Fair to the poor

The Greater Toronto Area has experienced a noticeable increase in all-day conferences and hefty consulting reports about road pricing and infrastructure funding. A decade ago it was once every few years. Now it’s monthly. Each of these conferences and reports carry the same message–our transportation infrastructure is inadequate, crowded and crumbling. And our purse is empty. While this is true of large cities more often than not, Toronto has it worse than many—Toronto’s population is growing especially rapidly and we have not invested at the rate we should have over the past quarter century.

Reaching Top Speed, a June 2011 report from the Toronto Board of Trade points out that the full bill to refurbish and operate transportation infrastructure in the GTA over the next 25 years—$100 billion, before overruns—is a figure 22% greater than the combined cost of the Big Dig, the Chunnel and the Three Gorges Dam.

This same report identified several “funding tools” the top five of which were road pricing, congestion pricing, fuel tax, regional sales tax, and parking surcharges. These lean heavily toward fees on automotive use, although the rebuild is heavily transit oriented. The report suggests that these could raise $1 billion per year–or about half of the capital expense required for the 25-year plan.

There are important differences among the five tools listed. The most effective for managing gridlock is congestion pricing; the least effective is the sales tax. Congestion pricing is politically the most incendiary; the least is likely sales taxes or parking surcharges. But the touchiest subject is fairness. Among these, congestion or road pricing is often said to be unfair to lower income families.  But is road pricing worse than a sales tax for poorer families?

This problem was looked at recently by Lisa Schweitzer fromUSC and Brian Taylor from UCLA (Access, Spring 2011), albeit in the context of pure road funding. As we choose amongst funding tools, we should weigh their observations.

As a funding mechanism, sales taxes are collected pennies at a time and hidden in many transactions making it virtually impossible to see what one is paying for roads. Sales taxes make the poorest households worse off since the people in these households are paying something while driving little—certainly much less than people from richer households. This makes increasing regional sales taxes to fund roads doubly regressive.

Road use fees, which can be made fully transparent, take money from only those that use the roads, i.e., mostly middle- and higher-income families. Schweitzer and Taylor find that switching from tolls to sales taxes shifts the burden from users to non-users and away from middle-income people onto both the rich and the poor–i.e., road tolls are better than sales taxes for the lowest-income families (although they increase pre-existing access barriers).

How any of us pay for good urban transportation is a very complex social issue—hence the burgeoning industry in conferences and consultant reports, and the dearth of workable solutions.