You think the government is wasting a few billion a year on mass-transit subsidies. But what about the huge…

Commentary about business and finance.
July 30 2008 5:31 PM

Highways Paved With Gold

You think the government is wasting a few billion a year on mass-transit subsidies. But what about the huge subsidies for cars and trucks?

Ford SUVs. Click image to expand
A fleet of Fords

The Transportation Department reported that Americans drove 9.6 billion fewer miles in May 2008 than in May 2007, a 3.7 percent drop. The result: rising demand for mass transit and declining revenues for the Federal Highway Trust Fund, which is funded by gas taxes. The Bush administration's counterintuitive policy response, as the New York Times reported, has been for the Highway Trust Fund to borrow funds from the department's mass-transit account.

Naturally, many urban-dwelling, car-hating socialists (as well as suburban-dwelling, Jeep-driving moderates like me) believe this is precisely the time to put more government funds—not less—into alternate modes of transportation: natural-gas powered buses, bicycle-sharing programs, trains, light-rail systems, subways, ferries, and rickshaws. The notion that the government should invest more in mass-transit infrastructure has always raised conservative hackles. As they sit on the Amtrak Acela, or ride the New York City subway or Washington, D.C., Metro, to their think-tank jobs or to the Wall Street Journal'soffices, free-market types frequently fulminate against the systems that ferry them around. (New York Times house libertarian John Tierney's "Amtrak Must Die" from 2002 is a classic in the genre.) To such critics, money spent on mass transit, such as the $1.3 billion 2007 appropriation for Amtrak (here's Amtrak's 2007 annual report) represents an unconscionable waste of taxpayer funds. With their top-down bureaucracies and public ownership, they argue, mass-transit systems can never hope to compete economically with the private-sector alternative—driving gasoline-powered cars. They can't compete culturally and socially, either, since rugged American individualists prefer sitting by themselves in traffic to rubbing shoulders with strangers. And for those few areas where it does make sense to have mass transit, the market will step in and provide.

Advertisement

This is one of the oldest political arguments in America. For a good chunk of the 19th century, the prospect of the federal government supporting "internal improvements"—i.e., canals, ports, roads—was a major source of partisan contention. Ultimately, the Jeffersonians and Jacksonians (and their heirs) lost out to the Whigs (and their heirs). Whether it was the Erie Canal, the first transcontinental railroad, or the interstate highway system, state and federal resources have repeatedly been deployed to build new types of transportation infrastructure that the private sector couldn't, or wouldn't, fund. Over time, these investments paid huge economic, social, and national-security dividends to the country.

What hasn't been acknowledged is that the automobile is supported by a government subsidy that dwarfs anything provided to mass transit. How big is the subsidy? By my (admittedly extremely crude) calculations, it could total nearly $100 billion per year *.

Americans can drive so much because there is an extremely extensive system of (largely free) roads for us to use. Despite some private-sector efforts, maintaining and building the nation's roads remains almost exclusively the preserve of government. Data from the Census Bureau on construction spending shows that this year, public spending on highways and streets is running at an annual rate of about $75 billion. *

But that's not all. Tax credits and breaks for particular types of economic activity constitute a public subsidy of that activity. Taxpayers effectively subsidize home ownership through the mortgage interest deduction. They subsidize the use of mass transit through programs that permit people to purchase mass-transit tickets with pretax money. And taxpayers subsidize the purchase and operation of gas-powered automobiles in at least two big ways.

First, just as they can with other types of equipment, businesses and self-employed individuals can write down the cost of cars and trucks they own against their taxable income. This decade, the relevant portion of the tax code dealing with the issue, Section 179, was changed to provide extra taxpayer support for the purchase of very large cars. In 2003, as part of an effort to stimulate business investment, the law was changed to significantly increase the amount of deductions businesses could take on equipment, including vehicles that weighed more than 3 tons. (In the past, that category would have been limited to commercial vehicles, such as pickup trucks and moving vans. But in SUV-crazy America, that also means Hummers and Escalades.) So if a Realtor bought a $75,000 Hummer and used it mostly for business, she could take a $25,000 deduction from her taxable income in the first year of ownership. The stimulus package passed earlier this year included provisions that boosted the amount of total deductions businesses could take on equipment. But taxpayers aren't just subsidizing the purchase of gas-guzzlers by businesses. Thanks to tax credits for hybrids, they're also subsidizing the purchase of gas-sippers by individuals.

Self-employed individuals and businesses can also deduct the costs of operating a car for business purposes from their taxable income. In light of higher gas prices, the Internal Revenue Service this year boosted the mileage allowance to 58.5 cents per mile. A self-employed salesperson who drives 5,000 miles a year and is in the 33 percent tax bracket can thus save about $1,000 in tax payments. (The language of the allowance suggests that it applies only to cars—not to bicycles, scooters, or motorcycles.)

There are doubtless many other examples of taxpayers subsidizing the automobile and its related industries. (The Chrysler bailout comes to mind.) Send your nominations to: moneybox@slate.com.

Correction, July 30, 2008: The original version of this story contained a significant numerical error. It linked to a Bureau of Transportation Statistics report, which can be seen here, that shows public construction spending on roads and highways in monthly totals. That Census Bureau reports the data as monthly totals expressed at an annualized rate. Because we read that annual rate as a monthly rate, the original article overstated public spending on highways and roads by a factor of twelve. Mea culpa 12 times. ( Return to the corrected sentence.)

TODAY IN SLATE

Frame Game

Hard Knocks

I was hit by a teacher in an East Texas public school. It taught me nothing.

Yes, Black Families Tend to Spank More. That Doesn’t Mean It’s Good for Black Kids.

Why Greenland’s “Dark Snow” Should Worry You

If You’re Outraged by the NFL, Follow This Satirical Blowhard on Twitter

The Best Way to Organize Your Fridge

Politics

The GOP’s Focus on Fake Problems

Why candidates like Scott Walker are building campaigns on drug tests for the poor and voter ID laws.

Sports Nut

Giving Up on Goodell

How the NFL lost the trust of its most loyal reporters.

Iran and the U.S. Are Allies Against ISIS but Aren’t Ready to Admit It Yet

Farewell! Emily Bazelon on What She Will Miss About Slate.

  News & Politics
Politics
Sept. 16 2014 5:47 PM Tale of Two Fergusons We knew blacks and whites saw Michael Brown’s killing differently. A new poll shows the gulf that divides them is greater than anyone guessed.
  Business
Moneybox
Sept. 16 2014 4:16 PM The iPhone 6 Marks a Fresh Chance for Wireless Carriers to Kill Your Unlimited Data
  Life
The Eye
Sept. 16 2014 12:20 PM These Outdoor Cat Shelters Have More Style Than the Average Home
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Plus Video
Sept. 16 2014 2:06 PM A Farewell From Emily Bazelon The former senior editor talks about her very first Slate pitch and says goodbye to the magazine.
  Arts
Brow Beat
Sept. 16 2014 5:07 PM One Comedy Group Has the Perfect Idea for Ken Burns’ Next Project
  Technology
Future Tense
Sept. 16 2014 1:48 PM Why We Need a Federal Robotics Commission
  Health & Science
Science
Sept. 16 2014 4:09 PM It’s All Connected What links creativity, conspiracy theories, and delusions? A phenomenon called apophenia.
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.