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Congestion charging has been a fact of life in London since February 17, 2003. And now, New York City wants some of those extra tax revenues environmental benefits. Mayor Bloomberg’s hopes for a congestion charge currently face a tight deadline. As Newsday explains, if the New York State Senate enacts a bill clearing the way for a congestion charge on Monday, the city scores a $500m federal grant for its implementation. If not, not. To get it done, Mayor Bloomberg’s Albany shock troops have drafted an “act now, think later” bill. If passed, a 12-member commission will develop recommendations for putting an unspecified congestion charging plan in effect. Now that's what we call forward thinking!
27 Comments on “Big Apple Congestion Charging: Act Now, Think Later...”
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To me congestion charging sounds exactly like something bloomberg would implement.
On one hand, yes it is another way for the city to rake in the dough.
On the other hand, it takes a commons, and puts a price on it. Therefore it’s essentially pro-big-business. The people who can afford to drive, by some arguments these are the same people actually making the economy work, get to drive without us miserable plebians in the way.
I love it when the powerful use environmentalism to sell classism.
Neat trick eh?
In Oslo, Norway we do not have congestion charges at this time. What we do have, is a toll to get into the city. This money is assigned to variuos traffic-enhancing projects like tunnels and highway construction. We pay via a radio transmitter glued to the windshield that sends a signal to the computer system when passing the toll plaza. Of course, socialists are pushing for changing the toll into a congestion charge with dramatically increased rates during rush hour. So far, this has been rejected.
As far as I am concerned, we don’t need any congestion charges. I have more than enough motivation to leave the BMW in the garage and walk 10 minutes to the train.
Environmentalism is going to be a very effective way to get the riff-raff off the streets/planet.
I’ve read that New York was debating a plan to reduce incoming traffic to Manhattan during…the 1920s.
Good for New York. The city has a metro, it’s time for people to start using it.
Of course, cities like LA and Phoenix are screwed: decades of ridiculously poor (or nonexistent) urban planning have left them without viable public transportation networks, and as a result driving is both hellish and necessary for their residents.
This smacks of the same sort of reasoning as carbon offsets. I can pollute (and feel good about it), so long as I pay to “offset”, while you, who cannot afford it, must change the way you live. Didn’t Martin Luther nail a few complaints on a door because of thinking like this?
This isn’t about offsetting pollution, or indeed pollution in general, as it is about discouraging people from driving in downtown NYC. The general consensus among New Yorkers is that the city would be a much nicer place to live if the number of cars on the road were to be slashed dramatically. I can’t say I disagree.
So, let’s review this. According to the Newsday story, we see these charges:
“The fees. Motorists would be charged $8 to drive into Manhattan below 86th Street weekdays from 6 a.m. to 6 p.m. Those driving within the zone would be charged $4. Those driving a hybrid vehicle would be charged $4 to enter the zone and $2 to drive within the zone. Some versions of the plan call for motorists leaving the Manhattan congestion-pricing zone to be charged $8.
E-ZPass users. Motorists using E-ZPass would have the amount of any tolls on Manhattan bridges or tunnels deducted from the congestion fee. Those without E-ZPass wouldn’t get the discount.”
So, “some versions” of this guesstimate (given that the NY State Senate is expected to pass this thing without knowing exactly how it will be implemented, calling it a “plan” is inaccurate) would charge motorists up to $16/day ($8 to enter the zone, plus another $8 to leave it).
Further, some versions of this guesstimate would exempt E-ZPass users.
Overall, this sounds like a scheme to fleece tourists. After all, those who commute to Manhattan can easily determine how best to leverage “park-and-ride” sites. Those who absolutely need to drive to Manhattan can easily purchase an E-ZPass, the cost of which would be deducted from this “congestion charge.” OTOH, if I’m driving from Peoria, IL to a specific address in NYC, I doubt that Mapquest will tell me where to park-and-ride to avoid this outrageous fee.
Now, given the potential for $16 worth of fees just to drive into (and then leave) Lower Manhattan, what effect might this have on casual tourism?
