OP-ED | Replace Gas Tax with Congestion Pricing
by Heath W. Fahle | Jan 4, 2013 3:59pm
(9) Comments | Commenting has expired
Posted to: Business, Energy, Opinion, State Budget, Taxes, Transportation
There is no prohibition on proposing bad ideas in the Connecticut General Assembly, assuring that Connecticut’s citizens will be hearing many as the new Legislative Session begins next Wednesday. State Rep. Patricia Dillon will introduce a bill to bring tolls back to Connecticut’s highways. Piled on top of the bad ideas that have already become law in this state, tolling would be a particularly lousy one. But if a type of tolling, congestion pricing, were used to eliminate the state’s gas tax and the revenue used only to rebuild the state’s highways, Rep. Dillon would be on to a good idea.
According to the INRIX National Traffic Scorecard, 4 of the 162 most congested highway corridors in the nation are in Connecticut, making Connecticut’s congestion the fifth highest on a state per capita basis. Traffic congestion serves as a hidden tax on the economy, with the Texas Transportation Institute (TTI) estimating the monetized cost nationally at more than $100 billion per year. Other research shows that for every 10 percent increase in travel speeds, labor markets expand by 15 percent and productivity by 3 percent. Relieving congestion should be a top priority of legislators seeking to promote economic growth.
The gas tax was an effective financing mechanism because it linked road use with a charge for that use. Innovation and inflation, however, are eroding this link. Both improved fuel efficiency and the rise of vehicles that do not use carbon-based fuel spurred a decline in gas tax revenue. Connecticut’s gasoline tax generated $364 million in Fiscal Year 2012, marking at least the third straight year of producing less revenue than the previous fiscal year, according to the Office of Policy and Management’s Fiscal Accountability Report for Fiscal Years 2013-16. Further adjusting revenue figures for inflation reveals that “drivers pay about a third as much for each mile they drive as was paid in 1956 when Congress created the Interstate Highway System.”
The link can be re-established, however, by replacing the gas tax with automatic electronic tolling (AET) and dynamic pricing to both raise revenue and address congestion. Such systems are already in place around the world. London implemented a form of congestion pricing, cordon pricing, for individuals driving within a specified zone in central London. After some initial skepticism, support for the system grew as demonstrated by a study of central London’s business community one year after it was implemented in 2003 showing 72 percent of companies believed it to be working. Studies showed that the new system increased average travel speed in central London by 37 percent.
The most common American experiences with congestion pricing are with the growing network of High Occupancy Toll (HOT) lanes that are being constructed in urban areas. One such system recently opened on Interstate 495 in northern Virginia.
The libertarian Reason Foundation recently conducted a study of Chicago’s transportation infrastructure, proposing a $52 billion infrastructure plan to dramatically reduce congestion and increase mobility throughout the greater Chicago metropolitan area. Their plan was fully funded by dynamically priced user fees.
Here is how such a system might work. As part of a car’s registration fee, drivers receive an E-Z pass transponder. In order to get on the highway, drivers would pass underneath an AET system at highway speed and then again as they exited the highway. The motorist would be charged a per-mile fee for their travel. During peak travel times on congested highways, drivers would pay a higher fee.
Connecticut’s list of “unfundable” transportation projects is long and grows in urgency every day. Raising the revenue necessary to tackle these projects and reduce congestion will be less and less feasible as long as the state remains dependent on the gas tax. Replacing the gas tax with congestion pricing is a good idea that should be considered far more carefully than simply adding a new revenue stream from traditional tolling.
Heath W. Fahle is the Policy Director of the Yankee Institute for Public Policy and a former Executive Director of the Connecticut Republican Party. Contact Heath about this article by visiting www.heathwfahle.com
Tags: connecticut, transit, gas tax, heath w. fahle, budget, E-Z pass, tolls, dh
(9) Comments
posted by: miketcha | January 6, 2013 10:09pm
Not a bad idea, but I see CT as a pass through state especially Interstate 95. It seems unfair to tax CT residents who have no choice but use these roads to get to work and home while hundreds of nonresident motorist get a pass. Equally, there are a number of areas in the state that the congestion is the result of poor highway design and lack of future planning. Additionally, CT is a small state and people will game the tax by taking city and back roads adding more congestion to already crowded cities. For example, Middletown RT 9 get congested every am and pm - mostly due to traffic signals on a limited access highway. When there is a accident or major backup, automobiles will pour into the city trying to get around the congestion, only creating gridlock on Middletown streets. Despite all the above, I think some combination of gas tax and congestion pricing might be worth a try.
posted by: Noteworthy | January 7, 2013 9:08am
This proposal like all the rest of them, ignore the fact that the legislature takes a large portion of the gas tax and uses it for non-road expenditures. This proposal will have the same result unless some integrity in this scheme is put into place.
posted by: joemanc | January 7, 2013 10:36am
2 things - 1. The CT legislature is currently borrowing funds from the transportation funds to fund social programs in the general fund. Let’s start there first, before we put in tolls.
