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Returning to the concept of user fees

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Pat Goss
November 27, 2007

What’s the difference between a “tax” and “user fee”? Is the distinction important to you as a taxpayer—or simply as a citizen?


This question was at the center of the debate between state lawmakers as budget deliberations bogged down for months. Unfortunately, a growing segment of the population—and, consequently, elected officials who represent them—make no distinction between “taxes” and “user fees.” They see both as government’s way of separating taxpayers from their money.


This debate isn’t new; our 40th president, Ronald Reagan, was the master of understanding the difference between taxes and user fees. The late president hated taxes but supported appropriate user fees. This month marks the 25th anniversary of his speech that triggered a significant increase in transportation funding, an increase came from the least likely of proponents.


Reagan used his Nov. 27, 1982, radio address to promote an expanded highway, bridge and transit program funded with a five-cent increase in the federal fuel tax. This, he believed, was a quintessential user fee. His proposal represented a 125 percent increase to a fee that had been unchanged for 23 years!


Reagan, who many consider the very embodiment of the American conservative movement, didn’t mince words in pushing an expanded federal program at a time of economic uncertainty.


“America can’t afford throw-away roads or disposable transit systems,” Reagan said. “The bridges and highways we fail to repair today will have to be rebuilt tomorrow at many times the cost.”


He explained that the cost to the average car owner to use the transportations system amounted to about $30 a year, “less than the cost of a couple of shock absorbers.”


The four-year transportation bill Reagan signed Jan. 6, 1983, provided additional resources to not only address a growing backlog of highway and bridge needs but to create for the first time a dedicated source of funding for transit capital improvements. All due to a bipartisan willingness to increase a user fee and dedicate proceeds to needed system improvements.


For the record, user fees are paid by those using a government service, with the proceeds used to maintain or improve that service. Taxes, on the other hand, are paid by everyone and aren’t directly tied to using government services.


After months of haggling over the source and level of funding, the governor and legislators reached bipartisan agreement to raise revenues from increased transportation fees for needed system improvements. This budget begins addressing the well-documented investment needs in all modes of transportation. That’s progress.


However, as we move forward, we must strive to restore taxpayers’ confidence that when they pay a user fee, that revenue is dedicated to the service for which it’s intended.


Ronald Reagan was right 25 years ago when he proposed to raise the federal gas tax and dedicate those revenues to transportation. Let’s hope our state and federal leaders can learn from Reagan’s leadership and begin restoring the confidence of the public in our transportation user fee system.


Pat Goss is executive director of the Wisconsin Transportation Builders Association. Readers can reach him by e-mail at pgoss@wtba.org or by writing to him at 1 S. Pinckney St., Suite 818, Madison, WI 53703; phone (608) 256-6891.

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