The issue of congestion taxes has been raised in several SMH articles recently, and the blogs have been all over it.
This is one of many policy ideas in Australia that make obvious sense, but don’t have any big political interest behind them to offset the natural resistance of the political system to anything new.
Public-Private Partnerships get things pretty much the other way around. In most cases the economic case is weak or worse, but there’s a massive and well-financed lobby that stands to gain hundreds of millions from such deals and is happy to share some of the wealth with pro-PPP politicians, who are more or less guaranteed cushy jobs at megapay after they leave poltics.
John Quiggin 
Can’t you revenue hungry leaches ever think of something that doesn’t involve increasing taxation. For instance, spending some of the $300 billion taxation revenue that is extorted out of the Australian economy each year on providing decent roads and a decent public transport system. Instead of squirting this money up against the wall.
No because “there’s a massive and well-financed lobby that stands to gain hundreds of millions from such deals”…. the ‘revenue lobby’ (comprising the ATO, the Treasury and their allies in politics, academia, the media and the welfare industry).
Give us a break from this ‘revenue lobby’ crap. “variable tolling on arterial roads could be the only way to fix the city’s gridlock.â€?
Tax everything that moves and eventually nothing will.
ECONWITLESS
“Econwit” should learn some economics. Economists are not generally known to favour higher tax takes, yet most economists would back congestion tolling (assuming that tolling costs are negigible – as with technology they now are). Congestion tolling about the efficient use of infrastructure: not about raising tax revenue. It is entirely possible to introduce a revenue-neutral road pricing policy that entails congestion tolling – for example, by simaltenously reducing registration fees.
Essentially a congestion charge is price rationing the road space. The wealthier people can still afford to drive on the roads subject to the charge, and poorer people are placed onto the public transport system, or have to alter their budgets to accommodate the more expensive road system. This is not necessarily a bad thing – it’s what happens when price discrimination is introduced and is esentially a voluntary tax.
The problem with congestion charges, especially in Sydney, is that the public transport system is a mess. This in turn impacts on people’s elasticity of demand – if there are no substitutes, regardless of what you charge, people still have to use their car.
Until Sydney has a comprehensive and reliable public transport system, there is no way a congestion charging system could be implemented. Because of the inelasticity of demand (mind you, I am conjecturing here), the same number of cars will stay on the road (OK, it might fall at the margin). All that will happen is people will complain that they have already paid for the road once, now they are paying for it again, with very little benefit by way of price rationing of road space.
Strange argument from econwit. On the one hand he/she wants money spent on “providing decent roads and a decent public transport system” but on the other hand, he/she complains of “taxation revenue that is extorted out of the Australian economy each year.” Can’t have it both ways, I’m afraid. Either no tax and no spending, or tax right and spend right (I am not saying current governments are doing that by any means, though).
Another thought occurs. Apart from registration of vehicles, the use of the road system is virtually free for all motorists. Funding comes out of general revenue. Funding for public transport also comes out of general revenue, but users of the public transport system are expected to pay a commercial rate for the services they use. I wonder what the full economic cost comparison of roads versus public transport might be. Anyone? JQ?
Actually econowit, the congestion charge makes a lot of sense. London has had some success and I would doubt any decent economist would be against this. Furthermore perhaps you can read some economics regarding externalities.
PPP’s have been on average a disaster in some areas eg transport in sydney and the airport.
Econwit, you might want to consider the old saying “There ain’t no usch thing as a free road”
Econwit, many analyses I have read (e.g. Kenneth Davidson’s) suggest we punters end up paying more for PPP’s than we do for projects via tax revenue.
“Econwit� should learn some economics.�
Yes he should. “Econwit� is already a compound word made up of a four letter word and wit. By hypothesising the dismal science he will add up to be a total ****wit.
He can hypothesise about crap like this:
“It is entirely possible to introduce a revenue-neutral road pricing policy that entails congestion tolling – for example, by simaltenously reducing registration fees.â€?
It could also be entirely possible for pigs to fly unaided, but it will be a long time before evolution will grant them wings. Just as it will be along time before we see the public sector snout leave the trough for air and do something “revenue-neutral�.
