No one ever seems to complain about banana user fees. Bananas aren’t free, after all. You eat, you pay. The same goes for golf games, heating your home and pretty much anything else you might consume—except, of course, driving.
Putting a price on roads is often described—to mix transportation metaphors—as the “third rail” of Canadian politics. Recall that Bernard Lord won the 1999 New Brunswick provincial election partly on his promise to scrap a controversial highway toll. Lately, however, tolls have been creeping back into the political discourse, if only out of fiscal necessity. With Ontario Premier Kathleen Wynne’s blessing, Metrolinx, the Toronto-area transit authority, is currently pitching a menu of several different road tolls in hopes of raising $2 billion a year for transit expansion.
Despite plenty of populist opposition, road tolls actually make good economic sense when it comes to building and maintaining roads and controlling congestion. And the ideal road toll should properly reflect the amount of road being used—in the same manner that people who eat a lot of bananas pay more than those who don’t.
Keep in mind, Canadians already pay a road user fee of sorts: the gas tax. Drivers are obliged to pay the government in order to gas up. Part of the 10¢ per litre federal gas tax is funnelled back to municipalities for infrastructure projects. And yet the gas tax is far from an ideal system if we’re interested in accurately pricing road use or fighting gridlock. That’s because it is based on fuel use rather than kilometres driven. A Prius takes up just as much of the road—and causes just as much rush-hour congestion—as a gas-burner, but pays a fraction of the gas tax. How is that fair?
This conflict between fuel efficiency, road use and tax revenue will only grow as Ottawa commits to tough new fuel standards. By 2025, company-average fuel consumption for cars will be mandated at 4.3 litres per 100 kilometres. That’s half our current gas consumption standards. Gas tax revenue, already in decline, will no doubt fall further, along with fuel consumption.
We can thus expect governments to pay a lot more attention to road tolls in the future, if only to recoup their losses on gas taxes. Washington state is already charging electric car owners a $100 annual road-use fee in lieu of the gas taxes they avoid. Premier Wynne’s recent interest suggests some Canadian politicians are also getting over their fear of tolls. But how best to price total road use?
Britain once proposed a system in which every car would have a government-monitored GPS unit to constantly track mileage and driving time, but dropped the idea in the face of massive public outcry over privacy issues. U.S. advocates, where road tolls are starting to gain greater public acceptance, admit this “Big Brother” approach is likely a non-starter. “People really hate the GPS idea,” admits Robert Poole, director of transportation policy at the Reason Foundation in Washington, D.C., and member of the Mileage-Based User Fees Alliance.
But Poole has a work-around: he envisions a system in which major highways are electronically tolled in the manner of Ontario’s Highway 407: with gantry cameras taking pictures of licence plates moving on and off the road and automatically billing car owners. This information yields annual highway distance driven. Non-highway driving could be calculated by subtracting the highway amount from odometer readings when the car’s registration is renewed. Local and highway driving could thus be billed at different rates. A more sophisticated system might even vary the price of highway driving, depending on congestion. “It could easily be done,” says Poole.
Putting a price on something that currently appears free is never going to be instantly popular. But falling gas taxes will soon push politicians to take a closer look at road tolls, providing an opportunity to fight congestion at the same time. The ideal user fee ought to be fair and simple. Just like eating bananas.
Peter Shawn Taylor is a writer specializing in economic issues