.4 cents per gallon and the tax on diesel is 24.4 cents per gallon. It is not indexed to inflation, and was last raised in 1993. Revenues from the tax are spent on transportation. Washington State has a tax on gasoline of 49.4 cents per gallon, and the tax on diesel is also 45 cents per gallon, and was last raised in 2016. Washington has one of the highest in the country, although it is comparable to other states with similar levels of traffic. Gas taxes are paying a steadily decreasing share of transportation costs because of improved vehicle fuel efficiency and inflation in road construction, and as a result, many people believe that we should be transitioning to taxing vehicle miles travelled (VMT) instead.

Sales tax. Sales taxes are applied to vehicles on purchase, which for Seattle residents is 10.1%. In addition, the state levies a motor vehicle sales tax of .3%, with an exemption for electric or plug-in hybrid vehicles. Sales tax revenues are part of General Funds.

Car tabs. Car tab fees are payable annually, and include many parts. First, there is a general charge of $30 for registration, plus some for county filing, service fees, etc. There is another state fee which is determined by the weight of the vehicle, ranging from $25 for most passenger vehicles to $72 for buses and trucks. Transportation Benefit Districts may also levy additional fees, and in Seattle these were $80 in 2020. Regional Transit Authority (RTA) is an additional fee that is assessed for Sound Transit in the RTA district (within King, Snohomish and Pierce Counties). RTA taxes are assessed based on the value of the vehicle (MSRP), according to a depreciation schedule. Additional fees may also be applied: electric vehicles pay an additional $150 to make up for missing gas tax revenue, and electric and hybrid car owners pay an additional $75 that goes into a state fund to help further electrification. The combined $225 fee for electric vehicle owners is one of the biggest in the country.

Parking tax. Seattle has a downtown parking tax of 12.5%. Seattle also charges for parking along streets where there is a lot of commercial activity. Unlike many larger cities, Seattle does not charge for a residential parking permit, and parking on most streets is free.

Tolls. The Tacoma Narrows Bridge has a flat rate toll, while the 520 Bridge and, the SR 99 tunnel have a rate that varies by time of day. There are express toll lanes on 405 from Bellevue to Lynnwood, and on SR 167 – carpools travel for free in those lanes, and solo drivers may pay to use them. These funds are collected by the State, and in 2019 totaled $218 million. It costs an average of 43 cents per toll to collect via Good To Go. The proceeds are part of the WSDOT budget, and tend to be spent on debt repayment and capital projects.

Ferry Tickets. The Ferries are part of the State Highway System, and money from ferry ticket sales goes towards the cost of operating the ferries, but does not cover it completely – the state is subsidizing rates as part of WSDOT budget.

In spite of all these different ways of raising funds, the money raised is, by almost all indications, inadequate to keep up the maintenance, and has been for many years. The 2020 Statewide Transportation Needs Assessment found that existing funding is less than half of what is needed for maintenance, preservation, and capital upgrades. This means that we have a road deficit, and that there is a great deal of money we will have to spend in order to keep the roads and bridges we already have in good enough condition to use. In Seattle, the Magnolia and University Bridges have been flagged as particular concerns. The city spends about $6.6 million each year on bridge maintenance, but SDOT's most conservative estimate on what is required is $34 million. Statewide, WSDOT revenues aren't only for roads and bridges, but also go to transportation projects more generally, including the Washington State Ferries and (should go) to various local transit projects. As we look ahead to how we want our transportation system to work, we should be rethinking the pieces that will need replacement so we can make them integrate better into the system we will have in the future. For example, when we rebuilt the I-90 bridge, the new bridge was built to be capable of carrying light rail, and the new 520 bridge now has space for a pedestrian/cycling path that the previous bridge lacked.

Possible New Taxes or Fees

There are a variety of new ways of raising funds for transportation that have been discussed in the state and on the local level. Here are some of them:

  • Vehicle Miles Travelled (VMT) tax. This would be a fee that a car owner would pay each year based on the number of miles the car was driven during the year. This is also called Pay Per Mile. The State has been studying this as an alternative to the gas tax. It could be used as a way for both the state and local jurisdictions to collect money for funding transportation needs.

  • Pollution sales tax on new vehicles. On purchase of a new vehicle, the new owner pays for the cost of the pollution the vehicle is expected to produce over its lifetime. From a procedural point of view, this would be similar to the sales/use tax currently applied to vehicles, but would apply only to new vehicles. A typical car produces about 4.6 metric tons of CO2 emissions per year and has a lifetime of 12 years, which means it is producing a total of about 55 metric tons total. The social cost of carbon in 2020 is $75/ton, so the average fee assessed a new vehicle might be in the neighborhood of $4000. The average cost of a new vehicle is around $25000, and the current sales tax on that would be about $2500, so this would be a considerable increase. Note also that this includes only the emissions from operating the vehicle; there is a considerable amount of embodied carbon, possibly almost matching the operating cost, that is not included in this calculation. A bill to do this might need to be phased in over time, but would certainly encourage the purchase of cleaner (or older) cars. And it applies only to new vehicles, not used vehicles, so it is targeted to wealthier people.

  • Congestion pricing fee. This is usually a daily use fee levied on vehicles entering a certain area, such as downtown,, and typically the revenue is applied to improved transit. Many cities outside the US have adopted it; inside the US, New York City is in the process of adopting it. For more discussion of this, click here.

The State dictates how local jurisdictions are allowed to raise money for transportation, so its role is key, and this topic is expected to be a focus for the 2021 Legislative Session.

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