User Fees Inch Up
Haggerty, Todd, State Legislatures
States are relying on user fees more and more. State revenue from highway tolls, sewage assessments, park visitor charges and other user fees is up 5 percent over FY 1992. In FY 2011, user fees provided, on average, 17.1 percent of revenues raised directly by states. That's still far less than state tax collections, however, which provided 71.6 percent of annual state revenues that year.
In this era of protracted revenue growth following years of declining tax collections during the Great Recession, user fees have become an attractive trend for funding public services. But they're not a new idea. State and local governments have imposed user fees for admission to parks and recreation facilities for decades. The first modern state turnpike, in fact, was financed by tolls. The Pennsylvania Turnpike opened in 1940, 16 years before the Federal Aid Highway Act authorized--and funded--the federal interstate highway system. The rising importance of user fees raises a number of questions for state policymakers. Proponents of fees argue they allow governments to impose the cost of services on the citizens who want and use them. This prevents general fund tax money from paying for government services that benefit only specific individuals, they argue. Opponents argue that, since fees are the same for everyone, they are regressive--that is, they cost low-income households a greater proportion of their income than higher-income households.
State tax policy can be a complex and often divisive subject, but when fees are included, it becomes even more so. Every source of revenue has its advantages and disadvantages from the perspective of citizens and state government. …