Further, since the proposed fees don’t exempt those persons who might drive from other parts of Manhattan to the affected zone, exactly where will the toll booths be located, and how will setting up such toll booths reduce street congestion?
Roads are an excellent example of a good which is over-utilized as a result of its being under-priced; outside of Soviet breadlines, there are few clearer (or more irritating) demonstrations of this principle.
What’s key here is that if we want to keep things ceteris paribus, the congestion charge should be offset by lowering other taxes in the city in order to maintain rougly similar rates of taxation. Doing so will yield huge benefits from the swifter flow of commerce, while at the same time serving as a rough proxy for a carbon tax in its effect on driving and gasoline consumption.
Raising the price of anything has a proportionately larger effect on the poor, so calling this a class issue is fallacious and meaningless. The wealth of society will increase on the whole from such taxes, and few if any will be hurt in a meaningful way.
Calling this “putting a price on a commons” is misleading. Roads do not exactly fulfill the criteria of a common good; they are certainly rivalrous, but as toll-collection technology has developed, they have become more and more easily excludable. Viewing the market as not for roads, but for use of roads, they are simply private goods, where the price is artificially held at 0, far below a market clearing rate.
Rather than bemoaning such changes, we ought to examine why they currently exist as they do, and investigate the optimality of that condition.
“Good for New York. The city has a metro, it’s time for people to start using it.”
Have you ever tried getting on a train in Manhattan during the morning or evening rush?
Yes, and I wouldn’t say it’s noticeably more frustrating than trying to drive around Manhattan during the interminable rush hour. Either way, if Manhattan’s public transportation doesn’t have enough capacity for the hordes of people trying to use that’s just a sign that it’s a worthy public service that merits oodles more taxpayer dollars.
Who’s to say that the MTA actually gets the revenue from congestion charging? And who’s to say that the MTA, if they do get this money, will use it responsibly? It only seems like yesterday that they raised fares, and it only seems like tomorrow that they’ll raise it again. All while patting themselves on the back for record levels of ridership.
They always seem to find an extra half-billion dollars stashed under the mattress after the fares are raised.
Taxis are exempt… hmm. Every time I see film or video of the Apple, I’m always amazed at how many taxis there are; a sea of yellow (or, Yellow) on the streets.
NoneMoreBlack: One of the things I always liked about america was that there was supposed to be a certain level of equality. The more “free marketeers” have there way, the less of that equality we have. When do we officially put “Inc.” at the end of “USA”?
I live in nyc. The worst part about this plan is that both the MTA and the NJ transit are at capacity and have stated that they could not possibly handle the extra riders this would create. I generally like Bloomberg, but this is a really bad plan. Just because you can get $500 mil of federal funding is no reason to implement an ill-conceived plan that will cause chaos. Fortunately it seems highly unlikely he will get this plan approved. phew!
NonMoreBlack: Viewing the market as not for roads, but for use of roads, they are simply private goods, where the price is artificially held at 0, far below a market clearing rate.
The price is not held artificially at zero for those who use roads.
First, every gallon of gasoline and diesel fuel is taxed at the federal level. This money goes to the highway trust fund to build roads in the federal interstate highway system. So those who drive more pay more, which is then used to build federal highways. The “price” is included in each gallon of gasoline.
Federal highway funds can also be diverted to build bike paths, and a state can “flex” up to five percent of is share of highway funds to pay for mass transit systems. This is what Pennsylvania Governor Ed Rendell recently did to Pennsylvania’s share of federal highway funds for the benefit of the Pittsburgh Port Authority and the Southeastern Pennsylvania Transportation Authority (SEPTA), which serves the Philadelphia region.
So bike riders – considering that they pay no license or registration fees for their bikes – are getting the free ride, whether they use bike paths or regular roads. They are being subsidized by drivers who buy fuel, who are also subsidizing transit riders.
There is also a state component to transportation funds. In Pennsylvania, gasoline is taxed at the rate of 32.3 cents per gallon for gasoline, while diesel fuel is taxed at 39.3 cents per gallon. Revenues from these taxes, along with vehicle registration fees, as per the state Constitution, must be spent on roads and bridges.
