"User Pays" and Income Inequality

In the midst of Virginia's transportation funding debate, some well-informed voiced have been advocating a solution called "user pays." Jim Bacon may be the best proponent of this funding solution.

If the slogan of the old Byrd Machine was "pay as you go," the mantra for the 21st century should be "user pays." The unifying principle is very simple: There needs to be a direct connection between the demands citizens place upon the transportation system and what they pay. If, despite the abundant financing options available, money can't be found for a desired improvement, that's a pretty good sign that the project is economically unjustified and should not be built. - Bacon's Rebellion

Under Bacon's plan, a combination of tolls, impact fees and regional investment authorities would collect funds for roads from users of the roads. It seems like a fair enough solution, the users of services should have to pay for them. However, hidden inside this seemingly fair slogan lies a series of assumptions which are misplaced, and result in a new regressive tax.

A user pays system for transportation (which is another way of saying more tolls in more places for more roads) would significantly impact the people with the longest commutes and jobs that require going to worksites the most often. It would impact people with shorter commutes and work-time flexibility much less.

If a worker has a longer commute, it may be because that worker cannot afford a home closer to his or her job. Of course, there will be some who decide to live farther from work so they can enjoy other benefits, but all else being equal, the more money you make the better you can afford to live closer to you job. A user pays system, then, runs the risk of introducing even more costs onto people who have already demonstrated they cannot afford to live closer to their jobs.

Furthermore, if a job has frequent commutes, it means their work is probably fixed in place (i.e., it is less likely to be a "knowledge work" with flexible hours and work locations). Work fixed to a location is likely to be lower-earning than knowledge work. Thus, a user pays system runs the risk of disproportionately impacting those with lower-income jobs that require going into work. Meanwhile, those who can afford to work from home (and, perhaps, write treatises on the benefits of user pays) avoid the new costs even though they're better able to pay them.

At this point, a reader may ask "so what?" I will let Sen. Jim Webb explain the So What.

The most important--and unfortunately the least debated--issue in politics today is our society's steady drift toward a class-based system, the likes of which we have not seen since the 19th century. America's top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1% now takes in an astounding 16% of national income, up from 8% in 1980. The tax codes protect them, just as they protect corporate America, through a vast system of loopholes.
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This ever-widening divide is too often ignored or downplayed by its beneficiaries. A sense of entitlement has set in among elites, bordering on hubris. When I raised this issue with corporate leaders during the recent political campaign, I was met repeatedly with denials, and, from some, an overt lack of concern for those who are falling behind. A troubling arrogance is in the air among the nation's most fortunate. Some shrug off large-scale economic and social dislocations as the inevitable byproducts of the "rough road of capitalism." Others claim that it's the fault of the worker or the public education system, that the average American is simply not up to the international challenge, that our education system fails us, or that our workers have become spoiled by old notions of corporate paternalism. - Sen. Jim Webb, in The Wall Street Journal

Mr. Bacon proposes to add "paying for roads" to the list of things that only the lower and middle classes need do. A "user pays" system in our current environment would simply continue the exacerbation of income inequality in America. It would harm most those who must commute long distances because of their jobs and where they can afford to live. It would allow those who make enough to have work flexibility to "opt out" of funding roads which they themselves benefit from, since the same network of roads bring them their food and consumer goods, take their kids to school and allow fire and emergency services to speed their way to their house. It echoes the "only little people pay taxes" arrogance of a previous era.

Bacon's Rebellion advocates user pays as "the most economically efficient and environmentally benign scheme of all." In that statement is an artful dodge, because "economically efficient" is not the same as "economically fair." Economic efficiency, taken to its logical conclusion, means sacrificing the health and well being of families at the lowest end of the scale. Without major changes in the tax code, any user pays system would be merely another step along the path of two Americas, one rich and one poor.

(Neither is user pays particularly "environmentally benign." A sliding scale gas tax based on vehicle fuel efficiency would probably be more environmentally benign, since that would capture the cost of all driving, not just driving on roads with user fees.)

It is ironic that Bacon's Rebellion takes such a strong stance in favor of a regressive tax. This is the same commentator who said this about the 2007 abuser fees:

Needless to say, these sort of penalties are regressive and will have a severe impact on low and moderate income families (many of whom are minorities). How can the GOP claim that it is cares about low and moderate income families and minorities when it passes this type of legislation? - Bacon's Rebellion

Replacing abuser fees with user fees does little more than remove the letters "a" and "b" from the phrase. It will ultimately replace one regressive tax with another. Virginia needs comprehensive transportation funding reform, supported and paid by the entire Commonwealth. If the entire commonwealth benefits from the tax revenues generated by the economic engines of northern Virginia and Hampton Roads, then the entire commonwealth can pay to keep those engines running.