Pennsylvania: I-80 Tolling Would Cost Jobs

A recently released study concludes that Pennsylvania’s plan to toll Interstate 80 would burden taxpayers and potentially cost thousands of jobs. Grove City College economics Professor Tracy C. Miller’s analysis extended beyond the simple issue of how much money such tolling would raise for government coffers and, instead, attempted to quantify the effect of increased transportation costs on local businesses and residents. I-80 runs 311 miles across the state, serving as a vital commercial link between New York and Chicago. Pennsylvania Governor Edward G. Rendell (D) has been promoting the tolling effort in the hopes of generating $405 million in new revenue. Rendell and others refer to the toll as a “user fee,” but Miller disagreed with this characterization. “It is better understood as a tax or tariff, since much of the revenue will be used for purposes other than maintaining and improving Interstate 80 and since vehicles that use Interstate 80 already pay for using it via fuel taxes and other taxes,” Miller wrote.

Owners of commercial trucks that operate on I-80 already pay a $1600 registration fee, a $550 highway use tax, a twelve-percent tax on the purchase of a new truck and a 38.1 cent tax on diesel fuel. These existing taxes add up to $90 million a year, based on the number of trips taken by truckers on I-80. Taxes paid by automobile drivers bring the grand total in taxes raised by I-80 to $130 million, yet the Pennsylvania Department of Transportation only spends $80 million on I-80 maintenance.

Toll supporters also assert that their plan primarily affects out-of-state motorists and truckers who are merely passing through, but Miller’s report shows that industries central to the health of Pennsylvania’s economy would be harmed. The report predicts loss of tax revenue, job losses, depressed property values and higher costs of goods would follow the increased cost of shipping goods across the state. Trucking, for example, is one of the state’s most important industries.

“A toll of 31 cents per mile would increase the non‐labor variable costs of operating a truck by just under fifty percent relative to its current level,” Miller explained. “If the additional cost of shipping on alternate routes averages half the cost of tolls, then in addition to the $292‐$310 million that truckers will pay in tolls, shippers, consumers, and truckers combined will suffer deadweight losses of between $8 and $15 million per year.”

Businesses that face increased costs in a competitive market that does not allow increased prices would either be forced to cut wages, fire workers or relocate. For example, depending on the proximity to processing centers, milk farmers in various counties would see shipping costs increase between 3 and 12 percent. Truck stop and restaurants near the highway would see a ten-percent cut in business as motorists divert to alternate routes. Miller also cited the example of Weis Markets, a local grocery store chain with 126 Pennsylvania locations, which estimated the tolls would cost the company $1 million a year.

“In such a highly competitive industry, even a relatively small cost increase resulting from tolls may be enough to cause firms to move their warehouses and distribution centers to a different location,” Miller wrote. “Other firms that may have considered building warehouses near 80 may build elsewhere because of tolls.”

Residents will also feel the effects as the value of land drops near the toll road.

“Basic economics teaches that property values and thus property tax revenue will decline in counties near Interstate 80, unless counties and school districts raise tax rates by an offsetting amount,” Miller wrote. “The size of the decline in property values should reflect the lower expected earnings of firms and workers in counties along Interstate 80 combined with the higher cost of living to commuters and others who travel along it regularly.”

Miller concluded that a much better alternative to an inefficient tolling system would be to raise the gas tax by 10 cents to raise $600 million. The net effect would be to raise the cost of driving by 0.5 cents per mile for an average automobile and 1.5 cents for truckers. By spreading the tax statewide, there would be no negative effects from traffic diversion.

A copy of the study is available in a 500k PDF file at the source link below.

I‐80 Tolling Impact Study (Professor Tracy C. Miller, 10/12/2009)

[courtesy thenewspaper.com]