Don’t decry congestion pricing as inequitable until after you fix, or at least acknowledge, these ten other things that are even more inequitable about the way we pay for transportation.
There’s a growing interest in using congestion pricing to help tackle traffic issues in major cities. Putting a price on peak hour road capacity is the only thing that’s been shown to effectively reduce congestion, based on experience in London, Stockholm, Singapore and other cities, high occupancy toll (HOT) lanes in a growing number of US cities. But proposals to put a price on something that’s widely–if inaccurately–perceived to be “free” invites all manner of arguments from those who might have to pay. And a favorite argument is that road pricing is somehow punitive to the poor, and inequitable.
Any time we charge a positive price for anything, the cost of paying that price is a higher burden on the poor than it is on the rich. It takes a special combination of myopia and tunnel vision to look at the prospect of congestion pricing anything other than a minor blip on a system of transportation finance that is systematically unfair to the poor and those who don’t own (or can’t afford) car.
Here is our list of ten things that are more inequitable that road pricing.
1. Flat vehicle registration fees. Many states charge the same amount to register a used economy car as they charge to register a new full-sized SUV. As we demonstrated in our commentary, the Suburban and the Subaru, whether based on miles driven (a measure of value received from public roads), income or value (a measure of ability to pay) or weight (a measure of damage done to the roadway, a flat fee is simply unfair to lower income families. On a per mile basis, the owner of a ten year-old Subaru can easily end up paying registration fees three times higher than the owner of a new Suburban.
2. Not pricing roads, which results in slower bus speeds. As we pointed out last year, those who depend on public buses are the victims of congested roadways. Buses travel more slowly, are a less attractive alternative to car travel, and are less efficient (each bus and driver carry fewer passengers per hour or day). Not pricing roads makes bus travel worse for those who are dependent on it.
Not pricing roads means these travel more slowly, which is unfair to low income households
3. The storm sewer subsidy. Some of the most expensive infrastructure out there is the massive stormwater systems cities are building to deal with runoff during storms. Impervious surfaces like roadways account for up to half of urban stormwater, and much, if not most of the toxic material in stormwater comes from cars (leaking oil, tire residue, brake material, precipitated air pollutants). But roads (and therefore cars and car users) generally contribute nothing to the cost of collecting or treating stormwater: the entire cost is usually added to city sewer and water bills. The result is that city tax and ratepayers pay the cost of dealing with pollution, which comes from those who drive, many of whom are non-residents. It’s a huge burden for economically distressed cities, like Akron, which is spending over a billion dollars for giant new sewers to eliminate storm runoff. Akron city residents tend to be poorer and have low rates of car ownership, so they will pay for storm sewers; suburbanites in commute into Akron, and use the roads and surface parking lots that create the runoff, and who have higher incomes, won’t pay. It’s inequitable.
4. Insurance rates. Virtually all states require motorists to purchase liability insurance as a condition of owning or operating a motor vehicle. While insurance is privately provided, the fact that it is legally mandated makes it much like a tax. And insurance rates are not discounted for the poor. If anything, there is abundant evidence that both the poor and urban residents pay more for car insurance.
5. Gasoline and gas taxes. Nearly all vehicles are fueled by gasoline. Gas taxes, the principal user fee for roads, is not pro-rated by income. Low income households pay the same per gallon tax as high income households. Gas taxes, as a result, tend to be much more regressive than other forms of taxation. That’s just as inequitable, on its face, as congestion pricing, yet we’ve never seen a serious argument that we ought to discount the price of gasoline for poor households.
6. Tax credits for the purchase of new electric vehicles. The federal government and many states offer tax credits for the purchase of electric vehicles. Poor households both have much lower rates of car ownership, and are far less likely to purchase new vehicles; most can only afford used vehicles, for which tax credits are not available. Giving $7,500 tax credits to households who are rich enough to afford a new Tesla (MSRP: $46,000) isn’t equitable. (Some 200,000 Tesla owners have already gotten the credit, which will now be dialed back to $3,750 per car). Doubtful that any poor families qualified.
