Policy Documents

Dispelling the Myths: Toll and Fuel Tax Collection Costs in the 21st Century

Daryl S. Fleming –
November 1, 2012

One of the strongest arguments for motor fuel taxation is that it is a highly efficient means of raising highway revenue, while toll collection is highly inefficient (i.e. very costly). In May 2007 ATA’s American Transportation Research Institute came out with a major report on highway funding alternatives. Its assessment asserted that collecting and enforcing toll payments consumed 22 percent to 33 percent of the revenue generated, which they compared to an estimated 1 percent of revenue used to collect fuel taxes. Such figures have become part of the conventional wisdom, even appearing in a 2011 report on this subject from the Transportation Research Board (NCHRP Report 689).

This conventional wisdom is being challenged by this study from the Reason Foundation. Based on original research on the cost of collecting both types of revenue, it finds that the real cost of collecting revenue via fuel taxes is actually about 5 percent of the revenue. And it also finds that 21st-century all-electronic tolling (AET) can cost as little as 5 percent of the revenue collected.