11.12.12

PRICES ALLOCATE RESOURCES.

Los Angeles now sells the use of the carpool lanes to driver-only vehicles, and the results surprise anyone who is not an economist.
We can't add much more roadway, but as the population grows, we'd be wise to find ways to more efficiently use what we've got while adding transit options and encouraging more carpooling. And that's the whole point of toll lanes.

In theory, everyone benefits. The driver who chooses to pay a premium goes faster, but the driver who doesn't pay goes a little faster, too, for no extra charge. That's because as single-occupant vehicles and carpoolers are lured out of regular lanes and into the toll lanes, the volume is lowered in the regular lanes.
If the price-recalculating algorithm works as effectively as sports betting books are supposed to, travel times will be equal. The person paying the toll, though, avoids the risk of traffic congealing in advance.   Correct long-run incremental cost pricing will produce enough revenues to replace or expand capacity.
And money generated from the toll lanes will be plowed into transit improvements along the two highway corridors. Already, 59 new buses have been purchased for those corridors with money from a $210-million federal grant, which will also pay for a new El Monte bus station and transit center improvements.

The federal gas tax, set at 18.4 cents per gallon, hasn't been increased since 1993, said Martin Wachs, a transportation expert at Rand, and cars manufactured since then get much better mileage. That has meant less revenue for highway construction and maintenance. Tolls are a way to generate new funds for transportation improvements while at the same time creating more options for travelers.

As for the Lexus lane charge, UCLA transportation guru Brian Taylor argued that toll lanes aren't a bad deal for low-income people. When sales tax increases are used to pay for transportation projects — as with Measure R in Los Angeles County — everybody pays and the burden is greatest on the poor, because they lose a bigger percentage of their income. But if tolls are used to finance a project, such as the 91 Freeway toll lanes, it's the Lexus drivers who carry the load.
No escaping the fundamentals: in taxation there is the benefit principle, and the ability-to-pay principle, and working out the tax incidence isn't easy.

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