7. Paid parking. In many locations, particularly dense city centers, you practically can’t use a vehicle for transportation unless you are willing to pay for its parking space either at a metered space on the street, or at an off-street lot or parking structure. While cities do provide free parking for disabled citizens (a perk that is frequently abused), parking meters don’t charge different rates to users based on their income; you have to pay the same amount to park your used Jetta as you do your new Mercedes. Again: the cost of parking bears more heavily on the poor than on the rich, both as a share of income, and in relation to the value of their vehicles. Plus, we haven’t even said anything about the provisions of the tax code that subsidize parking, chiefly for high income workers. That’s inequitable.
Is high priced parking fair to the poor?
8. “Free” parking. As Donald Shoup has demonstrated time and again, there’s nothing free about free parking. The effective requirement that people have to build new parking as a condition of getting a building permit for a store, office, home or apartment, drives up the cost of new construction and housing. In addition, those who don’t own cars, who walk, cycle and ride buses, end up subsidizing those who get the free parking. One study estimates that carless renters pay almost half a billion dollars a year for garage parking that’s bundled in their rent, but which they can’t use, because they don’t own cars. As we wrote in our commentary on the triumph of parking socialism, the law in its majesty provides free parking to everyone, whether they own a vehicle or not. As a practical matter, “free” parking, like free roads, benefits those with higher incomes who can afford and who use cars extensively.
And parking can be so cheap it undercuts transit, and makes cities less walkable.
9. The property tax exemption for cars. Unlike say houses and other forms of real property, cars are seldom charged property taxes. For example, Oregon completely exempts cars from state and local property taxes, a provision that costs local governments $989 million per biennium in revenue. And naturally, the exemption is a benefit only for those who own cars, and disproportionately rewards those who own expensive newer cars. If we extended the property tax to cars–with say an exemption on the first $10,000 of value, so that someone driving a ten-year old clunker would pay nothing, the system would be much more equitable.
10. Unfair taxation of greener, safer, less congesting modes of transportation. Consider the fiscal conditions imposed on scooter operators as part of Portland’s experiment with fleets of shared electric scooters last year. The city required the scooter companies to pay $1 per scooter per day to cover the cost of streets. As we noted at City Observatory, that’s vastly more that the amount charged to cars, considering that cars take up dramatically more road space, cause more congestion and air pollution, and damage roads more. If cars were charged proportionately to scooters relative to their weight or value, cars should be paying $10 or $20 per day to drive in the city. Again: a transportation finance system that’s not equitable.
Peak hour congestion pricing actually tends to affect higher income households more because they are the ones who commute by car at the peak hour. As we documented at City Observatory, peak hour car commuters in Portland earn roughly twice as much on average, as those who commute by car or bus or in non-peak hours. Similarly, unlike flat tolls, congestion pricing can have low or even zero charges during off-peak hours, creating a low-cost or free alternative for those with limited means and flexibility in travel schedules.
There are plenty of things we can do to ameliorate any of the perceived negative effects of congestion pricing. First, as we noted in number two (above) road pricing actually benefits the poor and transit-dependent by speeding buses. But beyond that, there are good reasons to believe that we could rebate some of the funds from congestion pricing to offset the negative effect on low income households. In addition, we can spend congestion pricing revenue on transit and other alternative forms of transportation.
Playing the “equity” card as an objection to pricing the roads actually turns out to be a way to advance the interests not of the poor, but of those who benefit already from the wealth of subsidies to car ownership. We seem to be perfectly fine with all kinds of inequity in our transportation finance system, so long as it benefits wealthier car owners.
If we’re going to talk about equity, let’s not apply it to one isolated part of the transportation system. Instead, let’s ask what it takes to create an overall system that is fair to all, considering all aspects of how the system is paid for, who benefits, and who bears the external costs (of things like crashes, air pollution and runoff). If we do, congestion pricing can be at the heart of a system that is both more efficient and fair.
