Ending congestion by refinancing highways: the gas taxes used to pay for roads today should be eliminated and replaced by vehicle-mile fees.

• Author: O'Toole, Randal
• Position: Economics

AMERICA'S highway network once was the envy of the world, but today much of it suffers from terrible traffic congestion. According to the Texas Transportation Institute, the monetized cost of urban congestion quintupled between 1982-2007, and though it declined slightly since then due to the Great Recession, it still is more than $100,000,000,000 a year. Moreover, the TTI urban mobility report only counts some congestion costs; the total cost likely is closer to $200,000,000,000.

This congestion is related to several other difficulties with the U.S.'s system of highways, roads, and streets. First, financing roads using gasoline taxes fails to keep up with inflation and increasingly fuel-efficient cars. After adjusting for inflation, the amount of gas tax motorists pay for every mile they drive is one-third the amount paid in 1956, the year Congress created the Interstate Highway System.

Second, the notion of using gas taxes as a highway user fee never was perfect because the taxes people paid were not connected directly to the specific roads people drove on. This meant that the taxes failed to give road users the appropriate signals about the cost of using different roads, and the revenues failed to give road providers signals about the actual demand for various roads.

This imperfection particularly is acute at the local government level. Federal and state governments collect most gas taxes, while local governments own a large portion of the road system. A few local governments collect gas taxes, and most states share some of their gas tax revenues with local governments, but local governments still are forced to spend around $30,000,000,000 per year in general funds on roads.

Third, and partly because of the last point, at least some roads and bridges are in poor condition. Yet, various writers and special interest groups have overstated this problem: the number of bridges classified as "structurally deficient" has declined steadily, while the average quality of pavement has increased steadily. These trends, though, are far from uniform, and roads are in poor shape in some states and many local areas (perhaps because local road agencies must compete for general funds to maintain their roads).

Finally, exacerbating all of these problems, highways have been under attack by environmental and other groups for several decades. Rather than evaluate highway questions as institutional and finance situations, these groups treat highway problems as cultural issues, and their goal is to promote a major cultural change on the part of Americans, moving them away from personal vehicle gavel in favor of mass transit or foot travel. This simply is wrong: Americans, along with people in other developed nations, drive because it is more efficient and convenient than other forms of travel for most trips, not because of some "pro-automobile" cultural value. Yet, advocates of this view have persuaded many state and local highway agencies to avoid expanding roads to meet demand and even to neglect existing roads.

Increasing gas taxes can solve some, but not all, of these difficulties. It may compensate for inflation and more fuel-efficient cars, but only until there is more inflation and/or cars become more fuel efficient. Simply raising taxes does little to address the dilemma of localized road costs, targeting congestion, and other complications associated with the inefficient practice of paying for roads through Federal and state gas taxes.

Instead of raising gas taxes, it is proposed here to finance highways, roads, and streets through an entirely new system, which would replace gasoline taxes with vehicle-mile fees collected electronically while preserving traveler privacy. The revenue from these fees would be directed to the actual owners of the roads used, thus ensuring that local governments or other road owners have sufficient funds to maintain and operate roads without subsidies. Fees could vary by time of day in order to prevent congestion by encouraging people to drive at less congested times, thus making better use of the road system. Creating self-sufficient state and local road agencies would help insulate them from political pressure from groups who mistakenly view highways as a cultural issue.

Normally, when someone says a particular program or activity wastes billions of dollars a year, close evaluation reveals that some people benefit from the waste. Those individuals tend to form special interest groups demanding that the program continue. Congestion, however, has no clear beneficiary. Few private parties benefit from congestion, nor do many public employees have jobs that depend on congestion. Other than for anti-auto people who experience a perverse joy in seeing other people stuck in traffic, congestion is, for the most part, a dead-weight loss to society. This makes it all the more incredible that so little has been done to reduce it.

Highway congestion really is two separate problems, one obvious and the other more obscure. First, congestion takes place when traffic flows exceed the maximum flow capacity of roads. Each lane of a limited-access highway, for instance, has a maximum flow capacity of about 2,000 vehicles per hour. Obviously, when traffic flows exceed this capacity, traffic slows down. If this were the only problem, congestion would be a much less serious issue.

The subtle problem is that, when traffic slows down, the flow capacity of the road declines and that decline is persistent. Traffic can maintain high speeds so long as there are no more than about 1,000 vehicles per hour. When flows...