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Ed Newbold | Let’s not be fatalistic about tolling
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Let’s not be fatalistic about tolling

Let’s not be fatalistic about tolling

Posted May 8, 2016 from Seattle, WA

“Tolls are here to stay” wrote the Editors of the Seattle Times last Saturday, May 7.

 I say: Don’t be so sure!  Tolls have made their spectacular advance partly because we the public and our leaders haven’t  really thought  them through and because many folks—both those who like tolls and those who can’t stand them–are accepting as gospel the misguided notion that tolls are to ‘help the environment.’

I am running an ad in the A-section of the Seattle Times on Tuesday, May 10 that makes the point that “Tolls aren’t green!” Here is the ad:

 Newbold Ad tolls gas tax 2016 for ws

Since that’s not searchable, here is the text of the ad:

Tolls aren’t Green

WADoT is smitten with Tolls; Gastax still better

 WA DoT is smitten with tolls, no doubt because they have proven to be the path of least resistance to new revenue. Perversely, however, it is the spectacular success of the gas-tax in reducing Carbon pollution that has made DoTs all over the country so frustrated with it.  Gas tax revenues decline over time because gas taxes cause people to use fuel more efficiently.  Tolls by contrast are ‘Carbon-stupid’: a Hummer pays the same as a Yaris.  Rather than impose a hodgepodge of whatever tolls are politically do-able, with all the attendant irrationalities & shocking inefficiencies, why not go back to the old marriage–w/ an electric car fix–and restate the vows?

end of ad.

In the rest of the blog I’m just going to elaborate on the points made in the ad, which is too small to allow for any complexity.

Sentence 1:

WA DoT is smitten with tolls, no doubt because they have proven to be the path of least resistance to new revenue.

WA DoT has tried and failed and tried and succeeded in raising the gas tax in recent years, but the opposition is ‘pre-mobilized,’ and highly motivated, and indeed, new increases in the gas tax would involve a tough political fight. On the other hand  WA DoT’s success in getting 520 tolled, plus the new Hot Lane Tolls on 405 and 167 that came without any terribly bruising fights, has got to have the DoT excited that it has a new potential revenue source that won’t generate overpowering public opposition.

So far, tolls have been very much aided by the DoT’s “divide and conquer” strategy (I’m not accusing them of anything here, this all makes sense from the DoT’s standpoint). Here on Beacon Hill, we don’t have to go on 520 very much, or take the Tacoma Narrows Bridge.  If you aren’t late for work coming from Auburn, you can be zen, drive a safe speed, and you don’t need pay for a fast lane.  So far, anyway…

The Ethanol part is a bummer, but one great thing about the gas tax is they don't send you a bill

The Ethanol part is a bummer, but one great thing about the gas tax is they don’t send you a bill

Sentence 2 + 3:

Perversely, however, it is the spectacular success of the gas-tax in reducing Carbon pollution that has made DoTs all over the country so frustrated with it.  Gas tax revenues decline over time because gas taxes cause people to use fuel more efficiently.

These sentences are the heart and soul of the ad. In the Seattle Times on Feb 29, 2008 Andrew Garber wrote an opinion in the Seattle Times predicting where things were going in regards transportation issues that expressed the frustrationt DoTs everywhere were having with the gas tax:

“Tolls also would provide the state a new source of money. The growth of state gas-tax revenue is slowing, and, as vehicles become more fuel-efficient, officials predict tax collections won’t keep up with the cost of maintaining and improving the transportation system.”

To anyone aware and concerned about the current problem of Climate Forcing, this quote is very jarring.   Here is the gas-tax being credited with single-handedly working to solve one of the world’s biggest problems, the hidden cause of the destruction of the nation of Syria, the reason Florida is going to be running to the Treasury soon for compensation for lost real estate, the reason the Tar Sands forest is burning up, and instead of jumping up and down celebrating the amazing success of the gas tax in combating climate change we are hearing about the need to ditch it and find some other revenue-raising device.

If one took the trouble to look, one could no doubt find quotes like Garber’s from every state DoT in the country and from the Federal DoT as well, which is on a permanent campaign against the gas tax. DoT’s hate a revenue source that keeps declining, and although it is understandable that any bureaucracy would hate that, it is imperative that the public, the media and our leaders realize the implications of this decline: The fact that the agency is in pain means a very big problem is being solved!

