Wednesday, 27 July 2011

A replacement for fuel tax?

Eric Jaffe in the Infrastructurist discusses two options raised for replacing "the gas tax", which are in fact just one option that varies by scale.  He says:

In a recent article (PDF) in BNA’s Daily Report for Executives, Jack Schenendorf (an occasional contributor to National Journal’s Transportation blog) and Elizabeth Bell of the Covington & Burling law firm propose two alternatives to the gasoline tax: a ”Federal Interstate User Fee” for all interstate drivers, and a “Federal Motor Carrier User Fee” limited to commercial trucks.

The fuel tax wouldn't be replaced, certainly not initially, but supplemented by these fees. The proposals as Jaffe presents them are curious for their lack of detail and lack of consideration of consequences.

The technology proposed is essentially DSRC, as it it proposed that a tag and beacon system (EZPass being the one quoted) would be implemented, with charging at on and off ramps of all interstate highways.  It seems somewhat like the heavy vehicle charging systems already operational in Austria, the Czech Republic and Poland, which use overhead gantries to detect vehicles with tags (and also take number plate images).

Now just think about the scale involved in introducing such equipment on all of these across the United States.  It is technically feasible, but there are some major drawbacks:

1. Cost of installing gantries to do DSRC tolling on such a wide scale. Given the cost of a single gantry (which presumably has to have ANPR cameras to catch those with non functioning tags) could be anything from US$50,000 to US$150,000, the implementation costs on a nationwide scale are enormous, and could easily approach a billion dollars when communications and other infrastructure are included.

2. Diversion impacts of charging only on interstates. Obviously the answer to that is for states to be incentivised to charge their roads as well, to avoid diversion of traffic, but the negative short term impacts are considerable.  The obvious need is to charge across networks, and if states need to implement duplicate charging systems on their roads, it would easily be billions more.

3. If fuel tax remains, would the toll be high enough to make it worthwhile to collect?  Operating costs on a wide scale would inevitably decline, but a small increment of less than 2c/mile would almost be hardly worth it.

4. What of those not equipped for the toll?  The gantries would also need to include ANPR, so that number plates could be matched against those not paying through the tags.  As a result, there would be a huge exercise in chasing up unpaid bills across the country, and dealing with DMVs with poor quality vehicle ownership databases.

Certainly a transition from fuel tax is highly desirable, but a huge federal government run system would appear to be fraught with difficulties, particularly on such a scale.  It would be a nightmare to even do this for heavy vehicles alone.

Would it be better implemented by devolving power to collect revenue to the states, whether it be by fuel tax or a per mileage charge? Bear with me, because constitutionally what I am suggesting may not be possible, it’s just an idea.

At that point, states would be told that they would be responsible for collecting a set amount of revenue, based on statistics collected about actual traffic volumes on interstates. The states would be empowered to charge for distance, with a minimum amount to be paid to the federal government per mile (per type of vehicle even). If a state wanted to charge for its own roads then it could do as well, and of course it could contract out the collection and customer service aspects. If a state was uninterested in a distance tax, then it would still have to pay the money and collect it however it wished (e.g. fuel tax or annual registration fees). If the state refused to collect the money, then the federal government could contract another to implement it on federal highways.

In essence, I think the problem is that the network is too big and on too grand a scale to implement a single solution. I would strongly support a heavy vehicle only distance charge to be implemented nationwide, but initially as a voluntary option (with refunds of the fuel tax). With competitive service providers, it could be a way of managing risk (without being technology specific), but also provide a means to shift eventually to replacing fuel tax. Light vehicles would be the next, big step.

An alternative is for the states to pursue such charging and to piggyback off that, a reverse of what I described above.

In conclusion, what was suggested in the article is not ground breaking, but while barely thought out at all, it is in principle correct. A shift toward direct charging is desirable. Yet it is important for those who advocate that to not seek a silver bullet, for the transition away from fuel tax is going to be a long road.  The logical step would be to provide options for motorists to transition, to mandate an alternative for new vehicles, and to allow for diversity of options for payment and collection, as long as the right amount was collected.

Otherwise, it may be simpler to break up the Interstate highway network into a series of commercial companies, fund them with revenue from fuel tax now and empower them to introduce taxes or replacement means of paying for road use, then privatise them.   After all, isn't the USA meant to be the home of private enterprise, entrepreneurship and free markets?

UPDATE:  The article quoted at the top of this post is available here as a PDF.

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