Dueling incentives

Accused of contributing to urban congestion, Uber wants a tax to price you out of the city while their cars pay a lower rate. Ride-sharing services love “congestion fees.”

In its simplest form a congestion tax is a barrier toll around part of a city, say London or lower Manhattan. You pay $25 to drive three blocks past the zone boundary to a parking garage. A fleet owner spends $25 to have a taxi on the road all day.

Now you understand why they are spending millions lobbying for congestion taxes. They raise their fares by a dollar. You double your commuting cost.

If your commute causes $12.50 worth of traffic misery each way, a taxi should pay a $12.50 per fare congestion surcharge. The actual figure Uber is willing to pay in Manhattan is 75 cents a ride, about a tenth what Uber wants you to pay per one way trip. And half of what they want taxis to pay, despite serving the same function as taxis.

If you think drivers need to pay more there are other options but they come with their own perverse incentives.

What if you had to pay per minute on the road? It seems more fair than a daily rate when you’re only using city streets 40 minutes a day. On the other hand, when you got to a yellow light you’d be tempted to hit the gas. You’d tell yourself you’re not going to pay an extra 25 cents to sit at a red light that only turned red so the city could extract another quarter.

If city government can collect a per-minute congestion charge, city government will deliberately make traffic worse. Read up on toll road non-compete agreements. A company that wants to operate a toll road asks the local government to promise to have traffic jams on free roads. The 85 mile per hour speed limit in Texas was purchased by a toll road operator that insisted nearby free roads have low speed limits. Governments play along because they’re getting paid.

Making the first hour a flat rate would dilute the financial incentive. Cars going directly to a parking space would not pay more if they caught a couple extra red lights. Taxis and delivery trucks would pay a lot more for clogging the roads all day. The disadvantage is the government needs to track you more than they already do.

I wrote about the real motive behind taxation by GPS monitoring. They aren’t doing it to find out how many miles you drive. Your odometer would tell them. They are doing it so they can collect more data on you. You get a speeding ticket in the mail, he gets arrested for driving along a drug trafficking route too many times, she pays a higher fee for crossing an urban growth boundary before 9 AM.

Supposedly a congestion tax encourages drivers to improve traffic flow. We need a road funding scheme that encourages cities to improve traffic flow.

Cities post stop signs because obstructing traffic makes residents feel better. They’d rather write a ticket for running a red light than fix the broken controller that turned the light red for no reason. If they had to pay the cost of their traffic obstruction policy they’d use stop signs for safety instead.

It would be great if cities were billed for causing traffic delay and accidents. The problem is finding a system that doesn’t create its own incentives. Mayors would block off main roads to avoid carrying their share of traffic. Diverted drivers would cause traffic jams in the slower-to-act city next door, which would unfairly take the blame.

Traffic decisions on important roads in my area used to be made by state and county engineers who couldn’t be fired by the mayor. They were likely to care about safety and operational efficiency. But counties were abolished, traffic control policy devolved to cities, and the state DOT is offloading as many highways as it can pay cities to take over.

Ask yourself when you read about transportation policy, who’s really going to benefit from this? Would Boston raise the cost to park if the revenue went into the state transportation fund? Would New York want congestion tolls if the money went Upstate? Would Uber back congestion pricing if Uber had to pay its fair share?

There are some true believers in managing demand. UCLA professor Donald Shoup wrote a massive book most of which is about how price can be used to manage parking demand. But even he, no doubt a true believer, had to appeal to greed to get his policies enacted. The rest of the book is about how to pay off interest groups using revenue from parking fees.

The people who have the power to control the cost of driving are not the ones we should trust with that power.

The opinions expressed in this post belong to the author and do not necessarily represent those of the National Motorists Association or the NMA Foundation. This content is for informational purposes and is not intended as legal advice. No representations are made regarding the accuracy of this post or the included links.

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