Should tolls replace motor fuel taxes for funding highways?

[cpzilliacus]

TOLLROADSnews:  Fleming-Poole study from Reason says all-electronic tolling costs competitive with fuel taxes, should be "embraced now" as primary highway funding mode

An exhaustive study by toll industry consultant Daryl Fleming and veteran transportation policy analyst and writer Robert Poole says all-electronic toll (AET) collection is already comparable in collection costs to the gasoline tax. The study titled "Dispelling the  the Myths: Toll and Fuel Tax Collection Costs in the 21st Century" finds that fuel taxes and AET alike cost in the region of five percent of revenue to collect, but that the other benefits of tolling make it the preferred mode for highway financing.

A summary: "21st-century all electronic tolling is already a viable alternative to motor fuel taxes as a highway user fee. In particular, toll collection costs in the vicinity of 5% of the revenue collected are entirely possible today using proven methods and technology."

This they say is similar to the costs of gasoline/diesel fuel tax collection.

"The results of this research demonstrate that with existing technology and a proper operating framework, the costs of collecting fuel taxes and the costs of collecting tolls for an urban corridor can be very similar. In fact, when all the costs of collection are considered in both cases, the cost of collecting tolls in some toll operations today may actually be less than the total costs of collecting motor fuel taxes"

Tolls have significant additional advantages according to Fleming & Poole: "21st-century tolling offers the opportunity to charge for use of a specific highway, when it is used, and by the type of vehicle being operated. As with paying one's water bill or electric bill, the toll customer pays a user fee for the service provided.

The study concludes that from the highway operator's perspective, AET provides more flexibility to price the entire vehicle mix than do motor fuel taxes.

"When implemented with a value-pricing toll schedule, AET can also be used to manage traffic - offering significant benefits that motor fuel tax programs cannot provide."

[wxfree]

This study was conducted by an organization that likes to pretend there's a free market in roads.  There isn't.  There's a non-toll road and maybe a toll road.  You don't have 5 or 6 companies each building roads and competing with each other.  Why would anyone build something as expensive as a highway unless it had something of a captive market?  Highways are too expensive and take too much room to build multiple competing facilities some of which may go unused.

How would the prices be set?  If not by a free market, then how?  Until you've priced enough people out of their jobs that the roads run freely?  People already pay a form of a toll during rush hour, in the form of lost time.  A "value-pricing toll schedule" would impose higher costs when traffic is slow, charging more when the service is of lower quality.

Tolls are also much easier to avoid than taxes, unless all roads are tolled, in which case you may as well simply tax mileage.

I really don't buy the assertion that toll revenue is so cheaply collected.  Toll roads require a whole layer of bureaucracy and administration that isn't needed to collect taxes from a few fuel distributors.  It's more expensive to collect revenue from everyone individually than to collect it from a few sources.   Why does it cost me about 40 cents in taxes to drive 35 miles but costs over $5 in tolls (plus fuel taxes) to drive the same distance the way the toll roads in Texas are priced?  We could triple the fuel tax and it still costs less than a quarter of what tolls cost.

I know the math isn't as simple as I'm presenting it, but these are staggering differences.

[Alps]

Study by toll industry consultant... hired by Reason... reported by Tollroadsblog... yep, checks out, must be true.

[Brandon]

Yes and no, IMHO.  The tolls should only be imposed on controlled-access roads by a state-run authority and not for profit (such as ISTHA, OTC, or OTA).  Surface roads should remain with a lowered gasoline and diesel tax.

[kkt]

I flat don't believe that the cost of collecting tolls is as low as collecting gas taxes. RFIDs, sensors, maintaining toll accounts, customer service staff.  All that costs money, collecting gas tax is very simple and requires no additional equipment.

I also resist some entity keeping records of where everybody is going all the time.

So, pro higher gas taxes, anti tolls, in general.

[cpzilliacus]

Study by toll industry consultant... hired by Reason... reported by Tollroadsblog... yep, checks out, must be true.

