Social equity concerns about tolling and pricing (whether targeted or comprehensive) have played a large role in debates about the fairness and viability of these direct pricing options.65 The current tax system used to fund roads is already regressive. Fuel taxes paid directly or embedded in the cost of goods take a proportionately bigger share out of lower-income household budgets than they do out of the budgets of higher-income households, while a shift to more efficient vehicles that pay less in fuel taxes is likely to be greater among the latter group.66 There is also a substantial distinction between the overall distribution of the tax burden and the change in burden that may occur with a change in the funding mechanism. Much of the concern about social equity relates to low-income workers, who may face a substantial cost increase if they have to continue to drive as much during peak periods. However, the broader concern is the overall distribution of the tax burden in the long run. For the latter, the key question is whether a shift to comprehensive pricing at the federal level makes transportation funding more or less regressive and unfair than the current system.
The impacts of comprehensive pricing on social equity would be minimal or non-existent if current charges are simply replaced by a comprehensive VMT system that raises comparable revenues and covers additional system administration costs. However, the increased transparency of costs associated with road pricing could lead those who are more price - sensitive (particularly lower-income individuals) to perceive a higher cost and to travel less. A comprehensive VMT system could actually be more progressive than the gas tax to the extent that lower-income people drive less but still have the same fixed costs for driving (e.g., vehicle registration fees) or drive less fuel-efficient vehicles. And if road pricing also replaces non-user fee revenues, such as General Fund revenues that now go to highways, then on the whole individuals who travel less would experience a net financial benefit and those who travel more (on average, higher-income individuals) would experience a net financial cost.
If comprehensive VMT-based road pricing were implemented to increase total transportation revenues, people would pay more and the effects likely would be regressive, just as an increase in the motor fuel taxes would be. The increase in either revenue source would have a bigger impact on those with lower incomes-a regressive result.
The impact of targeted or comprehensive pricing on social equity becomes even more complex if pricing includes charges for emissions. Currently, because lower-income households tend to drive older, less fuel-efficient vehicles, gas taxes affect them more than they affect higher-income households driving newer, more fuel-efficient vehicles (assuming both drive the same number of miles). If a VMT charge were imposed with no offsetting charges for carbon or other emissions, these lower-income households would benefit, since they would be paying the same to drive as higher-income individuals with more fuel-efficient cars. If, however, additional charges were put in place to cover the costs of emissions, then these charges would affect lower-income households more than higher-income citizens, not controlling for differences in miles driven.67 Research in this area, however, indicates that the impacts on the lowest-income households is reduced somewhat, since they tend to drive less and rely more on transit or other modes. As a result, lower-middle and middle-income range households as a group may feel the greatest proportional impact.68 Those who are more price-sensitive, however, lose mobility more than others-with uncertain implications for the social cost and equity of that loss.
Results from the Oregon VMT pricing pilot project demonstrated that the social equity implications of comprehensive pricing are likely mixed.69 First, to maintain parity with net revenues from current sources, the development and additional administration costs of a VMT system would need to be recovered through VMT charges. These additional costs would likely be amortized across all users, thus, on average, drivers could pay more to cover increased costs associated with the new revenue mechanism. It is possible, however, and indeed likely, that there will be offsetting efficiencies from a VMT system, such as reduced need for investment (at least in urban areas) and reduced pavement damage, which in turn could result in lower overall costs for drivers for the same level of system performance.
Additionally, changing from a gas tax to a VMT charge would mean higher costs for some users and lower costs for others, mostly due to differing fuel efficiency of their vehicles. Those with more efficient vehicles may well pay more in VMT charges than fuel taxes, while those with less efficient vehicles may well pay less. According to some recent research, once people adjust to the VMT charge-some may change how often and how much they travel if the price of each trip is more transparent-the social equity of VMT charges and fuel taxes should be similar, and fine-tuning the way VMT charges are structured can help this result along.70 But again, the forgone or delayed trips represent additional social costs that will have a greater impact on those least able to pay.
It is not clear if targeted pricing and congestion would have worse distributional impacts than current funding approaches. A Brookings study found that congestion pricing imposed on congested Interstates and freeways would lead high-income households (over $100,000 per year) to pay about three times more per year than households making $10,000-15,000 per year. But as a share of income, the lower-income households would pay 2.7 times more than highest-income ones. In general the study found that the higher the household income, the lower the share of income spent on congestion charges.71 But it is important to note that the gas tax is regressive in much the same way.72 Moreover, even if direct taxes (tolling, pricing, and gas taxes) are regressive, individuals at all levels are not necessarily worse off. Researchers at Resources for the Future studied pricing in the Washington, DC, area and found that converting current HOV lanes to HOT lanes alone achieved 77 percent of the total social welfare gain (the overall net benefits to society) possible from tolling all lanes on all freeways. Additionally, all income groups benefited from the HOT lanes, in part because some users who value time more were more willing to pay to travel on the HOT lanes, freeing up space on the existing unpriced lanes. Moreover, the benefits were distributed more equitably by using HOT lanes than by tolling all lanes.73 There are clearly complex social equity issues associated with comprehensive pricing, some known and some perhaps still to emerge. But where such issues emerge, ideas for making road pricing more equitable have been developed and might be used by the federal or state governments when implementing a VMT pricing system. One study noted that the data from State Road 91 managed lanes in Orange County show that people value the time savings and reliability provided by the toll lanes in widely different ways and that individuals change their values depending on day of week, time of day, and circumstances of a trip.74 In fact, only about 20 percent of those using the lanes at any particular time are everyday users. The other 80 percent use the lanes once or twice a week, when they value time or reliability more than the cost of the toll. The authors modeled the effects of charging different prices on each lane and found that if those prices are set right, the outcome is more equitable than pricing all lanes the same. | There are clearly complex social equity issues associated with comprehensive pricing, some known and some still to emerge. But where such issues emerge, ideas for making road pricing more equitable have been developed and might be used by the federal or state governments when implementing a VMT pricing system. |
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Taking a different tack, another Brookings report explores using lump sum payments to road users with lower incomes to compensate for the regressive effects of congestion charges.75 The users would still have to pay the charges, thus maintaining the incentive to change travel behavior and reduce congestion, but their total income would not be affected. Such a solution would, of course, be complex to design and administer and could only be implemented at the state and local government levels.