GAO Study Examines Societal Costs of Transportation Modes

March 01, 2011

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A study by the Government Accountability Office finds that shippers do not pay the full societal cost of freight service in any mode, but particularly in trucking.

External trucking costs, such as accidents, pollution and congestion, are six times greater than similar costs created by railroads and at least nine times greater than those created by waterways, GAO said in its report to the House Subcommittee on Select Revenue Measures.

These costs are not borne by shippers and they are not recovered by society through taxes, spending or regulatory policies, the agency said.

The agency makes no recommendations from this conclusion. It does point out that the policy implications are hard to unravel.

"Policy responses that attempt to more closely align prices with marginal social costs (including a competitive rate of return on capital) or attempt to reduce gaps between fixed costs and revenues will confront a number of complex issues," GAO says.

Among other things, it is hard to estimate how changes in policy might affect one mode's ability to substitute its service for another mode, GAO says.

Also: "A policy that charges freight providers on the amount of their emissions would result in an overcharge for those traveling in rural areas where few people live and an undercharge for those traveling in more densely populated urban areas."

The agency does outline several policy options for dealing with this situation.

One would be to raise taxes on infrastructure users to recover their costs.

A second would be what the agency describes as "Ramsey pricing," in which infrastructure users are classified by the strength of their demand for the infrastructure and then required to pay a higher tax if they can't reduce the strength of that demand.

A third would be a two-part tax, one a flat rate to cover fixed costs and the second a per-use charge to cover the marginal cost.

All of these options involve higher taxes, which means that they can be seen as more theoretical than practical in the current political climate.

The report is available at

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