Traffic in your trousers

On a video from THE STRAITS TIMES of Singapore, The Singapore Transport Minister, Raymond Lim used my second favorite congestion analogy: “So saying ‘Let’s deal with congestion by building more roads’ is like telling a person who is suffering from obesity that ‘the solution to your problem is to buy bigger trousers with a larger waistline’. It is not a sustainable solution.”

He went on to explain why Singapore is lowering the fixed upfront taxes for vehicles (those are the ones we just raised here in Toronto) while simultaneously raising the road-use fees (those are the ones we are anxious might happen here in Toronto). (And, don’t worry; Singapore is building some new roads too.)

His reasoning for a $110M (15%) cut in vehicle taxes: “The critical thing for a person when they make a decision whether to drive a car … or to own a car … is after they purchase it is the out of pocket expenses. That’s key. They have to make a decision whether they are going to make that extra car trip and how you are going to make that extra car trip. That is why what we have done through the years is to shift greater reliance on usage [charges] while lowering the upfront costs. Because the minute a person pays the upfront costs the behaviour pattern is such that you forget it. What comes to their mind is really what it costs for that extra trip."

Saying this, Minister Lim has explained clearly how pricing signals work. High up-front costs and low operating costs encourages driving. Lower up-front costs and higher operating costs discourages driving. The Minister is not saying “tax more”, but rather “tax differently”. What he and the US Secretary of Transportation, Mary Peters, and many others are saying is that our tax structures are a major root cause of congestion. We simply tax the wrong things.

Singapore has at least a decade of experience ahead of Toronto. We would do well to take an economics lesson from them.