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UCLA/USC Study: Toll Roads More Equitable Than Tax Roads

With social equity a common theme in dicussions of congestion pricing and transportation finance, this new UCLA/USC study finding that tolling impacts low-income residents less than tax-based road improvements couldn't be more timely. The full study is available here. From the press release:

Popular wisdom may suggest that toll roads are unfair to the poor, but a new joint study by UCLA and USC researchers shows that these pay-as-you-go transportation options may actually be fairer to all income levels than paying for road improvements through sales taxes.

"Just Pricing: The Distributional Effects of Congestion Pricing and Sales Taxes," examines the high-occupancy toll lanes on State Route 91 in Orange County, Calif., known as the 91 Express Lanes. The study is currently available in the online edition of the journal Transportation and comes "at a time when public officials in Los Angeles and other cities are considering congestion tolls and sales tax increases for transportation," according to study co-author Brain D. Taylor.

In the study, Taylor, professor and chair of urban planning at UCLA and director of the UCLA Institute of Transportation Studies, and co-author Lisa Schweitzer, assistant professor at USC's School of Policy, Planning, and Development, compared how two distinct transportation-funding mechanisms – a toll road and a tax measure – affect Orange County's lower-income residents.

Because many voters and elected officials oppose proposals for "congestion tolls" on equity grounds, road projects are usually funded by more politically acceptable sales taxes. The researchers found that this reasoning is flawed.

Asking drivers to pay for road use ignites debates over fairness, but the debate often fails to address the larger question of how funding for transportation projects is actually being distributed throughout the community," Schweitzer said. "Freeways are a premium transport service, and they should be priced accordingly. The study shows that if we are prudent, we can do that while being sensitive to the circumstances of low-income drivers."

And policymakers pushing sales tax hikes to fund transportation improvements--including those in my state of Arizona--should reflect on a central finding of the study: "Using sales taxes to fund roadways creates substantial savings to drivers by shifting some of the costs of driving from drivers to consumers at large, and in the process disproportionately favors the more affluent at the expense of the impoverished." You'd think that would be pretty obvious, but it hasn't stopped Gov. Napolitano, among others.

For the latest on the rapidly evolving world of transportation finance, I would commend to your attention my colleague Bob Poole's excellent review in Reason's new Annual Privatization Report 2008. It should be required reading for anyone interested in the future of our transportation system. Reason's other surface transportation research and commentary is available here.

UPDATE: Bob offers some excellent insights on this here.

This research should go a long way to answer those who constantly portray HOT lanes as "Lexus Lanes." The question these people always ignore, when considering whether toll roads and toll lanes are "fair" is: Compared to what? The main source of highway funding in America is the gasoline tax–a regressive tax if ever there was one (meaning it takes a larger percentage of a poor household's budget than a wealthy household's). But as Schweitzer and Taylor point out in their study, in most California urban areas, local transportation sales taxes have become the other major transportation funding source, and those taxes are even more regressive. By contrast, congestion-based tolls are a model of fairness. First, they are optional–you only pay if and when you choose to use tolled lanes (unlike sales taxes you cannot legally avoid if you buy just about anything). Second, they are proportional to use: the more you use, the more you pay. Third, they respect the ability of people of any income level to make sensible choices. A working mother at a modest-paying job with two kids in day care will have occasions when a $5 toll saves her $10 or $20 in late fees. Most people–of all income levels–welcome having such choices, and public policy should make more such choices available to them.

Leonard Gilroy is Director of Government Reform


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