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Road Pricing
Beginning early next year, drivers in six states will begin testing a new way to pay for roads and transit: Commuters will be charged for the miles they drive rather than paying taxes on gasoline purchased.
GPS will make road pricing and auto insurance by the mile common in the near future. Widespread road pricing will increase investment in private roads. See Street Smart (I was the general editor) for more.
Posted by Alex Tabarrok on September 24, 2007 at 07:05 AM in Economics | Permalink
Comments
Forget about buying that Prius. Can't have tax revenues falling because people buy more fuel-efficient cars, can we?
Posted by: Foobarista at Sep 24, 2007 7:13:19 AM
A mileage fee doesn't make much sense to me. Congestion is a function of when and where you drive, not how many miles you drive. It looks like the idea is already being shaped by money-hungry leviathans rather than social-welfare-maximizing public servants.
Posted by: Keith at Sep 24, 2007 7:55:54 AM
Its not "GPS" that will make road pricing by the mile. Its the tracking of your car movements by a device that -may- make use of GPS (there are other technologies).
And these devices will pretty much erode what remains of our privacy so expect some sort of backlash if this is forced on consumers and they find out during divorce court cases that their "pay by the mile" tracking information is being used against them.
Posted by: tim at Sep 24, 2007 8:56:53 AM
Taxing miles driven does not address the
problems of pollution or congestion.
Drivers who use busy roads pollute more and
contribute more to congestion than other
drivers, but they would be taxed less.
Posted by: Francisco at Sep 24, 2007 9:08:12 AM
That doesn't make too much sense from the emmissions reduction scheme of things. Surely patrol taxation is better way to tax emmissions than mileage.
Then again perhaps the idea is to make owning SUVs cheaper...
Posted by: Naadir Jeewa at Sep 24, 2007 9:09:19 AM
Currently, the purpose of gasoline taxes is to pay for construction and maintenance of highways. Heavy commercial vehicles require much stronger construction materials and cause much more damage than light vehicles. A move away from gasoline usage taxes and toward mileage based taxes will remove that link between user cost and user payment.
If pigou tax advocates want to reduce carbon emissions, how will removing the link between efficiency and taxation help them achieve their goal? I am certainly not a pigou tax advocate, and I confess to not understanding why they put so much effort into a losing cause.
What scares me the most is that liberals will use geographic based taxation to advance their agendas. Governments will try to vary tax rates based on their planners' big government goals. Sprawl - which is actually the solution to congestion and air pollution - will be attacked mercilessly by the government
"lords".
Posted by: John Dewey at Sep 24, 2007 9:56:36 AM
Was this suggested by a GPS vendor or consultancy with a possible fat contract in the future?
One doesn't need anything this complicated to figure out how to charge for roads: find where the bottlenecks are (usually bridges) and put up a toll. And make that toll variable based on the time of day and the number of occupants in a vehicle.
For places that don't need tolls / can't easily install them (ie rural areas) just pay for it with gasoline and road use taxes. They probably aren't used that much and don't need as much work done on them.
Is there anything more that the GPS system will tell us than the above to points? I highly doubt it.
Also if a planning commission needs accurate numbers they can just ask cell phone companies to provide anonymized traffic patterns from their cell towers. Since 143% of cars have cell phones in them and they continuously hop to the nearest tower when on (not just when in use) the planners can get a good idea of usage.
Posted by: BlogReader at Sep 24, 2007 10:15:35 AM
Several commenters don't see how this will effectively address congestion/emissions/etc.
First, RE: congestion, it would be straightforward to design these systems to monitor congestion and change the road fees in real-time, while notifying you through the GPS unit.
Second, RE: mileage vs. road damage, have the GPS registered to a specific vehicle and charge different rates based on weight or class. (I suspect, however, that the the difference between a Honda Civic and a Ford F-350 is smaller than most people think; shipping vehicles are the majority of road wear-and-tear.)
Third, RE: emissions, the best way to influence behavior will be at the appropriate margin; thus, implement a carbon tax (on all fuels, including gasoline) to address emissions, and eliminate the gas tax as a way to fund roads and replace it with these road charges.
Finally, a behavioral economics question: Would drivers respond more to a "cab meter" system that told them what they were paying for all these things (road fees, congestion charge, insurance by-the-mile) in real-time?
Posted by: Daniel Hall at Sep 24, 2007 11:00:39 AM
Private roads will be a poor investment in the long run, because such infrastructure makes an extremely tempting target for imposition of rent controls. Consider the sad history of New York City's once privately-owned subways and the "nickel fare" which was imposed for four decades.
PS
tim,
Do you carry a cellphone? Guess what -- you already have a GPS-based tracking device with you in your car.
Posted by: at Sep 24, 2007 11:01:54 AM
Daniel -
Congestion: Would there be a way of monitoring and charging congestion in real time in such a way that it doesn't seem to the driver that they get unfairly punished for taking a wrong turning into traffic hell.
The carbon tax for emmissions seems the right thing to do.
As does the "cab meter". Is that intended to be like the "smart meters" that may be introduced into European homes?
Posted by: Naadir Jeewa at Sep 24, 2007 12:19:17 PM
It's difficult to believe the nation will accept monitoring of personal movement by the government.
