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Category — Motor Fuel Taxes

Congestion Pricing for Road Finance: Time to Replace Gasoline Taxes?

“[Gasoline] taxes do not properly price roads, with the result that traffic congestion costs Americans close to $200 billion per year…. Congestion pricing can … nearly double actual road capacities during rush hour, from 1,000 to 2,000 vehicles an hour.”

Gasoline and diesel fuel taxes have long been the main source of funding for building, maintaining, and operating America’s network of highways, roads, and streets. This is why the American Petroleum Institute nearly a century ago worked to enact such levies, welcoming taxes on its product to enable systemic road building to increase the demand for its chief product.

Today’s motor-fuel taxes are, at best, an imperfect user fee. One problem is that inflation and increasingly fuel-efficient cars have rapidly eroded gas tax revenues. After adjusting for inflation, drivers today pay only a third as much for each mile they drive as they did in 1956, when Congress created the Interstate Highway System.

Raising the pump tax would alleviate this problem, at least temporarily. But it won’t fix its other problems. The biggest is that gas taxes do not properly price roads, with the result that traffic congestion costs Americans close to $200 billion per year.

Another problem is that gas taxes are collected mainly by the federal and state governments, and local governments must find $30 billion in general funds each year to maintain county roads and city streets. As a result, local roads and bridges tend to be in poorer condition than highways funded out of user fees.

My New Study

On May 14, the Cato Institute published my new paper, Ending Congestion by Refinancing Highways, which made a case that replacing gas taxes with vehicle-mile fees could solve all of these problems. Such fees would be flat on uncongested roads and vary with the amount of traffic on congested roads. [Read more →]

June 13, 2012   9 Comments