Furthermore, the decline in revenues involves two virtuous circles: The gas tax puts downward pressure on the price of gas on the one hand, softening the increase of the tax on the paying motorist, and meanwhile, although this does not apply to folks who can’t afford to switch cars or adamantly don’t want to, the motorist can often simply opt for a more efficient vehicle, which also can reduce the pain of a gas tax increase.

Sentence 4:

Tolls by contrast are ‘Carbon-stupid’: a Hummer pays the same as a Yaris.

 Here is one of the fatal flaws of tolling. When the gas tax was conceived, the external costs of fossil fuels were not known or at least were not worried about.  But the gas tax got the problem right anyway, because in general a two-ton vehicle that will damage the road more pays more than a half-ton vehicle will and that proportionality is reflected by this near-perfect user-fee, the gas tax.  With tolls, all that knowledge is gone, a vehicle is a vehicle, and it would be a very heavy political lift with myriad technical problems to bring any of it back.  As more is known about the health effects of pollution, and the health and lifestyle effects of constant noise, we need to throw in a host of other external costs in addition to the climate costs of pollution.  The Gas tax intuitively knows about these pollution, health and also physical danger externalities while in the other corner, the virtual tollbooth, is completely  clueless and will not help society escape these onerous problems.

1/2-sentence 5:

 Rather than impose a hodgepodge of whatever tolls are politically do-able, with all the attendant irrationalities & …

 In his recent column on an out-of-stater who was billed by WA DoT even though he’s never been in our state, Danny Westneat alluded to the DoT’s long range plan to institute universal tolling.

It’s tempting to discuss universal tolling, which would have among other problems a lack of Carbon-pollution sensitivity and in addition might be overwhelmingly intrusive. But universal tolling is not on the table yet and for now the DoT is clearly engaged in an incremental strategy to implement tolling in a hodgepodge fashion.  And this is another problem with tolling that often doesn’t get discussed, or is willfully misunderstood.  Tolling is called a “user-fee,” which it sort of is, but that misses the point as tolling that isn’t universal is actually a “use- of- a-roadway-with- a-monopoly” fee.  Nobody is going to toll 3rd street when anyone can go to 4th st. or 2nd st. to avoid the toll.  Tolls are only charged when the roadway, for whatever reasons, holds a natural geographical monopoly.  At times, like with the Tacoma Narrows Bridge, the monopoly is very strong and the construction costs of the bridge are very high.  I don’t like tolling ever, but if ever there was a situation that falls into the “best case” category it would be the Tacoma Narrows Bridge.  But even there, it is fundamentally irrational.  If you are a worker who lives in Tacoma and get a job at University Place, you don’t have to pay any tolls to go to work.  If you get a job in Gig Harbor, you do.  And yet, the road network to get to either place costs the public to build and maintain and in both cases the road was determined to be a necessary part of our transportation infrastructure.  So it is irrational to charge the one worker and not the other.  Do we hate workers who live in Tacoma and work in Gig Harbor? No.  Do we want them to move?  No.

Irrational taxation is a horrendous thing to introduce into the economy. It’s as though a random color chooser decided every day on a color of clothes that would be taxed that day.  As it is, Delia and I live on Beacon Hill and go to Jazzercise on Mercer Island twice a week on I-90, which is free of tolls.  If we lived in Montlake and were going to Kirkland to do Jazzercise, we’d have to pay.  This may not involve a great injustice but it’s pure irrationality that is not naturally occurring but is injected into the economy by virtue of a gov’t funding mechanism.  Increasing that funding mechanism will increase the irrationality of the economy and the costs that irrationality imposes on the economy.

1/5 sentence 5

“….Shocking inefficiencies….”

In a recent opinion in the Seattle Times, acting Director of WA DoT boasted that the Dept. was collecting on 94% of the motorists who were crossing 520 and compared that favorably to other states achievement in tolling.   94%!   The Gas tax collects on 100% of users, and there are no costs borne by the private sector like stamps or checks or time spent paying bills.

No doubt the tolling apparatus will improve technically and as a result of public outcry—(thanks Danny Westneat!) but there is a corruption afoot in the land when we don’t pay attention to the cost of tolling. If I were overbilled by $800 it might just ruin my whole month as I tried to deal with it, would that count?  And what is the actual efficiency of collection of tolls?  This is a very straightforward number but you rarely see it or hear it discussed in the media, as though the media is intent upon protecting the bureaucracy.  I understand the toll industry itself, which you can trust if you want to, thinks it can ultimately get the percentage-lost-to-the-collection- process down to as little as 5% or more likely 8%.  This may sound low to some people but should be compared to the Gas tax’es percentage of significantly less than 1%.  It represents a huge new category of wasted-cost to the economy that isn’t there with the gas tax and understates the aforementioned burden that is borne privately by citizens.

