Most free market economists (like me) would agree that a tax on gasoline to fund road construction is a great way to make sure that the costs of a resource are borne by the users. Those who use the roads more burn more gas and thus pay more tax. Interestingly, in this case the challenge of high gas prices is not perfectly leading to improvement in either traffic or tax collection, but technology has an answer.
As reported in the September by USAToday, the growing problem with gas taxes is that commuters are finding ways to decrease the tax that they contribute by purchasing more fuel-efficient vehicles or using Ethanol, which has a lower tax rate. Meanwhile the costs of road construction materials and labor continue to rise. And the amount of commuting nationwide has increased non-stop in the past few decades.
But some states are starting to experiment with technology that allows commuters to be more accurately taxed for the miles they drive, rather than the gas they use. Starting in early 2008, six states will experiment with "road pricing." A few thousand drivers will agree to outfit their vehicles with a GPS system that records how much time they spend on the roads and will tax per mile used. Meanwhile, they will be able to deduct their spending on gasoline taxes.
Of course privacy fears will be stoked by anything beyond a test. Today's GPS sensors can measure vehicle location within 3 meters and determine speed within 1.5 MPH. But in one test in Oregon, 91% of testers said they would continue with the program. Many agree that the system is more fair than a gas tax or sales tax.
Tomorrow's technology and further experimentation could lead to further improvement. For example, like in Singapore today, we could see commuting prices vary according to time of day (higher during heavy traffic to discourage congestion).
It might be several years before governments move to a system like this. The Marginal Revolution blog predicts that early movers will be private, business-owned roads. Private investors will be intrigued by the market based pricing system, and consumers may choose to give up access to their data in return for a faster commute.
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