Reason Foundation Says Costs for Fuel Tax, Toll Collection are 'Myths'

The Reason Foundation, an American libertarian research organization, released a study saying it costs more to collect fuel taxes than is generally believed, and that thanks to new electronic tolling systems, collecting tolls costs less than is thought.

by Staff

November 27, 2012

Reason Foundation Says Costs for Fuel Tax, Toll Collection are 'Myths' — All-electronic tolling could be as cheap to operate as collecting fuel tax, says The Reason Foundation. Cash lanes, however, are more expensive to operate. (Photo by Jim Park)

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The principal author of the policy study, "Dispelling the Myths: Toll and Fuel Tax Collection Costs in the 21st Century," is Daryl S. Fleming, PhD, who has been helping implement electronic toll collection for nearly 25 years, both as a toll operator and consultant.

Fleming and colleagues critically analyzed three recent reports that assessed the costs of collecting highway revenues via tolling. All three were primarily backward-looking, capturing costs that are rapidly disappearing as toll facilities shift from cash to electronic tolling.

They also identified and studied in some detail three U.S. toll operators that have pioneered all-electronic (cashless) tolling. These agencies were able to achieve the low costs of collection that might be expected of much larger agencies that can spread fixed costs over a larger volume of transactions.

Extrapolating their findings to larger toll roads, the researchers estimate that all-electronic tolling can achieve a cost of toll collection as low as 5% of the revenue collected, using streamlined business models.

AET has not only reduced the direct operating costs of toll collection, the researchers say, but also has eliminated the secondary costs of manual toll collection such as traffic hazards at toll plazas, traffic congestion (and related emissions and fuel consumption), noise and consumptive land use.

Fleming also used information from a recent National Cooperative Highway Research Program report (and other sources) to re-estimate the cost of collecting highway revenue via per-gallon fuel taxes.

Thanks in part to new information on fuel-tax evasion and exemptions, as well as a detailed review of tax and other costs hidden within the fuel-delivery supply chain, they estimate that the true cost of fuel-tax collection is close to 5% of the revenue collected.

For a summary of the study: http://reason.org/news/show/myths-toll-and-gas-tax-collection