Limits of Tolling as an Answer to Highway Funding Problems

Making users pay directly for the highways they use is an idea whose time has come. One aspect of this is recent efforts to impose tolls on selected portions of interstate highways. Tolling express lanes on congested highways, such as the Capital Beltway around Washington, DC, has been a very effective way to earn revenue while providing lanes that are almost always free of congestion. By providing a source of revenue to finance construction of additional lanes, this arrangement can reduce overall congestion. General and widespread tolling of interstate highways, however, will not work well unless drivers get superior service in exchange for the tolls they pay or can be required, through some means, such as mileage based user fees, to pay for the miles they travel on competing highways.

Mileage based used fees are preferable to tolling selected highways. With mileage based user fees, technology, such as GPS, could be used to record miles driven by each car. Drivers would pay directly for the miles they drive, whether those miles were on Interstate highways, arterial highways, or local roads and streets.  Prices could vary depending upon the highway and time of day with drivers paying more for premium services, such as congestion free express lanes or bridges across major rivers.

Implementing a system of mileage based user fees would require that vehicles be equipped with a device that would record mileage driven including some information about the location of each mile, even if just the state. Some, such as Robert Poole, advocate tolling interstate highways as part of a transition to direct user fees until a system of mileage based user fees could be implemented. But carrying out a transition to tolls would be difficult politically. Many drivers oppose tolls for interstate highways because they already pay for the construction and maintenance of those highways via fuel taxes.  Another problem with tolls is that drivers could avoid them by using a parallel road or highway that does not have limited access. This will increase maintenance costs, the number of accidents and the amount of congestion on those parallel roads and highways.

With existing technology, it is easy to collect tolls for limited access highways, but much more difficult to charge direct user fees for other roads and highways. Yet interstate highways have a dedicated source of funding that, depending on the state, may not be available to fund local streets and roads.  States often give priority to interstate highways over local streets and roads in decisions about allocating revenue from federal fuel taxes. When drivers use alternate routes to avoid tolls on limited access highways, they may be using roads funded by cash strapped local governments through property taxes rather than by fuel taxes.

It is best to limit tolls to those highways for which comparable un-tolled alternate routes do not exist for most drivers.  Furthermore, it is inequitable to impose tolls on some interstate highways, but not others, as a source of additional revenue to fund all highways or transit within a given jurisdiction.  Beginning in 2007, the state of Pennsylvania tried to toll interstate 80 and use the revenue to fund other highways and public transportation in the state.  Local citizen groups objected strongly, and the Federal Highway Administration rejected the proposal on three separate occasions.

As a long-term solution to highway funding problems, mileage based user fees are equitable and offer the promise of more efficient funding and management of highways, particularly if the fees can be used to cover the cost of the particular roads and highways for which they are collected. As an intermediate step on the way to mileage based user fees, tolls are problematic because they can only be used on selected highways, leading to traffic diversion and an inequitable distribution of the costs of funding highways.  Tolls can and should be used selectively to allocate space on congested highways. But rather than trying to impose tolls on rural interstate highways, it may be better for the federal and state governments to continue using fuel taxes, while promoting a gradual replacement of fuel taxes with mileage based user fees.

Why voters oppose higher fuel taxes

Most voters do not like taxes and tax increases. One of the few taxes that was generally accepted and even welcomed when it was first enacted was the tax on gasoline. Unlike most other taxes, Americans recognized that paying this tax would result in improved roads and highways, which they valued. More recently, however, state legislatures and the US Congress have experienced widespread public opposition when they consider increases in gasoline taxes, in spite of growing concern about deteriorating bridges and highways.

Recent strong opposition to fuel tax increases does not mean that Americans are less willing than before to pay taxes in order to have better roads. What it does reflect is voters’ opposition to money paid in fuel taxes being used for purposes other than highway spending. In recent years almost 20 percent of money paid into the Federal Highway Trust Fund (FHTF) has been spent on mass transit. In addition, FHTF money is being spent on recreational trails, historic preservation, and scenic easements. Besides the FHTF money allocated for nonhighway purposes, a growing share is used for earmarks, which reflect political priorities of individual members of Congress rather than the priorities of highway users who pay gasoline taxes. Many drivers do not want to pay higher fuel taxes when less than 75 percent of the money paid in federal fuel taxes is used to maintain and improve streets, highways, and bridges.

Is the answer then a return to the good old days when fuel tax revenue was used in a (relatively) responsible manner? That may no longer be possible. The federal government and many state governments are now controlled by a ruling class that has little respect for the preferences of the general public. Instead, they seek to impose their enlightened ideas of how society should be organized. Hence, they may continue to seek to use fuel and other taxes to subsidize public transit and otherwise promote greater density and less automobile use, even if this is contrary to the wishes of the general public.

Widespread opposition to increases in fuel taxes at the federal or state level thus reflects a fundamental distrust of government. This distrust is based on evidence that the ruling class has its own agenda, which is inconsistent with the preferences of the general public. Given their smaller size, state governments may be more accountable to the voting public, and thus more likely to spend fuel taxes wisely. Recent failure to pass an increase in fuel taxes by the Pennsylvania legislature, however, suggests that voters are not yet ready to trust the Commonwealth to make good use of additional fuel tax revenue. If the federal and state governments can no longer be trusted to spend tax money wisely, a better approach may be to develop innovative local approaches to funding transportation.