Drivers in Oregon - where citizens believe in government solutions to everything - may accept this invasion of privacy, as the article indicates. I predict that voters in most Southern and non-coastal Western states will reject it by wide margins.
Can such a system be implemented on a state-by-state basis? I don't see how.
Gasoline taxes in most states are collected from wholesalers and distributors. Collection costs are minimal. Collecting mileage taxes from individuals will just create a costly bureaucracy.
Posted by: John Dewey at Sep 24, 2007 12:59:58 PM
Would there be a way of monitoring and charging congestion in real time in such a way that it doesn't seem to the driver that they get unfairly punished for taking a wrong turning into traffic hell.
Excellent question. Running into an unexpected traffic jam is bad enough without having to pay extra because of it.
Besides, if you are trying to influence behavior, you should set things up so that drivers can plan, and you should minimize random fluctuations in cost.
Posted by: Bernard Yomtov at Sep 24, 2007 2:38:27 PM
I may sound naive, but couldn't at least some privacy concerns be alleviated by adding a swipe card to the on board GPS units. Then a payment account need not be directly associated with a particular driver/vehicle?
Posted by: Nathaniel at Sep 24, 2007 3:44:45 PM
And these devices will pretty much erode what remains of our privacy so expect some sort of backlash if this is forced on consumers and they find out during divorce court cases that their "pay by the mile" tracking information is being used against them.
Don't libertarians support the use of private contracts between consenting individuals? By that logic, shouldn't technology that effectively lowers the enforcement cost of said private contracts, and thus providing cheaper justice, be celebrated? I think the beef is with the institution of marriage, or more specifically, the institution of divorce.
Posted by: Nathaniel at Sep 24, 2007 3:49:08 PM
It sounds like a good way to privatize roads to me. Let the market decide how much privacy drivers are willing to give up, and what the best pricing and traffic schemes are to make best use of available roads. For the most part I'd bet drivers will not pay much attention to pricing schemes unless they are professionals (taxi or truck drivers), or the prices get out of hand. I'm envisioning GPS navigation devices having choices between "fastest route", "shortest route" and "cheapest route".
I do NOT want the government using this technology to track drivers, and as was said, erode privacy. As a motorist in a "speed trap" town, I'd love it if road owners enforced their own traffic rules, meaning traffic cops would have to treat people as paying customers instead of sources of revenue who can't take their business elsewhere. As it is now (and I realize not all towns are like this), I feel like I'm being held up at gunpoint in order to finance the existence of traffic cops and courts under the pretense of doing 10-over.
Posted by: G at Sep 24, 2007 7:46:00 PM
yeah, this type of thing creeps out Americans.
Europeans might go for it though.
Posted by: thehova at Sep 24, 2007 9:28:17 PM
Obviously you don't need GPS to charge road use fees by the mile. Cars have odometers, and many states have required inspections every year or two where they could record the readings. You do need GPS for congestion- and time-of-day-pricing.
You might argue that people would want the more frequent billing that GPS would allow, but you could change the annual billings into adjustments by continuing to charge the road use taxes at gas stations and adjusting when the milage readings come through at the end of the year.
-dk
Posted by: Dick King at Sep 25, 2007 1:24:59 PM
As taxes on gasoline have increased, people have begun to buy cars that get better gas mileage and are also using fuel that is taxed at a lower rate. This is done so that they can bypass some of these taxes. As a result, a problem has arisen because gas tax revenue isn’t growing proportionally with the number of miles driven, and more money is needed for road upkeep. This problem can be contributed to the elasticity of demand. As taxes on gas increase people are finding ways to demand it less, thus the demand is elastic. I feel that this will also occur with the mileage tax. The demand for the use of roads will also be elastic because it is, ideally for the government, going to make people pay more taxes than they already were. People will begin moving closer to their jobs or carpooling to try and compensate for the new tax.
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Posted by: jack at Jan 7, 2008 1:19:51 AM
This option sounds like a good solution to the lack of sufficient funding for maintaining roads. Of course, it would help if this money were directed to highway improvements and not used for other needs. The monies raised by federal gas taxes and placed into the Highway Trust Fund haven't historically been allocated to road improvements in the ways that they were intended. As a result, roads have continued to worsen over time. Working in the highway construction industry, I have learned that the roads in the worst condition get the attention/money for repairs. Other roads that could use some work tend to be neglected until they reach the point of absolutely having to be maintained.
I imagine we all complain when we fill up at the gas station, but the federal gas tax is intended to create a benefit for drivers. When used properly, the funds generated by this tax can keep roads in prime driving condition. We don't enjoy driving on roads that are filled with potholes and are in poor shape. Our traveling experiences are better when we aren't getting beat and banged around by the roads we are on.
It doesn't really matter if you drive a big truck or a small car or something in between. The bottom line is that all travel and commuting wears out the roads. It stands to reason that those people who are logging the miles driving should also be involved in the process of funding the maintenance for these roads. Maybe paying by the mile is the solution to better maintained roads.
One question that does come to mind relates to allocating the money back to the states in which the mileage occurred. I guess that's where the GPS and other tracking discussed above would come into play.
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