Machiavelli had it right when he observed that there is nothing more dangerous than to introduce change, because the opponents of change are determined, vocal and organised, and supporters at best lukewarm (summarised from The Prince). Alternatively, you could look at public choice economics and theories about rent seeking, but that’s much duller than good old Niccolo. John’s theory about why congestion charging has not been introduced bears out the propostion. Econwit misses the point about congestion charges – their purpose is not to raise revenue (which is in the general scheme of things not great) but to change behaviour. Economists constantly observe that behaviour does change with incentives, particularly pricing incentives. As for EcWs’ “public sector snout” comment, it is clearly the case that many revenue changes have been designed to offset new taxes with elimination of old ones: the biggest recent example was when States reduced or eliminated a whole raft of their own taxes in exchange for the introduction of the GST, and the Commonwealth changed tax rates at the same time; the intention at the time was broadly revenue neutral or even tax reduction, although in practice constant strong economic growth since has meant overall revenues have grown (only marginally in real terms).
It’s always easier politically to increase old taxes than introduce new ones, which is why old Treasury hands have the saying “an old tax is a good tax”.
But it can be done, as the experience with the GST showed, where, contra Econwit, a new tax was introduced, and old taxes cut, in a revenue neutral if not revenue negative way.
Congestion taxes could even be introduced in a PPP friendly way, if that is what it takes to line up the required interest groups. Just put the tolling out to private tender, and pay the winner a share of the congestion revenue. In fact all this could be done with existing private toll roads. It is a very simple matter to have the toll vary by time of day, so that you pay more at peak times.
JQ, you should look at the economic history of these things. Language has shifted; roads really only ever need to be free, unlike streets which need work done to them, things like surfacing and grading. Trollope records that Australian roads were simply the routes where traffic went, being shifted over from time to time as the old routes got bogged.
stephen, I didn’t plagiarise you on the GST. Your comment appeared as I was writing mine. (It is surprising that Econwit, who claims to know something about economic policy, didn’t know that the biggest tax reform in a generation was revenue neutral.)
A question for Econowit:
You say that Governments are “squirting this money up against the wall” regarding tax revenue, rather than spending it on worthwhile purposes. What Government programs would YOU cut if you were in the position to?
Supplementary question – where would you build roads to reduce congestion in, say, Sydney, and where would you put the car parks that people will need?
I Sydney there have been calls for a London-style conjestion tax for the CBD. This doesn’t seem to make a great deal of sense, as the CBD is no more conjested than many other parts of the city during peak hours. A much broader application will be required.
A simple measure would be to reduce registration charges with a corresponding increase in fuel taxes. However, I guess politicians get less heat from an annual than a weekly bill.
This is just another BS tax on Men.
Can the government actually DO something instead of just taxing everything that moves, and particular everything that Men do? Do they really want us to ride our bikes to our university tenored offices while sipping chai latte teas in our turtle neck sweaters?
Who will do the Plumbing?
The government could, if it wanted to actually DO something could fix the east darling harbour ports situation.
We have massive prime moving trucks going up and down sussex st 24/7 because the government wont move the P&O ports to Wollongong.
This causes massive CBD conjestion and could be easily fixed. But its much easier to slug Joe Public
Yeah it definitely is a tax on Men.
Real Men sit in traffic, it is only the poncy effeminate intellectuals and ivory tower bearded hippy types that think this is some kind of problem. Those chai latte basket weavers oughta be run over by a 4WD, I reckon.
Wilful
No we all think its a problem, “it is only the poncy effeminate intellectuals and ivory tower bearded hippy types” that think the best solution is yet another tax on Joe Public just because hes got something we can stick an e-tag on.
Stand on Pitt st mall and look at all the vehicles going by. you’d be lucky to find 1 in 20 driven by a woman.
Men will bear the brunt of this tax just like they bear the brunt of progressive marginal tax rates.
If I want to incentivise my employees an extra $10K it costs me close to $20K after the Government takes its cut.
Everywhere the government steps in is 1 less transaction at the margin, another lost economic opportunity, another reason not to bother doing business.
What kind of economic growth rates and new innovations could be achieved if the government just got out of the way! for gods sake!
“If I want to incentivise my employees an extra $10K it costs me close to $20K after the Government takes its cut.”
Only if they making more than $125K per year. Do you have many of those?
Oh cry me a river. That’s right, it’s all a feminist plot.
I don’t know how you can be such a successful businessman and yet so clueless.
And ‘incentivise’? Firstly, it’s not a word, secondly, if your workers are on over $120k, which they must be to be taxed at that level, there are many more ways to motivate those staff than simply paying them more.
