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taxes constituted only 3 percent of State and local imposts on motor vehicles in 1921. By 1926 they totaled $188 million, which was 40 percent of user-tax collections, though still well below the $258 million received from registration fees.

In 1929, the first year in which all the States and the District of Columbia levied the motor fuel tax, its yield exceeded that of registration fees. By 1931 it produced $538 million, nearly three times the 1926 yield and close to twice the income from registration fees of $298 million.

In 1923, when 37 States imposed a motor fuel tax, the average rate was under 2 cents a gallon. In 1929 it averaged approximately 3.7 cents.

A new fee was added to the user-tax family in the twenties. Vehicle-operator and chauffeur licensing began in most States in the early part of the decade. In 1925 the States obtained nearly $10 million from this fee, which is not considered a prime source of revenue for road purposes.

As the decade of the thirties opened, the Depression triggered by the 1929 stock market crash was beginning to be felt in highway financing, but there was a delayed response to economic conditions so that, for a time, the pattern of highway finance continued very much as it had before. The Federal-aid program had been moving forward at a rapid rate. Federal aid for highways of $273 million in 1931 was nearly three times the 1921 figure. Together, Federal and State funds were providing half of all current income available for roads and streets. The equivalent of most of the Federal-aid funds received by the States was passed on to the counties and local governments. Only $50 million of these funds was spent by the States themselves.

State taxes on motor vehicles and their use were now a major element in the tax structure. Totaling $848 million in 1931, they were 93 percent of all State revenue for highways obtained from State sources. They provided nearly seven times their 1921 yield and constituted about 36 percent of the total of $2.3 billion available in that year for highway and street expenditure by all levels of government. State bond proceeds added another $351 million to the available State funds.

On the expenditure side, the total by all levels of government began to decline sharply in 1930 until it reached a low level of about $1.7 billion in 1933. Although declining, State current expenditures (excluding debt retirement) of $1 billion in 1931 were still more than 2½ times their 1921 level. On the income side, on the other hand, average State registration fees and related imposts began to decline only slightly after 1931, largely because of the adoption of graduated fee schedules lowering the rates for certain types of vehicles, notably passenger cars and light trucks.

For county and local roads, expenditures from regular highway funds had reached $700 million in 1930, nearly $100 million more than they were in 1921. Expenditures for city and village streets showed much greater growth, rising from $337 million to a high point (if Federal work-relief expenditures are omitted) of about $800 million. Taken together, these 1930 expenditures by the counties and localities, rural and urban, were more than 1½ times their 1921 level. During the 10-year period since 1921, a change in emphasis had taken place in the financing of local roads and streets. In 1930 the counties and local rural units of government were spending more to maintain and administer their roads and to pay interest on the debt incurred for highways than they were spending for new construction. Expenditure for construction by the urban governments exceeded those of the rural governments by close to $200 million, a foretaste of the effects of the great population movement to the cities.

Failure of the Property Tax

Motor vehicle imposts were relatively unaffected by the Depression. The major problem in highway finance arose from the failure of the property tax to fulfill its customary role in support of the highway function, which had been a major recipient of property tax income in most States. The municipalities were almost totally dependent on the property tax for road and street funds, and the counties and local rural governments only a little less so.

As income from farming and other sources declined, unemployment soared, and prices (especially farm prices) skidded downward, taxpayers began to default on their mortgage and tax payments. Delinquency rates rose rapidly, and mortgage foreclosures and tax sales became common.

State laws were enacted providing for increased leniency toward tax delinquents. Limits were placed on tax rates, the levy of taxes on property for certain purposes was sometimes forbidden, and homeowner and other exemptions were introduced.

Laying a new stone block surface at East 23d and Broadway in New York City in the late 1920’s.

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