But the state also diverts a portion of the statewide sales tax to mass transit systems, which means that taxpayers in rural Pennsylvania are subsidizing SEPTA and the Pittsburgh Port Authority, even if they never use those systems, or even visit those metropolitan areas.
Turning to New York state, there is a 43.9 cents per gallon tax on gasoline, and a 42.3 cents per gallon tax on diesel fuel.
New York state has a Transportation Dedicated Funds Pool, which includes portions of the Petroleum Business Tax, the Motor Fuel Tax, and motor vehicle fees.
Money from the Transportation Dedicated Funds Pool goes toward the dedicated mass transportation trust fund, dedicated highway and bridge trust fund, and mass transportation operating assistance fund. In addition, there is a supplemental petroleum business and aviation fuel business tax, which is allocated as follows: 63 percent to the state highway and bridge trust fund, 34 percent to the state mass transportation trust fund (with most of these funds earmarked for New York City’s transit authority), and 3 percent for other mass transportation projects.
So New Yorkers are paying for their roads as they use them, via taxes on petroleum-based fuels, and part of the tax revenue that drivers generate is used to subsidize mass transit systems, in particular the New York City Transit Authority.
NoneMoreBlack: Raising the price of anything has a proportionately larger effect on the poor, so calling this a class issue is fallacious and meaningless.
There is a considerable difference between natural market forces raising prices, and government artificially raising prices through either taxes or fees.
NoneMoreBlack: The wealth of society will increase on the whole from such taxes, and few if any will be hurt in a meaningful way.
That is a pretty bold statement…do you have any examples to support it?
jabdalmalik: Either way, if Manhattan’s public transportation doesn’t have enough capacity for the hordes of people trying to use that’s just a sign that it’s a worthy public service that merits oodles more taxpayer dollars.
Part of the problem with giving metropolitan transit systems “oodles more taxpayer dollars” is that politicians too often use it to keep fares too low (which don’t reflect the true cost of providing service); maintain routes that do not attract enough ridership to be cost-effective; and award lavish contracts to public service unions (as they want the support of urban labor unions around election time).
These have nothing to do with improving service, or even expanding it.
If the service is that popular, I’d suggest that fares be raised, which can then be used to improve service and upgrade the system.
The price is not held artificially at zero for those who use roads.
The tax is close to meaningless in terms of discouraging road consumption. The average gasoline tax in the US is about $0.46 per gallon. For a driver with a vehicle that gets 20 mpg, that means that the gas tax equates to about less than $0.03 per mile.
And fuel taxes do not pay for all road construction and maintenance. Much of the money comes out of the general fund and bonds serviced from the general fund, so their costs are spread across the system.
A lot of the discussions about transport issues seems to forget the fact that no form of local transit, whether by private car or public transit, is self-supporting, nor should it be expected to be self-supporting. Transportation fulfills a social good by providing access and mobility to individual, and by facilitating commerce and the flow of goods.
If you demand that the ability to be self-supporting serve as a litmus test for selecting transport options, then we’re all going to end up walking and carrying brooms so that we can clear our own paths. You could get rid of every bus and subway system in the US, but you’re still going to need taxes from the general fund, user fees and bond issues to pay for what’s left, no matter what you do.
Geeber;
You make some valid points, but I think you’ve missed mine. I was somewhat exaggerating in saying the price is held at 0; whatever it is held at is irrelevant, it is simply below a market clearing rate. As Pch101 points out, taxing the burning of gasoline is not the same thing as taxing the use of roads; in my post I mentioned this when I said that a congestion tax will serve as a rough proxy for a carbon tax.
The example of bike riders is a good one, but should be broadened to anybody who transports themselves via means other than a car within the city. If they use the roads, by walking or biking on them, they are subsidized in a roundabout manner by those paying gasoline taxes. However, much greater is the magnitude of the subsidy non-drivers pay to drivers in the form of the portion of their property and other taxes which go to road construction and maintenance, as, again to parrot Pch101, gasoline taxes nowhere near meet the amounts required for this activity.