A few
They are the most productive, efficient, and experienced of the lot. And the system punishes me and them the most, they are the ones I want to hold onto and the ones my competitors are trying to poach.
Dont forget that Australias biggest export is services, i.e. things provided by workers.
The government would never dream of slapping 48.5% or even 30% tax on Wheat or Wool or Coal, but it happily does it on our biggest export sector, services.
Heck the goverments will bend over backwards to build trains and ports infrastucture for coal. But people providing services get slugged every which way they turn.
Most stupid economists think that housing, cars and roads, are in the “non traded goods sector” and happily tax them like crazy, but like ya know… those export dollar earning service providing people do actually need somewhere to sleep at night…
Idiots!
wilful
Can you suggest anything that not either subject to FBT or patronising?
uncle milton, I have seen enough of your posts to know you would never plagiarise! I took your comment as confirmation that mine was also on the right track, so thank you. its happened to me too – while the electrons from my posting are queuing to get through the gate (or however it happens in cyberspace) some other electrons earlier in the line get there first with a very similar observation. I suspect we share the same suspicions about econwits’ economics credentials given he did not seem to recall ANTS
John,
There is a long-term proposition going around Whitehall in Britain for pricing every journey in Britain, using satelite technology and modelling of busyness of roads.
For instance if you drive the M4 and M25 from Bristol to Essex you’d be charged more than taking backroads in Wales.
If you ask me it is a great idea but has “liberty” issues from a populist standpoint. People might not like being “tracked”.
Whilst I think this model is appealing, it is only possible witha decent public transport system. For instance in London (with the Congestion Charge) there is a real choice as to whether you get to work in the City or suburbs by Tube or bus – but Australia rarely has the public transport infrastructure or the population density to support a system of public transport where you can get almost everywhere and only have to wait 3 to 5 minutes for a train Tube or bus.
I would like to discuss the CC in London more but I can’t for commercial, and work related reasons.
Cheers,
Corin
The government would never dream of slapping 48.5% or even 30% tax on Wheat or Wool or Coal…
To compare apples with apples, they do tax mine workers the same as yours. They also tax company profits at 30%(nominally at least). So I’m not sure your statement holds up.
Besides which, if the govt reduced tax on your $120k earner to 10% how much of that would your employee see, and how much would be either retained by you, or used to cut your prices?
This is , needless to say, not a bad thing, but I don’t see your employee getting any personal pay benefit from it, and they will lose most of the benefits that a well-funded government brings.
I thought congestion represented a form of taxation already. Lets say that on route-A it takes an extra hour to get to work because of congestion. Then the labourer who might make an extra $25 that day (if not for the traffic congestion) has to consider the benefits of catching the train. And the lawyer who might make an extra $250 that day if not for congestion also has to consider the beneifts of catching the train. Given that the lawyer probably lives in a nice leafy suburb and has a short walk to the local train station and the labourer lives in outer suburbia and has no such easy access to the train station then the existing setup seems about right.
However if you used a $10 toll that remove the congestion on route-A then the labourer might now walk 40 minutes to the train station whilst the lawyer would still drive (even though he occupies real estate in a leafy suburb with an easy walk to the train). Of course the lawyer would now be $240 richer each day so he would send a letter of thanks to the SMH as well as Quiggin and co.
Regards,
Terje.
I think paying what is right is not a problem but unacceptable taxes or unwanted dues are never good. I never wanna pay them.
Dear John
I would like to bring this discussion back to the task at hand. I agree with you that Australian cities are currently not managing their traffic congestion well and will need to adopt some form of congestion tolls sooner rather than later. It seems that people in this country act as though they have never heard of congestion tolls (or recycled water) although Singapore led the way on these things decades ago. We seem to be stuck in the past.
Somehow we have people stuck in the past who still believe we can go on sitting one person in a huge four wheel drive, or similarly inefficient vehicle, and continue to add to the number of these vehicles without end. Somewhere along this continuum we get to a point where the traffic is grid locked and we can’t go on building more roads. Already cars, roads and their associated activities occupy 33% of our city’s space. Only about 50% of the population contribute to this problem, yet they want all of us to pay for their wanton behaviour by subsidising their unsustainable behaviour.
It is probably true, as Sydney Lord Mayor, Clover Moore, says – that the public transport system is not up to scratch in Sydney. But how do you create political pressure from the electorate for more spending on long-neglected public transport? Not by building more road space for cars, as the NSW, Vic and Qld governments have done! You get this kind of pressure by taxing people for doing things you don’t want them to do. If the people who want single-occupant vehicles had to pay the real cost of this antisocial activity they would probably change their minds.
