Road pricing when? Old fleet, new fleet.

Ryan Avent at The Bellows argues in his post No Choice

“The bottom line is this: we can no longer afford to not tax important negative externalities. We can no longer afford to not do the stuff we really ought to have been doing in the first place. The options we have are to ratchet up current taxes with bad incentive effects and diminishing returns, or to cut spending on important priorities, or both. But cutting back on education spending and infrastructure investment while increasing taxes on income will squeeze growth, making the task of closing these financial holes harder.

Or we can bite the bullet, suck it up, and start charging an appropriate amount for valuable public infrastructure. We can stop giving away space on roads and parking spots for free, costing everyone a lot of wasted time. We can stop letting companies foul the air and slow-cook the earth with no negative impact to their bottom line. And then we just might have enough dough to keep critical infrastructure running. We might even be able to invest in a new and better infrastructure capacity.”

Similarly, the blog Grush Hour argues No more RUC [Road User Charge] trial please, suggesting we know enough and the time for action is now.

While any claims I have to working in transportation economics would be revoked if I did not support road pricing, there are several issues that keep getting ignored in the progressive blogosphere when endorsing quick implementation of road pricing.

  1. Gas taxes send the right signal about general use, and encourage conversion from gasoline to electric powered vehicles if set appropriately, though does not send a useful signal for time and place. See: A Dozen Reasons for Raising Gas Taxes
  2. Gas taxes are administratively efficient, road pricing loses on the order of 20-30% of revenue to administration and collection costs. See: Too Expensive to Meter
  3. Imposing a new mileage based user fee/road user charge/vehicle mileage tax on existing vehicles is going to be unpopular, probably less popular than simply raising gas taxes. See: Road pricing killed off by Transport Secretary

Everyone now recognizes gas taxes will cease to be effective as user charge as hybrid and EV adoption rises (unless the gas tax rises with MPG, and even then 100% EVs will get off the hook). If we rely only on gas taxes, we eventually will have to tax 100% of the cost of roads on the last gasoline powered vehicle. The system will break down long before then. See Beyond the Gas Tax


This suggests an obvious transition point. Use gas taxes to collect revenue from the “old fleet” powered by gasoline or diesel, use a Vehicle Mileage Tax to collect revenue from the “new fleet” powered at least in part by electricity. It can be easily communicated that the new fleet does not consume gasoline (or as much) and this is about fairness. The relative gas and electricity charges can still be skewed to adjust for environmental externalities associated with gasoline, but other than that, should be equalized to reflect costs imposed and benefits received. A standing, independent “Highway User Fee Commission” can set federal rates to ensure full funding of the Highway Trust Fund (and secondarily manage traffic by time and place). States could piggy-back on the apparatus.

Each new electric or quasi-electric car can have an on-board device to compute tolls specific to the vehicle (based on MPG, and therefore discounting for the gas tax already paid) and for time (hour of day, day of week) and general place (in the city, on the freeway, vs. in the country, on local roads, etc.). Since this would apply only to new cars, no older EVs would be harmed (it is a small price to pay for political harmony).

Trucks are another story, since the fleet is smaller and more centrally (though not centrally) managed. They can be converted sooner.