As for backing my statement that such taxes will increase the common wealth, just do a google scholar search for congestion tax. For many, many years, economists have been examining the effects of such taxes, and the great majority have determined that they are an important pigovian tax , whose implementation will far offset its own costs.
There is a considerable difference between natural market forces raising prices, and government artificially raising prices through either taxes or fees.
As far as the disproportionate impact on the poor is concerned, there isn’t. One simply has to be justified while the other is a result of exogenous forces. In this case, my above argument is that such a tax is justified, especially if countered by lowering other taxes, which will lighten the overall tax burden on the (mostly poor) non-drivers.
NoneMoreBlack: when have you EVER known the government, ANY government, to lower one tax when raising another? You are talking about a fairy tale situation that can only exist in theory because we all know it will not happen in reality.
At the end of the day the poor get hurt more than the rich when you levy taxes that are not based on a percentage of one’s income.
Pch101: The tax is close to meaningless in terms of discouraging road consumption. The average gasoline tax in the US is about $0.46 per gallon. For a driver with a vehicle that gets 20 mpg, that means that the gas tax equates to about less than $0.03 per mile.
Gasoline taxes are not designed to discourage road consumption, anymore than a sales tax is designed to discourage regular purchases.
Gasoline and diesel-fuel taxes are designed to directly raise revenue for road and bridge construction from the users of those roads and bridges, which they do.
Pch101: And fuel taxes do not pay for all road construction and maintenance. Much of the money comes out of the general fund and bonds serviced from the general fund, so their costs are spread across the system.
That would depend on each individual state. There is a federal component to road construction costs, through federal highway taxes, which includes taxes on gasoline and diesel fuel, but under federal law, states must contribute to any federal road project.
Over the years, the trend has been to allow states to spend more federal Highway Trust Fund dollars on non-road projects.
Federal projects are paid for out of the Highway Trust Fund, which receives revenues from excise taxes on diesel fuel and gasoline, along with truck-related taxes on truck tires, sales of trucks and trailers, and heavy vehicle use.
The Mass Transit Account receives a portion of the motor fuel taxes. The General Fund receives a portion of the tax on gasohol and some other alcohol fuels that contain ethanol. (The Highway Account receives the remaining portion of the fuel tax proceeds.)
The Highway Trust Fund originally focused solely on highways, but by the 1980s Congress determined that a portion of the revenues from highway-user taxes dedicated to the Highway Trust Fund should be used to fund transit needs, resulting in a 5 cent increase in the gas tax (to 9 cents), of which 1 cent would go towards transit, to help fund the new account.
This resulted in the creation of the Mass Transit Account within the Highway Trust Fund in 1983.
In 1991, Congress passed the Intermodal Surface Transportation Efficiency Act (ISTEA). This law was renewed in 1998 as the Transportation Equity Act for the 21st Century, or TEA-21.
These laws increased the flexibility with which state governments could use their federal transportation grants, encouraging relatively more investment in transit, bicycle, and pedestrian projects and relatively less new road building.
(TEA-21 was succeeded by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). This law governs United States federal surface transportation spending through 2010, and contains the earmark for the notorious “bridge to nowhere” in Alaska.)
At the federal level, at least, there appears as though there is enough money raised by highway user taxes to pay for non-road projects.
If the concern is that drivers aren’t fully covering the cost of roads, then one wonders why the trend over the past 20+ years at the federal level is to allow the states more flexibility in the use of their federal highway dollars on non-road projects.
States also raise money, both to pay for their own road projects, and for their share of federal projects. As noted, in Pennsylvania, non-users are subsidizing mass transit system throught the statewide sales tax, while in New York, drivers are subsidizing the mass transit system through the state’s gasoline tax.
Given that decisions such as this should be made at the state level, if New Yorkers are happy, I have no problem with this. This is what state voters have decided, and they are the closest to the problem.
