Transport Economics, Management and Policy series
Chapter 4: Revenues
INTRODUCTION States have the opportunity to impose toll financing on many of their bridges and highways and to determine the rate of toll, recognizing the legal and fiscal constraints imposed by accepting federal transportation funds. Yet not all states levy tolls, and those that do vary in their rate of toll. This chapter examines empirical evidence to explain the dependence of state highway finance on tolls. The term ‘beggar thy neighbor’ describes strategic trade behavior, essentially mercantilist in nature, designed to give one country a foreign trade advantage at the expense of others.’ Inevitably, such behavior leads to retaliation and only makes everyone worse off. Countries perceive what game theorists term a ‘prisoners’ dilemma,’ whereby ‘cooperating’ to reduce barriers only pays off in the long term and only if others do so as well. Highway tolls are in some ways analogous to tariffs. States (or the turnpike authorities they establish) can charge travelers for crossing a boundary. Often, no similar charge is levied on traffic remaining within the boundary. In this way, a toll may be viewed as a tariff on the transportation portion of a good or on labor. Overall, states and users may be better off if other financing mechanisms, with significantly lower transaction costs such as gas taxes, are chosen. However, the inability of states to cooperate and compensate each other for their residents’ travel on other states’ roads leads to a more direct and costly toll system. When most users are in-state residents, a legislature...
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