Taxing public goods and congestion pricing

[mattbell]

Most of you are familiar with London's congestion pricing system, where you have to pay a fee of around $14 to drive into downtown London during peak hours.  The system was designed to eliminate its famous downtown congestion.  Reports of its success have been controversial, but positive enough that other major cities are looking at it. 

The Netherlands is considering a nationwide system that will continuously tax people based on what roads they are using, how far they drive on them, what time they're using them, and even how fuel-efficient their vehicles are. 

http://www.worldchanging.com/archives/009146.html

(It's not approved yet, and even if it is approved, it will take around 10 years to fully implement)

This sort of system, which has only become possible with recent computer vision technology, will allow for much more accurate taxing for use of public goods.  Right now, Americans pay the same amount in taxes for roads and highways whether they drive for 1,000 miles per year or 20,000 miles per year.  That's unfair. (A commenter has pointed out that gas taxes do charge heavy users of roads more than light users, though gas isn't the only source of road funding)  It would be much fairer to have people pay according to how much they use the system.  This congestion tax covers two public goods -- roads and air cleanliness.  Cars that chew up the road more would be charged more for the increased maintenance that the roads will require, and cars that pollute more will be charged according to how much pollution they put out.  This helps people understand the true financial consequences of their actions and behave accordingly, which makes the whole system work better.

Comments

[agentsteel53.livejournal.com]

two points...

one: Right now, Americans pay the same amount in taxes for roads and highways whether they drive for 1,000 miles per year or 20,000 miles per year.

with gasoline taxes, this is not the case.

two: do I really want Uncle Sam tracking my every movement?

[nasu-dengaku.livejournal.com]

Good point about gasoline taxes. I did some googling, and while the internet was surprisingly unyielding of information right away. It seems like gas taxes provide much but not all of the funding for various transportation projects. California often has bond measures on the ballot for highway construction and maintenance. If you can find exact data I'd be very interested.

I would note though that gas taxes don't fully take the pollution level of a vehicle into account. Two cars with equivalent mpg but different amounts of pollution currently pay the same amount in taxes.

[browascension.livejournal.com]

Beware the marketing gimmick of "bond measures for X". Often the X is simply chosen to be some popular thing that can get the bond measure passed. You know, for the children.

Just because there are bond measures sold to the voters with highway projects doesn't mean that the gas tax isn't enough to cover highway expenditures. It's possible that the gas taxes go into a "highway fund" which has a surplus which goes into the "general fund".

[radiantsun.livejournal.com]

What percentage of our taxes goes to roads and highway maintaince? Would that percentage then be removed?

[nasu-dengaku.livejournal.com]

Looks like 3% on all transportation, at least at the federal level.

http://finance.yahoo.com/taxes/article/102817/How-Your-Tax-Dollars-Are-Spent

One would hope it gets removed.

[hansandersen.livejournal.com]

This would also cause goods and services to be more expensive, as usage taxes would be levied against the mechanisms that get goods (and employees) to your local store, and those taxes would be passed along to the end consumer. Basically, it turns transportation costs into a sort of VAT. Likely a regressive tax at that - permit me a moment to trot out the old cliche about janitors in Palo Alto who can't afford to live anywhere near their workplace.

[patrissimo.livejournal.com]

I have mixed feelings about such taxes. On the one hand, they are (in theory) economically efficient.

On the other hand, this is true only if the government either a) implements them in a revenue-neutral way, reducing other taxes like income taxes, or b) spends the extra money in a non-wasteful way.

(a) is possible but unlikely, and (b) is essentialy never true. (the case is weak enough for very much government spending being of positive-value, and extra, marginal dollars on top of existing budgets are almost certainly wasted).

So in practice, the tax makes use of the resource more efficient...while giving the government more money to waste. Not at all clear that this is a good thing.

But make it revenue-neutral, and I'm all for it.

[easwaran.livejournal.com]

This sort of tax strikes me as regressive, since it will disproportionately affect poor people. Of course, most fines are like that. But apparently in Scandinavia costs for things like traffic tickets bear some sort of connection to the person's salary, so that there was a famous case of a Nokia executive stopped for speeding on a motorcycle and paying the equivalent of $50,000 or something for the ticket. Which really is important, because in order for these sorts of taxes to have an effect on people's behavior, they have to be using amounts of money that provide relevant incentives for people.

[nasu-dengaku.livejournal.com]

I heard about that. I wonder if it causes cops to set up speed traps in ritzy areas.

[easwaran.livejournal.com]

Do cops get money from speeding tickets? I suppose there's really no way to have a government either collect revenue or impose fines without putting perverse incentives of some sort somewhere in the system - I guess the question is just about how to get the strongest incentives at the desired points. If you really want to cut down on carbon emissions and road usage, you have to make the costs really hit those who do the most of these things. But if libertarians are right that government inefficiency is a result of the fact that government officials aren't as responsive to financial incentives for the government as corporate officers are to financial incentives for the corporation, then we can assume that the government would be less inclined to act on these perverse incentives. But that's a big if.