If New Yorkers want to tax drivers even more, at either the state level or just for New York City, that is their business, although it would make me think twice about visiting there. (Granted, I would not want to drive in New York City in the first place, so I would never take a car into the city. But I would drive to visit other areas of New York, such as the Finger Lakes region, so a statewide effort would make me think twice.)
Pch101: If you demand that the ability to be self-supporting serve as a litmus test for selecting transport options, then we’re all going to end up walking and carrying brooms so that we can clear our own paths.
Never said, that, just want to point out some inaccuracies and mistaken perceptions.
Pch101: You could get rid of every bus and subway system in the US, but you’re still going to need taxes from the general fund, user fees and bond issues to pay for what’s left, no matter what you do.
Rather than getting rid of mass transit systems, I ask that they be better managed, as opposed to being used as a re-election tool for politicians, who continually cry out for more subsidies.
NoneMoreBlack: However, much greater is the magnitude of the subsidy non-drivers pay to drivers in the form of the portion of their property and other taxes which go to road construction and maintenance, as, again to parrot Pch101, gasoline taxes nowhere near meet the amounts required for this activity.
You can’t make that blanket statement for the entire country. Each state has its own way of funding road projects.
Plus, property owners, especially businesses, benefit from roads that increase access to their property. So that is the return on their property taxes paid to road construction.
Taxes have two primary objectives. The first is to raise money for government spending. The second, and often the more important, is to provide incentives for and against various behaviors. A Pigovian tax is one which attempts to bring into concordance the private and public costs of a good. Since the private cost of the use of a road is near enough to 0, while the public cost, manifest in the marginal congestion brought about by another user of the road, is above 0, there is overconsumption of roads. There can be no clearer demonstration of the necessary factuality of this statement than rush hour.
geeber: I will withdraw unsupported blanket statements since I cannot match your research. It would be impossible anyway to determine which portion of all non-gasoline taxes are paid by non-drivers. This point is irrelevant to my basic argument, concerning only whom is paying a subsidy to whom, rather off the topic of whether a congestion tax is a good idea or not.
GEMorris: True, one cannot ever be optimistic when government is involved. However, whether or not they maintain a constant revenue by offsetting the raised congestion tax with lowered other taxes is merely a question of tax incidence, which has no bearing on the advisability of raising such a tax.
Regarding inequality, I’m not sure what you’re saying. There is a “certain level of equality” in the US; more than in some countries, and less than in others. The Gini coefficient of the US hasn’t increased very much in the last 50 years, and linking what increase has taken place to so-called “free-marketeers” (something I’m also not familiar with) is bold. Some recent academic work has suggested that higher technology stocks has driven demand for skilled labor, increasing the value of higher education, and causing the incomes of those without education to rise more slowly than those with education, leading to increasing inequality. The key to fighting inequality in income then, is to fight inequality in access to education, which is perhaps the great debate of the civil rights movement.
Also, I’m confused as to what stance you take. You don’t have faith in the government’s ability to make rational economic choices, nor do you (appear to) have faith in individual freedom in making economic choices (the free market). What would you have us do, then?
This has kind of veered off into a somewhat philosophical discussion, so as a New Yorker, let me bring it back to local issues.
IMHO, all of the fears of this being highly regressive are misplaced. There is almost no legal street parking in Manhattan, and the amount available during business hours has been steadily declining in the 8 years that I have lived here. Drivers who come in during business hours typically pay anywhere from $20 (if they have a monthly spot) to $50 per day, plus 18% tax. This does not include the round trip tolls you must pay to come in from anywhere besides a handful of inter-borough bridges. We’re not talking about low-income workers who will be affected; the typical driver is a professional from New Jersey, Long Island, Connecticut or Westchester. Also, tourists rarely drive into Manhattan. They (correctly) take advantage of air, rail and bus access. Most non-residents I meet are terrified of driving in Manhattan and will actually pay good money to avoid it.
