I’ve subjected you to numerous rants about transport finance–including the fact that I think we over-invest in this sector–along with a question that haunts me…viz: who pays if transport system users don’t?
I sat down and frittered around with some numbers. The Institute on Taxation and Economic Policy derived some estimates for the out-of-pocket cost burdens for all major US taxes. I entered their data into a spreadsheet and then compared the estimated total burden for low-income households (which includes existing excise taxes) with estimates of a) system-wide HOT lane proposal for Washington, DC and b) a comprehensive, zone-based toll estimated for Paris designed to cut traffic by 25% (a big-ish toll, about $6 per zone). This is the result. The expected increase in total burden from HOT lanes is pretty small; the zone-based toll, however, is pretty large. c) and d) show the estimates of emissions charges compared to total tax burden. Those are really pretty marginal in the larger scheme of things.
Keep in mind these are just out-of-pocket costs. When you add in the benefits of congestion and emissions reductions, some estimates find progressive social welfare gains from pricing, even before you count revenue allocations. London’s cordon toll is pretty high and covers a fairly large swath of the urban environment. But the measured reductions in emissions following the cordon has resulted in sizable and steeply progressive air quality benefits for lower income areas of London.
So if we price the freeway, will the poor suffer? There is no easy answer to this question.