It's a policy document advocating a certain position. 

And yes, Reason has long advocated for "direct" funding of highways by their users by way of tolls.

If you disagree with what was written, why not e-mail Peter Samuel, the owner and editor of TOLLROADSnews and tell him?  He does publish well-written dissenting opinions.

[cpzilliacus]

So, pro higher gas taxes, anti tolls, in general.

Consider that most elected officials at the federal and state levels of government are absolutely terrified of increasing the per-gallon tax collected on motor fuels.

Toll collection is much less expensive if it is all-electronic, though I also agree that collection of taxes on motor fuels is pretty inexpensive.

[Revive 755]

Yes and no, IMHO.  The tolls should only be imposed on controlled-access roads by a state-run authority and not for profit (such as ISTHA, OTC, or OTA).  Surface roads should remain with a lowered gasoline and diesel tax.

Not for profit?  I think ISTHA might have to get tossed from that list, given the HOT/toll lane rumors floating around.

You might also want an agency that is a tad more insulated from political interference than ISTHA.

[flowmotion]

I think it's nearly inevitable, regardless of whatever the Reason foundation is on.

- Gateless tolling makes it relatively cheap to implement
- Gas tax hasn't changed since 1993, is declining in real terms to almost nothing
- Electric vehicles

The current transportation act legalized tolling existing highways, so long as the money goes back to that road. We will likely start seeing tolls appearing in a piece-meal fashion with major rebuilds and upgrades.

[wxfree]

My thoughts on this reflect my frustration with the current political climate overall.  We have an obvious, efficient, well-proven, and immediate solution to the highway funding problem-higher fuel taxes.  An increase would require no new roads, no tag readers, no extra collectors, no ongoing extra cost at all.  It wouldn't be a permanent solution, but it would be a good medium-term solution and could start generating steady revenue tomorrow.  But, like so many other things that make too much sense, our politicians declare it to be impossible.

It's communist/un-American/blasphemous to pay an extra half-penny per mile in taxes, but it's just dandy to pay 30 times as much and set up whole new departments to keep track of it all and enforce it, as long as well call it something other than a tax (even though that's exactly what it is).  Our government loves deception and unnecessary complexity.

I don't oppose toll roads in principle.  I do oppose what TxDOT has pressured NTTA into doing, charging higher rates in order to produce extra revenue for unrelated projects.  That isn't a user fee; it's a tax at an amplified rate.  I also oppose tolling all freeways and pushing traffic onto roads that are less able to handle the traffic.  I don't oppose private, for-profit, toll roads as long as there's no government subsidy (no eminent domain, no government loans or loan guarantees).

We built (most of) the Interstates without tolls.  What's happening now that we can't do what we figured out how to do 60 years ago?

[realjd]

The issue is, as cars become less and less reliant on gasoline, revenue will drop significantly. Gas mileage is increasing steadily, resulting in lower gas taxes. Drivers of cars like Teslas, the Leaf, and the Volt don't use any gas at all. As that becomes more common, alternative means of funding our transport infrastructure will be needed. Should it be through toll agencies? Per-mileage taxing? Higher yearly registration fees? I don't know, but something will need to be done other than just raising gas taxes.

[jeffandnicole]

I also resist some entity keeping records of where everybody is going all the time.

I hope you don't have a cell phone then.

[wxfree]

The issue is, as cars become less and less reliant on gasoline, revenue will drop significantly. Gas mileage is increasing steadily, resulting in lower gas taxes. Drivers of cars like Teslas, the Leaf, and the Volt don't use any gas at all. As that becomes more common, alternative means of funding our transport infrastructure will be needed. Should it be through toll agencies? Per-mileage taxing? Higher yearly registration fees? I don't know, but something will need to be done other than just raising gas taxes.