As usual the NMRA and similar ‘motoring’ organisations make the kind of arguments that are just a recipe for more road funding and less public transport. It is way past time these people realised that their ‘motorist’ members do actually spend a lot of their time outside of their vehicles, sometimes walking, cycling and catching the public transport.
It is not in the best interests of the members of these organisations to keep the political pressure on governments to build more roads at the expense of public transport. This is because the members will still be stuck in traffic when global warming has altered our climate and fuel cost four times what we are paying now.
As mentioned by other commentators, the PPPs, quite apart from representing more expensive ways of funding infrastructure, are designed to encourage governments to do more of the same and to deliver shareholder profits to a privileged few, whilst they fail to deliver good social and environmental outcomes which make good sense for the future. If you want to know what would be a better transport solution, don’t ask the public, just ask a ‘consultant’ – and the answer must be a road.
PPPs, by their lucrative nature also tend to foster corruption among our political operators and do not achieve socially and environmentally optimal solutions. Look where some of our former state Premiers have continued their careers. There are plenty of examples in Melbourne, Sydney and Brisbane. Jeff Kennett privatised the trams and built a private toll way to Tullamarine with secret contractual arrangements to curb any improvements to public transport to Melbourne’s busy airport.
I believe there must be something similarly unsavoury regarding the tunnel that Brisbane’s Lord Mayor, Campbell Newman is having built from Kangaroo Point to Bowen Hills in Brisbane.
Room for more comments, I’m sure.
Regards
Willy Bach
Such people frequently sit in congested traffic. So they do pay the real cost. Mean while I generally sit and read my newspaper on the train. The status quo is just fine. Congestion taxes would no doubt mean that I have to read my newspaper standing up. Which is the version of congestion that I personally loath. In fact standing up might be so taxing as to make me drive the car to work.
Apollo – I do agree with one point you make – move the ports out of Sydney Harbour. But how about moving them to a place that really wants them and has more than 150ha of free empyty wharf frontage and rail head into those wharfs? What, a site like that exists? Yes, the Port of Newcastle and the land abandoned by BHP in 1999.
Terje, if you can sit in public transport on the way to work, you either work strange hours or you live in the middle of nowhere; my experience with PT is that unless you’re up at the crack of dawn or you can leave late enough that peak hour is passed, you’re not likely to get a seat! Personally, I am sick of seeing tollways built (and users complaining about the tolls!) while all public transport gets is replacement trains/trams that are harder to use and have fewer seats than the old ones. And while Governments (and Oppositions) promise plenty, they don’t seem ever to follow through, and most of the promises aren’t helpful anyway. (OTOH, the number of T lights at intersections round Melbourne nowadays is great to see—if only they’d actually use them.)
Bob:
I’m with you on “tax right and spend right�, unfortunately it becomes extortion when the public sector tax at an exorbitant rate and fail to deliver any semblance of service.
SB & UM
Moving the deck chairs on the Titanic didn’t make much of a difference nor does relabelling a tax reduce revenues or make them neutral.
You guys are off with the pixies if you think the introduction of the GST � the biggest tax reform in a generation- was revenue neutral.� On the contrary it has increased total taxation revenue as a percentage of GDP by nearly 2% since it introduction- a huge amount of dollars in anybodies terms.
It was the biggest ‘revenue lobby’ tax swindle ever perpetrated on a generation and it was successfully orchestrated to let the revenue trough overflow and flood public sector coffers.
There has only been one period since federation when revenues were reduced or made neutral and that was in the 1950s- the rest of the time they have been rising unabated.
See: table 27.19 Total taxation revenue per head as a percentage of GDP per head:
http://www.abs.gov.au/ausstats/abs@.nsf/94713ad445ff1425ca25682000192af2/a6e24932616f91edca2569de00296982!OpenDocument
The introduction of the GST was highly inflationary. 75% of taxation revenue is income tax (see table 27.20) subject to progressive tax scales. The GST induced inflation combined with the neglect to adequately adjustment the tax scales increased effective tax rates. It increased the proportion of average weekly earnings taken in tax as well as increasing the percentage of earnings paid in tax of lower quartile wages.
“Revenue neutral� just another absurd abstract theory that only exists in dismal scientists minds.
