Highways Can Be Privatized : Toll Roads Without Bureaucrats

If states want to gain revenue from highways, there is good information now that says state and federal highways should be privatized. Taking the bureaucrats out of the pictures will save billions as the rate of misuse of taxes collected will end.  Some governors use fuel taxes for political advantage during elections, buying votes.

But given this idea that taxes will be taken out of the hands of legislators is the main reason selling off major highways systems will not work, and the very thought of lowering the gas tax is out of the question.

Dispelling the Myths: Toll and Fuel Tax Collection Costs in the 21st Century
Source: Daryl Fleming and Robert Poole, "Dispelling the Myths: Toll and Fuel Tax Collection Costs in the 21st Century," Reason Foundation, November 27, 2012

December 5, 2012
For decades, the federal government, as well as many state governments, has relied on motor fuel taxes to maintain the U.S. highway system. However, growth in traffic necessitates an expansion of roadway facilities, as well as reconstruction, but the funds don't exist. Because the tax has not kept up with inflation and fuel efficiency is improving, there is less revenue generated through the motor fuel tax, say Daryl Fleming and Robert Poole of the Reason Foundation.

One solution for increasing highway funds would be for governments to turn to more toll collections. Conventional wisdom has long held that toll collection costs are higher than the cost of collecting fuel taxes. However, recent advances have changed the reality of the situation.

•Fuel taxes were previously thought to be easier to collect and a less expensive means of collecting revenue.
•However, electronic toll collection has reduced many of the costs associated with keeping tolls.
•Moreover, all electronic tolling (AET) has eliminated the need for toll booths, reducing operating costs and secondary costs such as traffic hazards and congestion.

A new study by Fleming and Poole finds:

•The cost of collecting motor fuel taxes is greater than the widely believed 1 percent of the revenue collected.
•The cost of collection for AET is less than most historical data suggests.
•Cost data shows that the net collection costs of an AET operation can be around 5 percent of the revenue. This suggests that toll collection costs can be similar in magnitude to collected federal and state motor fuel taxes.
•Toll collection costs can be reduced even more than already demonstrated by toll road operators using AET.

Additionally, AET gives toll operators a tool to combat congestion and other social costs, such as pollution and regional productivity, which are benefits that can't be measured by simply looking at revenue generated.

Critics argue that there needs to be further improvement in technology before fully shifting highway funding from fuel taxes to electronic tolls. However, that is unwarranted considering that there are demonstrable cost reductions based on current research of electronic tolling. Furthermore, technological advances can reduce cost even more through techniques such as sharing databases or back-office processing.