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Faced with shortfalls in spending on local roads, policymakers
often must choose between increasing the budget share for roads
or raising taxes. Addressing an audience of researchers and transportation
professionals at the CTS Transportation Research Conference, Barry
Ryan of the Department of Applied
Economics explained how small adjustments in spending and taxation
hold the potential to improve Minnesota's road funding picture.
From 1982-2003, Minnesota witnessed a moderate increase in spending
on roads. However, according to Ryan, "Over the last 20 years, Minnesota
local road budgets have not always kept pace with the increase in
public safety, general government, or parks and recreation budgets."
Ryan's research compared sources of local road funding in Minnesota
with those in several other states. He said that the largest contributor
to local road funding in Minnesota is local government general funds
at 31 percent, consistent with the national average of 29 percent.
Minnesota's combined property taxes and special assessments contribute
24 percent, forming the second largest revenue source. This is nearly
twice the national average of 13 percent.
Increasing the budget share for roads is a difficult and highly
political task. With this in mind, Ryan also presented information
on the structure of taxes that contribute to local roads across
the country and how they can be used to generate larger revenues.
Ryan identified three distinct tax categories that contribute to
local road funding across the United States. The first category,
property access, is defined by property taxes, real estate transfer
taxes, special assessments, impact fees, and utility fees. The second
is identified as vehicle use and includes vehicle registration taxes,
motor fuels taxes, and toll charges. The last category is local
economic activity and can be divided into sales taxes, personal
income taxes, and business taxes.
Each state uses a different combination of taxes to generate revenue
for local roads. Ryan's presentation outlined the tax policies of
each state based on its similarity to the mechanism used in Minnesota.
According to this outline, Nebraska and Wisconsin have policies
that most closely resemble that of Minnesota and New Hampshire and
Florida currently use tax mechanisms that are drastically different
from Minnesota.
When faced with the decision to either reduce the service of local
roads or raise revenue, local governments may be able to take advantage
of the tools set forth by Barry Ryan to make more informed choices
about tax policy.
Read Ryan's report, "Local
Road Tax Options: Is Minnesota Really That Different?"
Reprinted with permission from the June 2006 edition of Research
E-News, a publication of the Center for Transportation
Studies.
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