Its bad enough having 3 unrestrained hands in our pocket (federal, state and local) so spare us the burden of letting them dig deeper with a new tax payable at a booth on every corner.
pre-dawn leftist :
“What Government programs would YOU cut if you were in the position to�?
I’d sack 30% of public servants, abolish middle class and corporate welfare, and reduce and peg government revenues to 25% of GDP.
To your supplementary question
To relieve the traffic congestion in Sydney?
I would not build any new roads as you suggest I would merely reopen the existing roads that the clowns recently closed.
econwit
tax revenue has gone up in recent years because the economy has boomed. This is thanks to China and would have happened with or without the tax reform. You can only judge revenue neutrality, or otherwise, by the immediate effect, because over time too many other things change which affect tax revenues. In the case of the 2000 reforms, it was GST in, WST and other indirect taxes out, income tax cut, overall effect on revenue neutral at most, probably negative.
UM
It is not the size of the economy that matters. It is the proportion that is government revenue. That has inceased 2% since 2000.
I don’t think its necessary to create congestion tax’s to increase support for public transport. As Terje has pointed out we already face congestion tax’s in terms of lost time at the moment. As most people who regularly drive to work in Sydney will know, that is a pretty big tax at the moment. I am sure there is plenty of public support for public transport already.
An extra congestion tax on traffic entering the CBD does not seem to make any sense for Sydney. The traffic problems are just as bad well well outside the CBD and are also caused by cars going to and from non CBD destinations.
The problem is a lack of public transport caused by a government aversion to debt financing and poor transport planning for Sydney in general. They have tried to get public transport funded privately with a new rail link to the airport and it has been pretty abysmal.
econwit
the booming economy has led to tax growing faster than the economy itself, not unusual at the top of the cycle. Where you have half a point is that a fast growing economy necessarily means fast growing consumption, abetted by low interest rate driven household debt. The GST almost certainly has raised more revenue than the indirect taxes it replaced would have.
But unless you believe that John Howard knew all this was going to happen back in 1999 your argument that the GST was a big trick to rip more money out of people’s wallets just doesn’t hold. As everyone says these days, the states have got an unexpected windfall from the GST revenue, the key word being unexpected.
Back to congestion taxes iIf they work as intended by changing people’s driving times, they won’t raise much revenue anyway.
one the EW/UM debate, also look into the compostion of revenue – you will note that company tax revenue has been the main driver of revenue increases, because companies are making much higher profits, because the economy is booming. conversely, if there is at any stage a downturn, these will be the first to dip, and dip sharply.
Apollo, sorry I diodn’t get bak to you earlier. Have a read of this new book, it says a bit about performance motivation: Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management
wilful Says: July 6th, 2006 at 3:19 pm
” Oh cry me a river. That’s right, it’s all a feminist plot. ”
We had 3 months of feminist apoplexy and media handwringing over GST on Tampons.
So I think that Gender Bias in Taxation was a valid topic?
i love the song cry me a river.
Suck lol olo
Righto Econowit, which 30% of public servants would you sack?
Too late on the Sydney roads – its already happening 🙂
You obviously do not live in Waverley- where every where a councillor lives a street was sure to close. I can point you to a lot of road closures with a residing councillor in Waverley. If you can stop their snouts blocking those streets I’d be happy.
“Which 30%?�
That’s a dammed if I do, damned if I don’t type question.
“Righto” you asked/for it.
As 50% aren’t working the choice shouldn’t be too difficult. I’d start with the highest paid ones, as they are responsible for the crippling bureaucratic nightmare this country is in, then I’d work my way down.
We had 3 months of feminist apoplexy and media handwringing over GST on Tampons.
So I think that Gender Bias in Taxation was a valid topic?
Pointing out that tampons are an essential being taxed as a “luxury” is hardly “apoplexy” or “handwringing”, unless you have an agenda.
And as for car driving being mainly a male occupation – you’re weird, dude, to borrow another blogger’s language. Here in Melbourne both genders drive, but I do hear Sydneysiders are pretty strange. Here’s a suggestion: More male drivers in the CBD because women are less likely to be employed in management positions entailing a company car and/or subsidised parking. May be right, may be wrong, but I think it’s more rational.
pre-dawn leftist,
Who lives in a dream world you or me?
http://www.smh.com.au/news/national/displaced-public-servants-survive-iemma-government-purge/2006/07/13/1152637808209.html
As I said above “get their snouts out of the trough!”