British Columbia Premier Gordon Campbell has proposed raising gasoline taxes by 3.5 cents per liter in order to fund transportation projects in rural B.C. The upgrades include improvements to Trans-Canada Highway near the B.C.-Alberta border and through the Kicking Horse Canyon; as well as improvements to the Sea the Sky highway to Whistler; and other rural highways improvements in British Columbia.

But funding transportation projects with fuel taxes is a bad idea for several reasons. First, fuel tax-based funding of transportation is inequitable: taxes on gasoline are broad based, taking money from people who never use certain roads, and subsidizing other people who do. Sometimes that subsidy is quite regressive, with lower-income people paying to fund mobility for higher-income people. Why should people who drive primarily to commute to work in the Lower Mainland pay to send skiers to Whistler? Why should a motorist who can’t afford a new, better-mileage car (and who will therefore pay more gasoline tax) subsidize someone who can afford a newer, higher-mileage car? And why should automobile drivers pay to subsidize the mobility of for-profit trucking firms who use and impose most of the wear on the roads between Alberta and British Columbia?

Second, tax-based financing of transportation is usually horrendously wasteful. With no concerns for profitability or cost-containment, government transportation agencies have no incentives to bring projects in on time, or on-budget. Consider the Alex Fraser Bridge in Vancouver, for example, estimated at $130 million, but ultimately costing over $400 million. Or consider the Lion’s Gate Bridge upgrade project in British Columbia. Originally contracted at $88.6 million dollars, and scheduled for completion in December 2000, the bridge upgrades eventually cost the province $125 million and were completed only last year.

Third, fuel-tax based financing of highways can undercut efforts to reduce air pollution, and result in over-use of newly constructed capacity. Studies suggest that controlling air pollution as well as roadway degradation is best done by the use of proper economic incentives, rather than through command-and-control regulations. So the best way to make sure that roadways aren’t degraded rapidly by excess truck traffic is to establish a maintenance program funded by tolls paid by trucks in proportion to their impact on the roadway. By the same token, the best way to insure that motorists incorporate environmental concerns into their mobility decisions is to make sure that the cost of driving includes the cost of remediating their scientifically demonstrated environmental impacts. That’s not easily done if the transportation system provides motorists with seemingly unlimited highway mobility paid for obliquely via taxes, and sometimes by a third party altogether.

It would seem intuitive to anyone outside of government that people should only pay for the services they use, unless those are vital services that cannot be funded in any other way. And transportation most certainly can be funded in more equitable ways that provide better incentives for responsible use of highways.

Consider the 407 Express Toll Road (ETR), a highway that extends 108 Km east-west, just north of Toronto. The 407 was developed as a public-private partnership between Canadian Highways International Corporation (CHIC) and the Government of Ontario. There was a guaranteed construction price tag of $930 million, which was met according to budget and on schedule. The road was then sold to 407 International Inc. for $3.1 billion dollars, earning a windfall for the taxpayers in Toronto.

Even less-than-perfect toll-road projects are better than tax-funded transportation. Consider the Coquihalla Highway, which runs for just over 300 kilometers from Hope to Kamloops in British Columbia. The Coquihalla’s construction was estimate at $375 million, and though it came in $768 million, there was at least a good plan in place to earn the money back. The Coquihalla currently earns $43 million per year in tolls, and if it were sold, like the 407 ETR, the Coquihalla Highway could earn a windfall for B.C.

The timing of Campbell’s highway tax couldn’t be worse: with Canadian’s reeling under skyrocketing gasoline prices already, the last thing most Canadians need is an inequitable, anti-environmental increase in the cost of their mobility. Campbell should ditch his tax proposal, and go back to the drawing board to scope out some public-private partnerships and toll-based approaches that will give Canadians the mobility they need, apportion the costs according to use, create better incentives for environmental protection, and avoid wasteful governmental spending.