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Transportation Funding Reform

Equity Considerations for Older Americans

This AARP Public Policy Institute report by Sandra Rosenbloom of the University of Arizona and AARP’s Jana Lynott examines whether current and proposed transportation funding sources at all three levels of government are in some way inequitable for low-income people, rural residents, people with disabilities, or older adults. Overall, older and retired travelers make different demands on the transportation network and have very different needs than the average system user. Any taxes and fees that don’t account for these differences may be inequitable. Those that are regressive—taking a larger share of income from low-income persons than higher-income persons—raise ability to pay equity concerns for low-income travelers of any age.

Older and retired people, on average, make fewer trips, travel fewer miles, travel less on Interstate highways, and travel less in peak periods than those who are younger. Yet most current financing mechanisms at the federal, state, and local levels do not reflect key differences in how older people use the surface transportation system. Most are regressive.

  • The fuel excise tax, the single largest U.S. transportation revenue source, is an indirect user fee. As such, drivers partly escape the financial, pollution, and health costs they impose on others. Those who travel in peak periods create excess demand for new highway capacity. Consequently, older travelers whose travel patterns mirror those typical for their age group end up subsidizing peak period users. Furthermore, the fuel excise tax is regressive, negatively affecting low-income drivers.
  • General sales taxes are both regressive and unrelated to system use.
  • Many local transportation revenue sources, from property taxes to development fees, are regressive and only moderately linked to system use.
  • Income tax revenue used to fund the transportation system addresses ability to pay concerns, but does not lead to more efficient use of the transportation system.

To equitably provide transportation services, whether or not the revenue sources were equitably raised, the government must ensure that those services are structured and delivered in ways that specifically meet the issues faced by people with special needs. Government policy at all levels must seek to expand, improve, and enhance a wide range of transportation infrastructure, facilities, and services, with a clear and specific focus on the needs of older and retired people. Increased investment in public and community-based transportation options, highway modifications, driver assessment and training, pedestrian facilities, and attention to urban design and land use policies would help to ensure that those who pay receive their fair share of benefits.

The lack of sufficient transportation revenue has posed a stumbling block for Congress which must reauthorize the multibillion-dollar federal transportation law, which expired in fall 2009. Given the national debate over alternatives to the gas tax, and the wide variety of new or expanded financing mechanisms being adopted at the state and local levels of government, this is an opportune time to examine the equity of various transportation taxes, fees, and charges and look for ways to address inequities while meeting the needs of an aging society.

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