There are only a few of outer-borough communities that are basically “off” the subway system now. Reduced traffic will benefit them, not hurt them, by making express bus service a viable transit option. Low income workers from these areas do not drive into Manhattan currently. They endure long local bus journeys to remote subway outposts, and then ride 45 minutes or more to get to Manhattan. Expanded express bus service would be a huge boon to these areas.
Finally, drivers coming into Manhattan limit airport access. We have 3 major airports around New York City, but only one of them (Newark) can be conveniently reached by train. Getting to JFK is particularly bad during peak times because the only viable route is via the Long Island Expressway, where one must share the road with countless single-passenger vehicles (usually German) inching their way home. Given the quality of mass transit available from Long Island, it makes me wonder if they are driving simply to make their commute take as long as possible because they secretly hate their lives. It’s an absurd state of affairs.
My only beef with the plan is that I don’t think the charge is high enough, given the already high cost of parking and tolls. I believe $50 per day is probably the appropriate level, personally. The truth of the matter is that most people who drive into Manhattan have displayed so much price inelasticity that I don’t think anything less will make much of a difference.
Btw, the “German” comment in my post above in intended to indicate driver income demographics on the LIE (i.e. people who can afford premium cars), not to make any comment on what driving a German car might indicate about a person’s character. I happen to own a German car, for full disclosure.
i’m all for it and so are most of my manhattan residing automobile owning middle class friends. all pedestrians here are plagued by dangerous drivers every day. to bloomberg’s credit, he is also pushing for mass transit improvements like the second avenue subway. although i’m still peeved that he opposed the trans-harbor railway tunnel which would have diverted most of the long island bound truck traffic off our streets. currently, nyc fails federal air pollution standards so i think it’s ridiculous to accuse us of pandering to the rich when we are trying to protect our health. i have nothing against tourism but if you are going to drive here be prepared to pay the cost.
NoneMoreBlack: Since the private cost of the use of a road is near enough to 0, while the public cost, manifest in the marginal congestion brought about by another user of the road, is above 0, there is overconsumption of roads. There can be no clearer demonstration of the necessary factuality of this statement than rush hour.
We are dealing with two different costs here.
The first is paying for the actual road itself, which, as has been shown, drivers do through federal and state gasoline taxes, along with vehicle registration fees.
The second is paying for relatively rapid, uninterrupted travel because the road is not congested. The congestion tax is designed to make this a reality by raising the cost of road use for everyone, which, it is hoped, will discourage driving and thus make driving for those who do pay faster and more pleasurable. (Driving is obviously more enjoyable and efficient when the vehicle is moving and making progress.)
What they are paying for is not the road, but the use of the road in a more efficient, uninterrupted manner.
But there is one problem – all drivers have already contributed to the cost of building and maintaining the road, and now New York City is turning around and saying, if you want to use it, you have to pay even more. And not all drivers may be able to do this.
But, if New York City wants to do this, and the voters support it, that is the city’s business.
NoneMoreBlack: It would be impossible anyway to determine which portion of all non-gasoline taxes are paid by non-drivers. This point is irrelevant to my basic argument, concerning only whom is paying a subsidy to whom, rather off the topic of whether a congestion tax is a good idea or not.
It’s not impossible to determine this. I just asked my contact at the Pennsylvania Department of Transportation (PennDOT), and he said that federal and state gasoline taxes, along with vehicle registration fees and fees to obtain a driver’s license, pay for virtually all road construction and maintenance costs in Pennsylvania.
Pennsylvania’s mass transit systems receive direct state subsidies and a portion of the statewide sales tax. Mass transit receives money from the Pennsylvania Lottery, although this is used to provide services for the elderly.
So, in Pennsylvania at least, it’s easy to discover which users of each respective transportation system are closer to paying their own way.
The federal gasoline tax is not expected to cover all road construction and maintenance costs.
It is designed to cover the federal contribution to federal highway projects, but states have been always expected to contribute to federal highway projects.
My concern is not with the congestion charge – New York can do what it wants, as I don’t live there and never will – but with the suggestion that drivers are receiving some sort of free ride at the expense of mass transit users, and therefore need to be taxed more heavily. Which is not necessarily the case.