Note: This commentary has been revised to correct a typo in the headline, h/t to @stevenspinello.
Ten things more inequitable than road pricing
Don’t decry congestion pricing as inequitable until after you fix, or at least acknowledge, these ten other things that are even more inequitable about the way we pay for transportation.
There’s a growing interest in using congestion pricing to help tackle traffic issues in major cities. Putting a price on peak hour road capacity is the only thing that’s been shown to effectively reduce congestion, based on experience in London, Stockholm, Singapore and other cities, high occupancy toll (HOT) lanes in a growing number of US cities. But proposals to put a price on something that’s widely–if inaccurately–perceived to be “free” invites all manner of arguments from those who might have to pay. And a favorite argument is that road pricing is somehow punitive to the poor, and inequitable.
Any time we charge a positive price for anything, the cost of paying that price is a higher burden on the poor than it is on the rich. It takes a special combination of myopia and tunnel vision to look at the prospect of congestion pricing anything other than a minor blip on a system of transportation finance that is systematically unfair to the poor and those who don’t own (or can’t afford) car.
Here is our list of ten things that are more inequitable that road pricing.
1. Flat vehicle registration fees. Many states charge the same amount to register a used economy car as they charge to register a new full-sized SUV. As we demonstrated in our commentary, the Suburban and the Subaru, whether based on miles driven (a measure of value received from public roads), income or value (a measure of ability to pay) or weight (a measure of damage done to the roadway, a flat fee is simply unfair to lower income families. On a per mile basis, the owner of a ten year-old Subaru can easily end up paying registration fees three times higher than the owner of a new Suburban.
2. Not pricing roads, which results in slower bus speeds. As we pointed out last year, those who depend on public buses are the victims of congested roadways. Buses travel more slowly, are a less attractive alternative to car travel, and are less efficient (each bus and driver carry fewer passengers per hour or day). Not pricing roads makes bus travel worse for those who are dependent on it.
3. The storm sewer subsidy. Some of the most expensive infrastructure out there is the massive stormwater systems cities are building to deal with runoff during storms. Impervious surfaces like roadways account for up to half of urban stormwater, and much, if not most of the toxic material in stormwater comes from cars (leaking oil, tire residue, brake material, precipitated air pollutants). But roads (and therefore cars and car users) generally contribute nothing to the cost of collecting or treating stormwater: the entire cost is usually added to city sewer and water bills. The result is that city tax and ratepayers pay the cost of dealing with pollution, which comes from those who drive, many of whom are non-residents. It’s a huge burden for economically distressed cities, like Akron, which is spending over a billion dollars for giant new sewers to eliminate storm runoff. Akron city residents tend to be poorer and have low rates of car ownership, so they will pay for storm sewers; suburbanites in commute into Akron, and use the roads and surface parking lots that create the runoff, and who have higher incomes, won’t pay. It’s inequitable.
4. Insurance rates. Virtually all states require motorists to purchase liability insurance as a condition of owning or operating a motor vehicle. While insurance is privately provided, the fact that it is legally mandated makes it much like a tax. And insurance rates are not discounted for the poor. If anything, there is abundant evidence that both the poor and urban residents pay more for car insurance.
5. Gasoline and gas taxes. Nearly all vehicles are fueled by gasoline. Gas taxes, the principal user fee for roads, is not pro-rated by income. Low income households pay the same per gallon tax as high income households. Gas taxes, as a result, tend to be much more regressive than other forms of taxation. That’s just as inequitable, on its face, as congestion pricing, yet we’ve never seen a serious argument that we ought to discount the price of gasoline for poor households.
6. Tax credits for the purchase of new electric vehicles. The federal government and many states offer tax credits for the purchase of electric vehicles. Poor households both have much lower rates of car ownership, and are far less likely to purchase new vehicles; most can only afford used vehicles, for which tax credits are not available. Giving $7,500 tax credits to households who are rich enough to afford a new Tesla (MSRP: $46,000) isn’t equitable. (Some 200,000 Tesla owners have already gotten the credit, which will now be dialed back to $3,750 per car). Doubtful that any poor families qualified.