2. The reason we have congestion is overpopulation. I haved work in Stamford, for 12 years and my co-workers tell me there was little or no traffic down here until UBS came here and then other companies followed, and then all kinds of condo and apartment buildings went up. There is no room to expand roads, such as I-95, yet look around Stamford and apartment buildings keep going up. Land needs to be set aside as open space to prevent overpopulation and thus congestion.
posted by: justsayin | January 7, 2013 1:44pm
The facts used appear to be skewed or even flawed. Revenue (taxes) are down because people are leaving or buying gas in cheaper areas as they pass through the state. Maybe if the state did not continually raid the fund the repairs and improvements could have been in the works. This is a spending issue not a revenue concern.
posted by: Heath | January 7, 2013 1:54pm
miketcha said:
Not a bad idea, but I see CT as a pass through state especially Interstate 95. It seems unfair to tax CT residents who have no choice but use these roads to get to work and home while hundreds of nonresident motorist get a pass. Equally, there are a number of areas in the state that the congestion is the result of poor highway design and lack of future planning. Additionally, CT is a small state and people will game the tax by taking city and back roads adding more congestion to already crowded cities. For example, Middletown RT 9 get congested every am and pm - mostly due to traffic signals on a limited access highway. When there is a accident or major backup, automobiles will pour into the city trying to get around the congestion, only creating gridlock on Middletown streets. Despite all the above, I think some combination of gas tax and congestion pricing might be worth a try.
I would argue that a user fee for highway usage is more easily exported to non-CT residents than is the CT gas tax, which can easily be avoided by filling up in New Jersey or Massachusetts.
Second, I agree that poor highway design is a source of congestion for CT motorists. But with the gas tax structurally unsound, a user fee makes much more sense as a revenue mechanism. See the cited Chicago study above which invests $52 billion in infrastructure improvements wholly with user fee revenue.
Third, I disagree that “overpopulation” is the cause per se, but rather over-consumption of a public good. Implementing a pricing mechanism that takes highway capacity into account will more efficiently distribute the scarce resource.
Fourth, to this point about driving on local roads as a substitute for highway driving, it is valid I think for short journeys, but the point of dynamically priced user fees would be to (virtually) guarantee a driver highway speeds throughout the journey. Compared to sitting at stoplights on Rt. 1 in Fairfield for example, an I-95 that actually moves traffic would be enticing.
posted by: Heath | January 7, 2013 1:56pm
noteworthy said:
This proposal like all the rest of them, ignore the fact that the legislature takes a large portion of the gas tax and uses it for non-road expenditures. This proposal will have the same result unless some integrity in this scheme is put into place.
It’s true. This plan would require legislators to use the revenue for its intended purpose.
posted by: Heath | January 7, 2013 1:58pm
miketcha: strike my comment about overpopulation. That should be directed toward joemanc.
posted by: Heath | January 7, 2013 2:03pm
justsayin said:
The facts used appear to be skewed or even flawed. Revenue (taxes) are down because people are leaving or buying gas in cheaper areas as they pass through the state. Maybe if the state did not continually raid the fund the repairs and improvements could have been in the works. This is a spending issue not a revenue concern.
All facts are linked to their source. To your point about the cause of revenue decline, the OPM report cited addresses this in brief, noting the structural change on the part of consumers rather than a cyclical change. I agree that spending is the problem as I’ve written in this space before. But its also true that the primary revenue source for transportation funds is quickly becoming part of the problem. Fixing this problem in such a way as to improve the overall system for drivers seems an appropriate remedy.
posted by: gutbomb86 | January 9, 2013 12:08pm
This a great idea. It’s a much better idea than sticking with the status quo - the gas tax & high gas prices in general have a much larger ripple effect on the economy than most people realize. And the state has raided the fund for years. The problem I’m hearing from people in the loop is that because the tax produces so much revenue. Without a firm footing of new revenue expectations based on an improved economy, then we’re stuck with a 1 to 1 kind of equation. If we can’t replace it all through congestion pricing, we’re going to take a pretty big hit for a year or two as we wean ourselves off the revenue as it is structured now.
The direct consequence (from what I am told) is that the transit funds that go to the towns will be directly impacted and we could face property tax hikes.
Complicated stuff but I think the gas tax is a big piece of the problem. If we got rid of it, we certainly would improve the business climate. The price of gas drives up the price of everything.