Sentence 5 continued

why not go back to the old marriage–w/ an electric car fix–and restate the vows?

First the electric car fix. There is a devil in this detail for sure.  Oddly enough, the gas tax really doesn’t raise all that much money or cost the average person that much (compared to other taxes) and for most electric cars a fair across the board gas tax equivalent might involve a $100 car tab surtax.  This would bring in exactly some of the evils I complain about with tolling, but ultimately a transponder (again, some of the evils associated with tolling) might protect electric drivers who don’t drive much or who drive on out-of-state roads.

tesla sThis problem should be kept in perspective.   We still haven’t seen inroads by electric cars, although the electrification of the entire fleet would be a wonderful thing, as electric cars are simply more efficient than gas combustion cars.

 Now to the main point:

There are those of us in the state who feel that WADoT should take no on the gas tax as its final answer: No means WA DoT should just live within the budget it is getting.  If it wants more money, it should come back to the voters with a new gas tax increase and try to make its case.

But realistically, I understand that WA DoT has big players with a stake in their operation that would never allow that. Many in the public probably would activate also.  WADoT undertook the 520 bridge with no funding for half of it and began the 99 Tunnel the same way.  I don’t make predictions but I wonder if tolling will even work for the tunnel.

No doubt the DoT is thrilled with the new revenue from the hot lanes. I have not been able to convince myself that this is totally wrong from a strictly economic point of view, so I’m certain I can’t convince anyone who supports the hotlanes that they are a terrible thing.

Still, I hate them. What a terrible direction to go in.  Watch the people in the upper castes whiz by, they are more important than the rest of us.  Whether that’s the kind of America people want, that’s the kind they are getting.

The overarching economic principle in my opinion is that roads should be paid for 100% by user-fees and should turn a reasonable profit for the owners of the asset, the roadway, which is the public. That will bring market discipline to the transportation sector.  That means  first the DoT should go back to the only real user fee it has, the gas tax.  And that means the gas tax should be raised higher, to pay some of our tax bill that we now pay through other forms of taxation—which would involve a revenue-neutral shift from people paying taxes to users of the roadway paying those same  taxes.  Some believe this would violate the Constitution.  It would probably violate the spirit of the Constitution, but to think profit is not part of the cost structure of delivering a good is something only someone who never studied economics would think.   Reaping a profit from our ownership of the roads is exactly the same as reaping a profit from our ownership of State Forest lands.  No one ever thought it was strange we should turn a profit on that asset, but for some reason our other assets: our Ports and roadway and airspace, are never asked to turn a profit.  When Amazon drones whiz by our house ever ten minutes, freely using our airspace and diminishing the quality of our lives without paying us a dime or paying a dime of our taxes, we will wish we understood this simple economic principle when it all started back in 2016.

This is Capitol Forest, State-owned Forest land south of Olympia.  No one questions this asset should make us a return, but Ports and roadways are not asked to earn money and are in fact deeply subsidized.

This is Capitol Forest, State-owned Forest land south of Olympia. No one questions this asset should make us a return, but Ports and roadways are not asked to earn money and are in fact deeply subsidized.

Right now, the gas tax is the only true user fee for the road, so it should be relied on more not less. Property taxes, which are extremely regressive by the way, should never be diverted into the roadway nor should should road money come from the general fund or any non-user fee.   This way we can get market rigor and discipline into the transportation sector.

 America hasn’t been well-served by the profligate subisidies heaped on the automobile, which include all the non-user fee roadway expenditure, the subsidy of no- sales tax on gasoline when the gas tax is not truly a tax but a roadway-maintenance fee, and  the subsidies for sprawl combined with the restrictive zoning and parking-rules and other restrictions in the urban core that defeat what would have been the market’s natural creation of urban housing.

In the Three county region here we are contemplating a vote on Sound Transit which will involve a huge tax increase. If cars were paying the true cost of the roadway, an investment in transit would be much more profitable and therefore we could easily finance the expansion of the train from profits of the existing train plus private debt financing.

(Sorry as I got more ambitious at the end the quality deteriorated a little. I have to get back to work.)

Oh, and one last thing: No to Tolls!!!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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