7. Paid parking. In many locations, particularly dense city centers, you practically can’t use a vehicle for transportation unless you are willing to pay for its parking space either at a metered space on the street, or at an off-street lot or parking structure. While cities do provide free parking for disabled citizens (a perk that is frequently abused), parking meters don’t charge different rates to users based on their income; you have to pay the same amount to park your used Jetta as you do your new Mercedes. Again: the cost of parking bears more heavily on the poor than on the rich, both as a share of income, and in relation to the value of their vehicles. Plus, we haven’t even said anything about the provisions of the tax code that subsidize parking, chiefly for high income workers. That’s inequitable.
8. “Free” parking. As Donald Shoup has demonstrated time and again, there’s nothing free about free parking. The effective requirement that people have to build new parking as a condition of getting a building permit for a store, office, home or apartment, drives up the cost of new construction and housing. In addition, those who don’t own cars, who walk, cycle and ride buses, end up subsidizing those who get the free parking. One study estimates that carless renters pay almost half a billion dollars a year for garage parking that’s bundled in their rent, but which they can’t use, because they don’t own cars. As we wrote in our commentary on the triumph of parking socialism, the law in its majesty provides free parking to everyone, whether they own a vehicle or not. As a practical matter, “free” parking, like free roads, benefits those with higher incomes who can afford and who use cars extensively.
9. The property tax exemption for cars. Unlike say houses and other forms of real property, cars are seldom charged property taxes. For example, Oregon completely exempts cars from state and local property taxes, a provision that costs local governments $989 million per biennium in revenue. And naturally, the exemption is a benefit only for those who own cars, and disproportionately rewards those who own expensive newer cars. If we extended the property tax to cars–with say an exemption on the first $10,000 of value, so that someone driving a ten-year old clunker would pay nothing, the system would be much more equitable.
10. Unfair taxation of greener, safer, less congesting modes of transportation. Consider the fiscal conditions imposed on scooter operators as part of Portland’s experiment with fleets of shared electric scooters last year. The city required the scooter companies to pay $1 per scooter per day to cover the cost of streets. As we noted at City Observatory, that’s vastly more that the amount charged to cars, considering that cars take up dramatically more road space, cause more congestion and air pollution, and damage roads more. If cars were charged proportionately to scooters relative to their weight or value, cars should be paying $10 or $20 per day to drive in the city. Again: a transportation finance system that’s not equitable.
Peak hour congestion pricing actually tends to affect higher income households more because they are the ones who commute by car at the peak hour. As we documented at City Observatory, peak hour car commuters in Portland earn roughly twice as much on average, as those who commute by car or bus or in non-peak hours. Similarly, unlike flat tolls, congestion pricing can have low or even zero charges during off-peak hours, creating a low-cost or free alternative for those with limited means and flexibility in travel schedules.
There are plenty of things we can do to ameliorate any of the perceived negative effects of congestion pricing. First, as we noted in number two (above) road pricing actually benefits the poor and transit-dependent by speeding buses. But beyond that, there are good reasons to believe that we could rebate some of the funds from congestion pricing to offset the negative effect on low income households. In addition, we can spend congestion pricing revenue on transit and other alternative forms of transportation.
Playing the “equity” card as an objection to pricing the roads actually turns out to be a way to advance the interests not of the poor, but of those who benefit already from the wealth of subsidies to car ownership. We seem to be perfectly fine with all kinds of inequity in our transportation finance system, so long as it benefits wealthier car owners.
If we’re going to talk about equity, let’s not apply it to one isolated part of the transportation system. Instead, let’s ask what it takes to create an overall system that is fair to all, considering all aspects of how the system is paid for, who benefits, and who bears the external costs (of things like crashes, air pollution and runoff). If we do, congestion pricing can be at the heart of a system that is both more efficient and fair.
Note: This commentary has been revised to correct a typo in the headline, h/t to @stevenspinello.
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