Distributional Consequences of Congestion Pricing in Los Angeles

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"Distributional Consequences of Congestion Pricing in Los Angeles"

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Yesterday, Atrios said “It is true that congestion tolling would be somewhat of a regressive tax, though I think opponents of such things tend to overestimate the degree to which poor people drive, even in the LA metro area.”

It’s worth being clear about this. A congestion charge would almost certainly take a bigger bite out of the median LA area household’s income than it would out of Tom Cruise’s income. At the same time, a congestion charge would, if used in part to finance better public transit, be highly beneficial to the poor. Car commuting in LA County is surpsisingly rare relative to stereotype—just 72.3 percent of employed adults tell the Census that they get to work by driving alone in a car or van. About ten percent walk or use public transit, 11.6 percent carpool, 4.2 percent work from home, and 2.1 percent use “other” means. The over 20 percent of the population that’s relying on public transit and carpooling is going to be a very disproportionately low-income group. Wealthy and middle-class residents of a metro area like LA look at the paucity of good transit options and conclude that everyone must own a car. Poor people look at the high cost of car ownership and just need to learn to live with the paucity of good transit options. In general, it’s almost never the case that the public policy status quo has been arranged for the maximal benefit of the poor. If that’s your hypothesis about why we do things a certain way, it’s usually worth looking into the issue in more detail.

Now to get really detailed about the distributional impact of congestion pricing you would, of course, need more detailed information about the income of different types of commuters. Another thing you would need to know is more information about the costs of congestion. Some people work odd hours—late-night fast-food cashiers, convenience store people, bartenders, security guards, some hospital workers—and wouldn’t be dealing with peak-hour traffic or a peak-hour traffic charge. One thing to think about, though, is what kinds of people really really need to be at work on time. For a normal professional, this isn’t that big a deal. If you’re ten or fifteen minutes late to work every now and again, it’s not that big a deal. But for shift workers, who tend to be further down the economic totem pole, showing up late will get you fired—it’s hard to make up for it by just staying late or putting an hour in on Saturday from home. People like that would reap a disproportionately large benefit from the reduction in congestion associated with a congestion price.

The important thing to recall, though, is that unpriced roads is a genuinely inefficient policy. If done right, then half of commuters would be better off with the congestion charge (people who put an above-average premium on their time) even if we lit the money on fire or gave it to AIG. But we don’t need to light the money on fire, we can use it to finance increased services or reduced taxes or some other thing.

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