The fuel tax increase will not be a permanent solution, but it is an immediate solution and makes perfect sense.  It's more equitable than everyone paying an extra $50 fee, regardless of road use (an idea being floated), and much more equitable than having a few people pay extraordinarily high tolls so that millions of other people can get some new roads at no cost to them (an idea Texas has fallen in love with).

As we develop the governmental structure and administration and cheap ways of tracking mileage, mileage taxes based on vehicle class seem to be the best long-term solution (as long as the rate will increase to keep up with inflation and highway needs).  There's no need for it to track where you go, or charge higher fees for certain roads or times.  I'd rather see a flat per-mile tax that mimics the fuel tax, which doesn't vary with road type or time of day.  It would be less efficient than collecting a tax from a few fuel distributors, but as the somewhat fixed cost pays for collecting all the highway revenue from everyone, and not just from certain trips (as toll roads do) the efficiency could be fairly high.  As we figure out how to implement this we should raise fuel taxes as a reasonable medium-term user fee.

[vdeane]

The issue is, as cars become less and less reliant on gasoline, revenue will drop significantly. Gas mileage is increasing steadily, resulting in lower gas taxes. Drivers of cars like Teslas, the Leaf, and the Volt don't use any gas at all. As that becomes more common, alternative means of funding our transport infrastructure will be needed. Should it be through toll agencies? Per-mileage taxing? Higher yearly registration fees? I don't know, but something will need to be done other than just raising gas taxes.

Just pay for them from the general fund like everything else?

[kkt]

I also resist some entity keeping records of where everybody is going all the time.

I hope you don't have a cell phone then.

As a matter of fact, I don't.

If I did, I'd keep the batteries out until I wanted to make a call.

[kkt]

The issue is, as cars become less and less reliant on gasoline, revenue will drop significantly. Gas mileage is increasing steadily, resulting in lower gas taxes. Drivers of cars like Teslas, the Leaf, and the Volt don't use any gas at all. As that becomes more common, alternative means of funding our transport infrastructure will be needed. Should it be through toll agencies? Per-mileage taxing? Higher yearly registration fees? I don't know, but something will need to be done other than just raising gas taxes.

The gas tax hits drivers of inefficient and heavy cars more than efficient and light cars, and as you say it doesn't hit drivers of all-electric cars at all.  I think it's actually a good thing that it hits drivers of inefficient cars harder.  It's incentive to buy more efficient cars and keep the cars you have in good shape.  In the long run, some way will need to be found to charge drivers of all-electric cars, but they're still a tiny part of the market and usually owned by fleets or people with a gasoline car in addition.  Perhaps they could pay annually or monthly based on the total mileage driven.

[J N Winkler]

The issue is, as cars become less and less reliant on gasoline, revenue will drop significantly. Gas mileage is increasing steadily, resulting in lower gas taxes. Drivers of cars like Teslas, the Leaf, and the Volt don't use any gas at all. As that becomes more common, alternative means of funding our transport infrastructure will be needed. Should it be through toll agencies? Per-mileage taxing? Higher yearly registration fees? I don't know, but something will need to be done other than just raising gas taxes.

The issue here is that the obsolescence of the fuel tax is a long-term development.  Yes, all-electric cars and cars using other propulsion technologies have the potential to make a tax on liquid fuels obsolete, but at present the price premium of such vehicles is many multiples of the added "bite" of a tripling of the fuel tax.  At the moment you can expect to pay about $4/gallon for fuel, of which about 50c (depending on state) is tax.  If your car gets 30 MPG and you drive 9000 miles annually, you are paying $1200 annually for fuel, of which $150 is tax.  The price premium of an all-electric car is nowadays on the order of $10,000, so if you buy one just to avoid fuel taxes, you are paying a premium equal to 60 times what you would save annually in taxes.  If fuel taxes triple, the premium is still 20 times what you would save annually in taxes.

