David King

User fees have long been seen as an efficient financing mechanism because beneficiaries of services pay for the benefits received. This point of view is especially applicable to public services with commercial aspects and in situations for which links between consumption and price are relatively easy to make. However, road pricing, such as tolls, can be very high and important to local price levels. This paper examines the way in which expenditures on tolls are tracked and measured in the United States through the consumer expenditure survey (CES) run by the U.S. Bureau of Labor Statistics. The paper describes the CES and its methods, both generally and for tolls and road charges specifically, and compares those with estimates of U.S. tolls from other sources and from some micro-data the authors have compiled for the New York metropolitan area. The results suggest that the current CES underestimates consumer toll expenditures. Because the CES is a key background input into the consumer price index, the paper argues that flow-on effects continue through to measurement of U.S. inflation and gross domestic product as well. User fees have long been seen as an efficient financing mechanism because beneficiaries of services pay for the benefits received. This belief is especially applicable to public services with commercial aspects and in situations for which links between consumption and price are relatively easy to make. Road pricing, such as tolls, can be very high and locally important in consumer cost of living and firm costs. This paper examines the way in which expenditures on tolls are tracked and measured in the United States through the consumer expenditure survey (CES), which is run by the U.S. Bureau of Labor Statistics (BLS) of the U.S. Department of Labor. This paper describes the CES and its methods, both generally and for tolls and road charges specifically, and compares those with estimates of U.S. tolls from other sources and from some microdata the authors have compiled for the New York metropolitan area as an indicative, detailed case study. The results suggest that the current CES underestimates consumer toll expenditures. Because the CES is a key background input into the consumer price index (CPI), the paper argues that flow-on effects continue through to measurement of U.S. inflation and gross domestic product (GDP) as well. Rise of Road PRicing in ameRica During the 20th century in the United States, the primary national source of funding for highways and, later on, transit was the fuel excise, or gas tax. Beginning with Oregon, all U.S. states and the District of Columbia implemented a fuel tax between 1919 and 1929. President Hoover initially instituted the federal tax with the Revenue Act of 1932. These taxes are a specific excise that is a fixed price per unit sold (as opposed to an ad valorem, or percentage of sales price) tax. This tax is collected at the national and state levels and has the advantage of being easy to collect, typically at the rack or distributor level, hard to evade, and administratively low cost (1, 2). The gas tax was increased at regular intervals for most of its history, though those increases always had political challenges from various quarters. For most states and at the federal level, the gas tax was never indexed for inflation, and opposition to raising it grew near the end of the last century and into this one so that its revenue yield has not kept pace with spending needs (1, 3). The federal tax is currently $0.183/gal of gasoline, and 84% of the revenue collected goes into the highway account of the federal Highway Trust Fund, with the remaining 16% going to the mass transit account (3). Nonetheless, the tax remains a significant revenue raiser at the federal level, with it alone contributing more than $25 billion to the highway trust fund in 2012; taxes on other fuels, such as gasohol, also exist, but the gasoline excise is the single biggest revenue source (4). U.S. states also raise significant amounts of money with their own fuel excises, which range from $0.08/gal in Alaska to $0.506/gal in New York. Like the federal government, most states have left their gas tax rates unchanged for years, so, while important, the gas tax's relative real revenue yield is falling (5). challenge of measuRing extent of Road PRicing The political undesirability of higher fuel taxes is combining with other factors to cause a significant shift away from fuel taxation as a revenue source for transportation investment. In the United States, federal and state governments have turned more and more to road pricing of various sorts, and these range from traditional tolls to experiments with taxes on vehicle miles traveled (VMT) (5). The FHWA reports the following major sources of highway-user revenues in 2012: federal fuel taxes ($33.8 billion, which includes other fuel excises beyond gasoline, such as diesel taxes), state and local fuel and other fees ($55.0 billion), and tolls (i.e., road pricing, $11.8 billion). Of a total reported revenue yield of $100.6 billion for 2012, around 12% was raised from road pricing (tolls), a significant increase from past years and a trend set to continue in the future (4). Toll revenues have doubled over the past 15 years and are likely to continue a rapid climb.