Paying for Roads
There are typically three reasons motorists should be taxed:
- Cars that burn gasoline release carbon dioxide, which contributes to climate change. This imposes a social cost, which should be internalized via a tax.
- A gasoline tax reduces road use, which reduces congestion and can cause other problems "title": "Traffic Congestion and Infant Health: Evidence from E-ZPass"
- Those who use roads should pay for them. Gas taxes fund road construction/repair.
According to standard economic theory, (1) justifies taxing gasoline, while (2) and (3) justify the use of tolls. However, realistically, tolls are expensive "title": "Sample Tolling Scenario for Iowa US 20 in Western Iowa", so it can often actually be more efficient for the government to use a gas tax as an imprecise proxy for road usage. This makes it difficult to figure out the optimal amount to tax gasoline v. to raise with tolls, which is why I've combined the analysis together.
With that aside, let's look at how much we should be taxing motorists...
CO2 emission has a social cost of roughly $12 per ton "author": "W D Nordhaus", and a gallon of gasoline emits 19.6 pounds of CO2 when burned "title": "How much carbon dioxide is produced from burning gasoline and diesel fuel?", which means that each gallon of gas should be taxed 11.8¢ to internalize that externality.
Diesel fuel emitts 22.4 pounds of CO2 per gallon "title": "How much carbon dioxide is produced from burning gasoline and diesel fuel?", which justifies a 13.4¢ tax per gallon.
Extrapolating from current tax policy "title": "Fuel taxes in the United States", we can estimate the total revenue from such taxes at $8.4 billion - significantly less than what is currently raised.
Of course, this assumes no change in behavior. Realistically, gasoline consumption would increase if we cut the tax on gasoline; however, the elasticity of gasoline is between -0.02 and -0.04 "title": "Gasoline prices tend to have little effect on demand for car travel", so this would have a minimal impact on revenue. In particular, given current gasoline prices "title": "Weekly Retail Gasoline and Diesel Prices", we'd see a 15% and 17% decrease in the prices of gasoline and diesel, respectively, corresponding to less than a 1% change in demand.
This means that our $8.4 billion estimate may be 1% too low, but we only have two significant figures anyway :)
Americans spend 4.8 billion hours in traffic each year "title": "Negative Externalities: Who Causes Traffic Congestion?". Estimates for the value of a year of human life range from $50,000 to $223,000, but the Department of Transportation's estimate allows us to estimate the price of a human hour at $35.87. This implies a total cost from traffic at $172.2 billion per year.
Americans drive 3.22 trillion miles per year "title": "Record Number Of Miles Driven In U.S. Last Year", so this implies that we'd be taxed 5.3¢ per mile in an ideal world.
As with before, we could expect people to travel less because of this. Typical cost estimates for driving a mile range from 47.6¢ to 75.4¢ "title": "How Much Does it Cost to Drive?", so this tax represents between a 7% and 11% increase in driving cost. Since the elasticity of gas is between -0.02 and -0.04, and gasolien is a reasonable proxy for driving, I'd be surprisied if this has any noticeable effect on tax revenue.
I should also know that there are other costs from traffic congestion besides time "title": "Negative Externalities: Who Causes Traffic Congestion?", so this is another negative externality, that I am not accounting for.
I'm finding it surprisingly difficult to find how much road-usage causes road deterioration. However, to the extent that this happens, this should also be added to the toll tax, or, if that's infeasible, a gasoline tax. Because I can't find any numbers on this, the rest of this post will be putting a lower bound on how much motorists should pay local, state, and federal governments.
So, ignoring road costs, we find that the government would tax gasoline at 11.8¢ per gallon, diesel fuel at 13.4¢ per gallon, and driving at 5.3¢ per mile (either via tolls or odometers). This would raise $8.4 billion in gas/diesel taxes and $172.2 billion in tolls/odometer taxes, for a total of $180.6 billion per year.
The US federal government taxes gasoline at 18.4¢ per gallon [24.4¢ for diesel], but state gasoline taxes increase the average tax to 49.4¢ per gallon [55.4¢ for diesel]. The taxes on gasoline and diesel raise $35.2 billion for the federal government "title": "Fuel taxes in the United States". Some simple extrapolation shows that this means gasoline and diesel taxes raise roughly $90.3 billion per year for all levels of government. Meanwhile, tolls raise roughly $13 billion was raised each year "title": "Tolling is an Important Feature of the US Transportation Landscape". This means that motorists pay a combined $103.3 billion each year for using the roads.
This all means we should be taxing motorists roughly 75% more than we currently do - and this is a lower bound, because it doesn't account for road maintenance! In an ideal world, we'd lower gasoline taxes and increase the use of tolls, but since tolls are expensive, taxing gasoline might be the best we can do.