Technological progress in propulsion technologies is hard to predict--there is no equivalent of Moore's law in this field.  However, it is a very safe bet that more than 90% of the vehicle fleet will be dependent on taxable liquid fuels in 10 years.  It is only a fractionally less safe bet that the same will be true in 20 years.  In 30 years it might be time to have a successor to the fuel tax on tap.

[cpzilliacus]

I do oppose what TxDOT has pressured NTTA into doing, charging higher rates in order to produce extra revenue for unrelated projects.  That isn't a user fee; it's a tax at an amplified rate.  I also oppose tolling all freeways and pushing traffic onto roads that are less able to handle the traffic.  I don't oppose private, for-profit, toll roads as long as there's no government subsidy (no eminent domain, no government loans or loan guarantees).

If you think what TxDOT and NTTA are doing is unique, I can assure you it is not. 

Ever heard of the Pennsylvania Turnpike Commission?  The Port Authority of New York and New Jersey? The New York MTA? Delaware River Port Authority of Pennsylvania and New Jersey? The Metropolitan Washington Airports Authority?  All of these have raised tolls to subsidize other activities (usually money-losing transit operations, sometimes "free" highways having nothing to do with the toll roads and toll crossings).

We built (most of) the Interstates without tolls.  What's happening now that we can't do what we figured out how to do 60 years ago?

I don't dispute that at all.

[realjd]

You all make good points about the electric cars and near-term necessity of a fuel tax. I was approaching it from more of a future-looking perspective.

How much of a highway funding problem do we have in this country? We have a generally excellent road system, often at the expense of other means of transportation. The only thing I specifically would like to see more spending on is upkeep of large infrastructure items like bridges.

[Chris]

The U.S. should seek alternate sources of funding. I don't think toll roads are a good solution, because of their side effects and random nature, some roads charge $ 0.20 per mile while a parallel similar road is free just because it was pre-existing. A toll-free network allows for greated optiziming of traffic flows. People tend to avoid toll roads if reasonably possible. You also cannot toll every single road, unless they come up with some kind of 100% coverage GPS-based mileage toll, which is unlikely at this time.

However, due to gas tax revenues dwindling, toll roads and express toll lanes are currently the only viable option to pay for large scale road projects, i.e. freeway projects.

What do you guys think of abolishing the federal gas tax all together and let the individual states raise their state gas taxes as they see fit? Too much money of the federal gas tax flows to non-highway destinations (I believe it's as much as 40%). The era of "interstate" construction is over anyway and states have proven to be able to fund projects without federal funding (like Phoenix).

[J N Winkler]

How much of a highway funding problem do we have in this country? We have a generally excellent road system, often at the expense of other means of transportation. The only thing I specifically would like to see more spending on is upkeep of large infrastructure items like bridges.

At the moment expert consensus backs a tripling of the fuel tax to meet "all" highway-related funding needs, which implies that the funding deficit is about double the current fuel tax.  It is divided between reconstruction of life-expired pavements and bridges and new capital expansion.  We do have a very good road system in general, but we have a large and growing number of freight bottlenecks (a logical target for capital expansion), and most of the activity in terms of reconstructing obsolete pavement and bridges has occurred in states where the infrastructure is both newer (constructed during the high period of primary Interstate construction, i.e. 1960 to 1975) and less heavily used (Midwestern states, variously defined--basically the Old Northwest west to the Great Plains).

What do you guys think of abolishing the federal gas tax altogether and letting the individual states raise their state gas taxes as they see fit?

The main problem with this approach is that the federal gas tax has a weakly redistributive effect.  States with moderately large populations would not suffer noticeably from a straightforward substitution, but large and thinly populated states like Montana and Alaska would suffer.  Since the US otherwise does not have much of a regional policy, unlike most European countries, it is partly for this reason that I am not keen on abolishing the federal tax.

Too much money of the federal gas tax flows to non-highway destinations (I believe it's as much as 40%).

