Study Says Collection Costs About Equal for All-Electronic Tolls or Fuel Taxes

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The cost of all-electronic tolling is about the same as the cost of collecting fuel tax, and could result in more money available for highway infrastructure improvements, the Reason Foundation said in a study released last week.

The libertarian think tank said the report bucks the “widely believed” notion that fuel tax collection costs about 1% of the revenue it raises. Instead, the report, which drew mixed reactions from transportation groups, claims fuel taxes and electronic tolling each cost about 5% of the revenue they raise, Reason said.

“These findings have major implications for the future of highway finance and funding,” Bob Poole, Reason’s director of transportation policy and the project manager for the study, said in a Nov. 27 statement announcing the research.

“Some of the concerns over shifting from increasingly inadequate per-gallon fuel taxes to a per-mile charging system have been the assumed much-higher cost of charging by the mile,” he said. “The authors suggest that, for the limited-access highway system . . . it would be feasible today to begin the conversion from gasoline and diesel taxes to all-electronic tolling.”

American Trucking Associations, which supports fuel taxes over tolling to pay for new infrastructure, was suspicious of the report.

“We’re examining it, as we would with any report or study that is so far out of step with what the preponderance of research has said to date,” said ATA spokesman Sean McNally. “We’re looking at that with a critical eye, and also considering the views and leanings of the source of the report.”

“The body of research of the subject shows that perhaps tolling is not as good a public policy choice as the study would purport to claim,” McNally added.

Auto group AAA was more open to Reason’s findings.

“Tolling is a piece of the puzzle, but it is not a panacea to solving our long term transportation financing needs,” Chris Plaushin, AAA’s director of federal relations, said in a statement. “AAA believes tolls can be implemented on a case-by-case basis as long as the user fees paid by the motorists are being utilized to improve the safety and efficiency of the system being used.”

Daryl Fleming, who consults tolling agencies on collection systems, led the research for Reason.

Fleming’s work focused both on the costs of fuel tax collection that previous research did not find and the cost savings associated with electronic tolling, which requires less infrastructure and labor than other tolling systems, Poole said.

Previous research on the cost of tolling estimated it at 20% to 30% of the revenue raised, but “they didn’t completely understand all-electronic tolling,” Poole told Transport Topics.

Poole cited a 2006 study from the Transportation Research Board as one such report he sought to dispute.

As for tax collection, Reason’s findings “on the extent of the evasion of fuel taxes and some of the other costs that are built in . . . suggest strongly that the 1% is very much an underestimate, and it really is closer to 5%,” he said.

The research also found that tolling could enable higher charges for different vehicle classes or times of day. This “opportunity cost” puts the cost of fuel taxes higher than 15%, the group said.

The efficiency of fuel tax collection is one of the main reasons that ATA supports it as a funding source for highway infrastructure. ATA has pushed for Congress to raise the federal fuel tax to fund needed highway repairs.

But the tax hasn’t increased since 1993. It stands at 24.4 cents per gallon of diesel and 18.4 cents per gallon of gasoline, which in recent years has become inadequate as the chief funding mechanism for the Highway Trust Fund.

The difficulty state and federal governments have had in raising fuel taxes further proves Reason’s position that tolling could be a better funding mechanism going forward, Poole said.

“I think about half the states have had at least one increase in their state fuel taxes since ’92. But a lot of them haven’t,” Poole said. “And of course we see how difficult this has become at the federal level. And yet the needs are out there.”

Reason lobbied to allow states to put tolls on existing interstate highways as part of the most recent transportation funding measure, which was passed this year, Poole said. But that provision did not make it to the final version of the law.