Study: OC Taxes More Regressive Than Tolls

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A new study by researchers at UCLA and USC calculates the cost to people of lower income of funding transportation with toll revenue and compares it to other ways of funding transportation. The study concludes that tolls, especially congestion pricing tolls, are among the most progressive ways to raise funds.  The study reaches this conclusion by comparing the source of funds generated by HOT Lane tolls on SR-91 with fees collected from taxes in Orange County.

From the abstract, emphasis added by Streetsblog:

This paper compares the cost burden of a value-priced road, State Route
91 (SR91) in Orange County, California with the cost burden under
Orange County’s local option transportation sales tax, Measure M. We
find that although the sales tax spreads the costs of transportation
facilities across a large number of people inside and outside Orange
County, it redistributes about $3 million (USD) in revenues from less
affluent residents to those with higher incomes. The entire Measure M
program redistributes an estimated $26 million from low-income
residents to the more affluent.
Low-income drivers as individuals save
substantially if they do not have to pay tolls, but as a group
low-income residents, on average, pay more out-of-pocket with sales
taxes.

What little press this report has garnered has focused on what it means to Metro’s push to convert HOV Lanes to HOT Lanes, but the report raises a larger problem for Metro than it might help solve.  If this report backs up the BRU’s contention that sales taxes are regressive, what does it say about Metro’s chances of seeing its half cent sales tax increase passed by voters this fall?

Photo: BigMikeLakers/Flickr

  • Matt Gleason

    It’s not that the BRU considers sales taxes regressive, its that everyone does. Economists, public finance scholars, policy people, advocates, everybody.

    Low income folks have (obvioulsy)lower incomes, and every dollar is that much dearer.

    Their spending is also (proportionally) more likely to be taxed.

    And by passing this tax, those who live without autos will be subsidizing highway spending. I don’t think I need to draw a demographic profile of the typical car-less household.

  • this just in, the OC more regressive than trolls.

  • On the other hand, transit riders overwhelmingly benefit with this measure. The majority of money is going to transit, and the money that goes for truck lanes, local streets, and signal synchronization also benefit transit riders through improved goods movement and improved pavement quality for their bus rides. With the fare freeze, the transit rider which uses a monthly pass saves $156 over the year between 2009 and 2010. This covers the sales tax increase for 3 to 6 years, depending on whose numbers you believe (I use $50 because that is more realistic than the LAEDC’s $25). This period is even greater for students and seniors, who will have the lowest fares in the country when the fare freeze for them expires in 2014.

    The primary people who are going to get the greatest impact on their household budget are the lower middle class that drive in from the Antelope Valley, and those with long commutes to their jobsites. They will pay an extra two cents or more on every gallon of gasoline they use, and will probably never be able to use the transit paid for unless they live closer (since Metrolink fares are not being frozen, nor is a local bus ever going to be competitive for 60 mile commutes to locations outside the main hubs). Transit riders get more rail, lower fares (relative to inflation), and better roads for their buses to go on.

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