Why States Toll: An Empirical Model of Finance Choice

Abstract

This paper examines the question of why some states impose tolls while others rely more heavily on gas and other taxes. A model to predict the share of street and highway revenue from tolls is estimated as a function of the share of non-resident workers, the policies of neighboring states, historical factors, and population. The more non-resident workers, the greater the likelihood of tolling, after controlling for the miles of toll road planned or constructed before the 1956 Interstate Act. Similarly if a state exports a number of residents to work out-of-state and those neighboring states toll, it will be more likely to retaliate by imposing its own tolls than if those states don't. The policy implications for the future of congestion pricing are clear, if hard to implement. Decentralization of finance and control of the road network from the federal to the state, metropolitan and city and county levels of government will increase the incentives for the highway-managing jurisdiction to impose tolls. And tolls are a necessary prerequisite for an economically efficient strategy of congestion pricing.