How much will Pay As You Go driving cost you?

There is an oft-stated fear that time, distance, place (TDP) road use charging will “price cars off the road”. (The US calls this VMT charging.) Let’s play with some numbers.

Revenue Neutral (see comment #2): The average American motorist pays less than $20 (about $C25 in Canada) per month in fuel taxes. That is $240 per annum or 66 cents per day. 1000 miles per month means about 2 cents per mile as a rough figure. In this scenario you would pay the same amount in a mileage charge instead of a fuel tax.

System costs: This is unrealistic because TDP charging costs a couple percent to operate – assume a 4% credit card level – so expect to pay an extra $0.0008 per mile to stay revenue neutral or $9.60 per year to have the charge collected. We are now at $250 per annum, up from $240. Or up 2.75 cents per day.

But this is also too simplistic, because you are not paying enough to keep the roads up anyway, so…

More Funding needed: To make up the projected $15B annual shortfall in the Highway Trust Fund (shared by 253M vehicles), your share would be an extra $5 per month or ½ cent per mile. So a flat mileage fee that tops up the Highway Trust Fund would mean an average of $.0258 per mile or $310 per year up from $240. An average of $70 difference annually means an extra 20 cents per day per vehicle compared to now – what’s that – the price of a cigarette, right? Do we really want to keep our crowded, crumbling roads, and polluted cities to save 20 cents a day?

And who would not be able to drive their car to work because of 20 cents? So what’s the fuss?

Well, TDP charging means variable rates. Time, distance and place means that more or less will be charged for traveling at more or less congested times or in more or less congested places. So, as an example only, expect that driving in congested times or places would cost you 3 or 4 times more per mile (say 8 to 10 cents* at the top of the scale, up from 2.5 cents) AND driving in less congested places and times would cost less (say, 1.5 cents at the bottom of the scale). So immediately, if you are a rural dweller you would be better off while an urban dweller who takes a car into the city at rushhour could be worse off.
* Yes, Manhattan might go higher. But why are you driving in Manhattan?

But who among us ONLY drives in congested places and at congested times? If you are a suburban driver who drives the same 12,000 miles after charging begins, at the projected average 0.258 cents per mile for 2/3rds of your trips and 10 cents per mile for the other third, your annual road use fees would be $606 instead of $310 or an additional 81 cents per day more than the simple, non-green, miles-traveled, non-variable rate.

The assumption is that a majority of urban drivers will have some choice regarding traveling earlier or later or by different means. More efficient car types will also carry lower TDP per-mile rates. Perhaps the suburban driver will pay more for a long daily commute. Or perhaps that driver will start using light rail where it is available. The key is: the amount of road use charge to be paid for the same miles traveled can be altered by the choices the driver makes rather than how many gallons of gas are used. You will have some choice of cheap miles and expensive miles. That is not possible when paying gas-taxes fixed by volume.

To be realistic, only the drivers who still prefer to drive during rushhour would pay more. For those that wish to do so or the few that literally have no choice, at least their trip will be less congested.

TDP road use charging carries advantages for all of us.


Lee Haber said...

You need more than 2 cents per mile to be revenue neutral. That's if you want all road costs (not just highways) to be paid for by road users. The external road costs, i.e. those not paid through gas taxes, is estimated to around 2.6cents/mile. That means in total the average driver should be paying around 5 cents/mile.(See www.vtpi.org/tca/tca0506.pdf)

Bern Grush said...

Lee: My use of "revenue neutral" ONLY means "matches the fuel tax". I suspect that if you are to have the driver pay 100% of all costs for every road, your figure may be closer. But I doubt that will happen. While drivers do currently underpay for roads - esp local roads – those roads have many more beneficiaries and purposes than 'only' operators of private and commercial motorized vehicles, so there is a valid argument for the "common good" (consider school buses, garbage trucks, bicycles and the myriad services beneath the asphalt, etc). Note also that 2% was my starting figure as illustration. I really ended up with a range between 1.5 cents and 10 cents. Your and Mr Litman’s calculations have more to do with “full cost recovery”. My calculations (which are based on EU thinking re TDP pricing) provide a range to send use-signals. What would be brilliant is to scale a signal-based pricemap so that it integrates (under the curve, so to speak) to an agreed cost recovery calculation. THAT would become truly revenue neutral.