Executive Summary

By: Ken Notis

Recent work in the private sector and current policy debates have refocused attention on Federal subsidies to passenger transportation modes. To provide the Department of Transportation with an independent analysis of this issue, BTS developed data on federal transportation revenues, expenditures, and net subsidies, by mode. Subsidy, for the purpose of this analysis, represents a simple accounting calculation of the net flow of funds to or from the federal government for individual transportation modes. The excess of expenditures over revenues is the net subsidy. To show the amount of subsidy relative to the level of use of transportation infrastructure, we normalized the data by dividing the absolute net subsidy values by passenger-miles.

Highways

  • Users of the highway passenger transportation system paid significantly greater amounts of money to the federal government than their allocated costs in 1994-2000. This was a result of the increase in the deficit reduction motor fuel tax rates between October 1993 and September 1997, and the increase in Highway Trust Fund fuel tax rates starting in October 1997.
  • School and transit buses received positive net federal subsidies over the 1990-2002 period, but autos, motorcycles, pickups and vans, and intercity buses paid more than their allocated cost to the federal government.
  • On average, highway users paid $1.91 per thousand passenger-miles to the federal government over their highway allocated cost during 1990-2002 (Figure 2).

Passenger Rail

  • The net federal subsidy to passenger railroads was the third largest, except for the years 1998-2000 (Figure 1), when it was second. The Taxpayer Relief Act of 1997 provided Amtrak with a tax credit in the amount of $2.18 billion in current dollars that caused the net federal subsidy to increase dramatically in 1998 and 1999.
  • Passenger rail received the largest subsidy per thousand passenger-miles, averaging $186.35 per thousand passenger-miles during 1990-2002 (Figure 2).

Transit

  • Between 1990 and 2002, transit received the largest amount of net federal subsidy, increasing from $5.09 billion to $7.31 billion (Figure 1), an increase of 3% per year. Next to passenger rail, transit received the next highest net federal subsidy per thousand passenger-miles for the period, averaging $118.26 in year 2000 chained dollars (Figure 2).

Air

  • After transit, air transportation received the second largest net federal subsidy, except for the period from 1998 to 2000 (Figure 1), when rail was second. Subsidies declined in 1998-2000 as a result of the increase in federal receipts from aviation users associated with the Taxpayer Relief Act of 1997, which increased existing aviation excise tax rates and introduced new taxes as of October 1, 1997.
  • Net federal subsidy per thousand passenger-miles for air increased between 1990 and 1996 and then declined from 1997 to 2000, before rising again in 2001 and 2002 (Figure 2). The decline during 1997-2000 was caused by the increase in federal receipts from aviation users as a result of the increase in the existing excise tax rates and the introduction of new taxes in 1997, which preceded increases in expenditures.



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