That isn't true.  The 40% figure applies to the "uncovered" portion of total highway expenditure in the US (i.e., the percentage of total highway spending at all levels of government that is in excess of highway-related revenues).  Per FHWA Highway Statistics table FE-21B, the only diversions that apply to the federal fuel taxes, which are otherwise deposited in the Highway Trust Fund neat of collection expenses, are to the Mass Transit Account (2.86c/gallon out of total tax of 18.4c/gallon for gasoline and 24.4c/gallon for diesel) and the LUST Trust Fund (0.1c/gallon).

Diversions are actually more of a problem at the state level.  The federal government has honored a commitment to spend revenues collected for highway purposes only on highways, with the lone exception of the small diversions for mass transit and LUSTs (never more than 16% of revenues depending on the mix of diesel and gasoline in vehicle fleet fuel consumption).  Many states, however, do not have a rule of dedicating all their highway revenues to highway purposes, while others dedicate their highway revenues to general transportation purposes (meaning mass-transit projects can compete for highway revenues).  What this means is that abolition of the federal fuel tax could actually result in a decrease of revenue available for highways since some states would opt not to replace the federal fuel tax while others would retain the same marginal tax but apply much larger diversion percentages.

Accepting that these diversions would be in the public interest requires believing that society is better off if more is spent on transit, or even on non-transportation-related purposes, at the expense of highways.  Is this what you want?

The era of "interstate" construction is over anyway and states have proven to be able to fund projects without federal funding (like Phoenix).

I don't think Phoenix's model is all that portable.  Phoenix has experienced rapid population growth, and has a long tradition of protecting potential freeway corridors from development.  This means the vast majority of its new centerline freeway mileage has been in greenfield corridors where costs are very low and construction can be tightly scheduled.  Highway needs exist in other areas where corridors are already highly developed and costs per mile are quite high.  Wichita, which has had its own sales tax increment for freeways since the mid-1980's, is arguably a more representative example of what would happen if the Phoenix model were rolled out nationally--20 years to upgrade a 13-mile crosstown expressway/divided surface arterial corridor to six-lane full freeway versus three years to build a 10-mile four-lane freeway (the K-96 Northeast Freeway) on greenfield.

[cpzilliacus]

reported by Tollroadsblog... yep, checks out, must be true.

You could buy  it and make the  changes you deem appropriate, since its owner is advertising it for sale.

[kkt]

What do you guys think of abolishing the federal gas tax all together and let the individual states raise their state gas taxes as they see fit? Too much money of the federal gas tax flows to non-highway destinations (I believe it's as much as 40%). The era of "interstate" construction is over anyway and states have proven to be able to fund projects without federal funding (like Phoenix).

I don't think letting the states do it all is a good plan.  The Feds now have a major obligation toward road maintenance.  That has to be funded somehow, and it isn't going to be from the general fund.

We have a national interest in a good road system.  Leaving it up to the states would leave it open for a state that's in trouble to put off maintenance and charge unreasonably high tolls on routes that mostly serve cross-country travelers.

There are few new interstates being constructed, but there are many that need to be expanded and many more for which there is a maintenance backlog.  For that matter, there's several proposed interstates that can't be done at state's expense.  I'd like to see the toll roads we have converted, with their maintenance paid for by gas taxes, but alas we are going in the opposite direction.

The gas tax should be a percentage of the sale price, not a fixed charge per gallon.  Most every other tax is a percentage of the sale price, not per amount.  That way it wouldn't have to be adjusted for inflation (or else dwindle down to not enough to fund maintenance).

[johndoe]

Let's just check everyone's odometer annually!   Give x% revenue to localities, y% to states, z% to fed. 

[cpzilliacus]

Let's just check everyone's odometer annually!   Give x% revenue to localities, y% to states, z% to fed. 

How do you apportion those percentages? 

For example, I drive (a lot) in Maryland and Virginia, as well as lesser amounts in the District of Columbia, Delaware, West Virginia, Pennsylvania, North and South Carolina.