Don’t tax, toll: Presentation to the Canadian Home Builders’ Association

Lawrence Solomon

February 24, 2003

Roused by his Next City article, “Don’t tax, toll,” published by the National Post on May 16, 2002, the Canadian Home Builders’ Association (CHBA) invited Lawrence Solomon to be the luncheon speaker at its annual convention, held in London, Ontario, on Friday, Feb. 21. The speech appears below.

Today, I have good news to announce. I’ve come to announce an end to traffic jams, an end to gridlock. The traffic jam, those who navigate congested roads will be pleased to learn, will soon be a thing of the past. Gone. Outlawed. All roads will be free-flowing, all the time.

One such example involves the Riverside Freeway outside Los Angeles, one of the most congested freeways in the world. Inside the freeway – in the median of the Riverside Freeway – a private company built an electronic toll way – it’s called the Express Lanes. To travel the 10 miles of the toll way costs just 25¢ in the middle of the night, when traffic is light, and more when traffic gets heavier – $2.50 during the height of rush hour.

The freeway remains free, and it remains heavily congested. The toll way is not free but it’s free flowing.

The Express Lanes was the world’s first fully automated toll road and the first example of congestion pricing. It guarantees that you can drive at the legal speed limit of 65 mph or you get your money back. It can do this because, as soon as traffic builds up, it raises the cost of getting onto the road, to discourage people from getting on. When traffic volume drops, it lowers the cost of driving, to encourage more people to get on.

It’s free flowing, and it has an incentive to keep it that way. When it’s not free flowing, the road operator doesn’t get paid. If the 401, near here, gets closed, the Ontario government doesn’t suffer – only those who use the road do. But with the Express Lanes, if traffic doesn’t move, the operators receive no revenue.

So the operator of the Express Lanes maintains its own fleet of tow trucks to pounce on any vehicle that may have a flat tire. Run out of gas? They’ll give you a free gallon to get you moving, and stop rubber neckers from slowing down to have a look. Because this highway is so superb at keeping obstructions off the road, it has an unbeatable accident record.

But this highway outside L.A. isn’t the good news I’ve come to announce. My optimism over the end of gridlock stems from London, England, where a historic event occurred just this week.

On Monday, February 17, central London – the most congested area in one of the most congested cities in the world – became uncongested.

Before Monday, traffic crawled at an average of 3-4 mphs during rush hour. On any journey, drivers could expect to be stationery 40% of the time. That was before Monday. On Monday, the roads were free of congestion. And on Tuesday. And on Wednesday and Thursday and today, Friday.

What did London do? Something very basic. On Monday, London began charging £5 – about $12.50 – for the privilege of entering central London by car between 7 a.m. and 6:30 p.m. on any weekday.

Because of that charge, about 10% to 15% of drivers decided to change their habits. They took public transit or a taxi or shared a ride or walked or decided to do their shopping on the weekend, or brought a bicycle or scooter, or worked from home that day, or arrived earlier, before 7 a.m., or left later, after 6:30 p.m., or did any number of other things to avoid that £5 charge.

Not everyone, just 10% to 15% of the drivers. But it only takes 10% to 15% of drivers to leave the road to turn miserable driving conditions around. To end gridlock.

Some of those drivers will come back in coming weeks, after they get used to the “sticker shock” of paying good money for a commodity that they used to consider a free good. But many people won’t come back, by car. We know this because the car insurance industry reports that, in the months leading up to the introduction of the £5 “congestion charge,” as it’s called, people started cancelling their car insurance policies in record numbers.

The insurance industry had never seen that before. Two-car families became one-car families. One-car families became no-car families. Family members did the New Math and decided that the extra £5 a day tipped the balance against the car – for many families, the car’s costs now outweighed its benefits.

Other families decided to keep their cars but not to use them for commuting trips. We know that because they converted their regular automobile insurance policies – which in the U.K. are called “social and commuting” policies – into low-mileage “social use only” policies. That saved them another £90 or £100 a year in insurance costs.

By charging £5 a day to use its high-value central London roads, the city of London solved one of the most vexing problems facing cities since the days of Imperial Rome – traffic congestion.

But London accomplished much, much more, too. London’s traffic congestion costs the U.K. economy some £4 billion a year. Now those economic costs will be reduced.

Trucks and drivers and their merchandise won’t be sitting in traffic as much, instead they’ll be making extra deliveries, lowering the cost of transportation and allowing businesses to keep less inventory.

Yes, delivery businesses will be paying £5 a day for the privilege of entering central London, but, typically, they’ll make that £5 back in the first 15 minutes that the truck and driver don’t waste in traffic.

This is a win for business, a win for the economy, a win for commuters, a win for quality of life and the environment. And it’s a win for taxpayers and the government’s coffers, because all the money that the government is raising from the £5 congestion fees will be going to city infrastructure and public transit improvements.

Some of you may be wondering, what does the public in London think of all this? How can an elected city government dare to charge its residents to use city streets.

Let me tell you how it happened.

London’s mayor – his name is Ken Livingstone, and he’s famous in the U.K. for being a flaming socialist – ran for office on the pledge that, if elected, he would charge Londoners to drive on city streets. He was upfront, brutally upfront.

He told them that there was no alternative to charging because London’s roads were getting more and more clogged, to the point that the economy couldn’t bear it, let alone the frayed nerves of those stuck in traffic. He told them traffic would only get worse without congestion charges, because more and more people were moving into London – after decades of decline, people have begun to flock to London, as they are to other big cities in the world.

He told them that if people value big city amenities, and if they want to use city streets – which are, after all, one of the city’s most important assets – they’d have to bloody well pay for them.

What did Londoners do when they heard this for the first time? They burst out into applause. Paying a fair price for a valued resource struck his audiences as fair. They elected him handily.

The congestion charges stayed popular after he was elected. They stayed popular as the launch date neared, despite scare stories in the press about the certainty that the plan was sure to fail.

And the congestion charges stayed popular after Monday, after they’d been introduced and people had a taste of what they meant.

In fact, Livingstone has announced that he plans to extend the zones subject to charges to other congested parts of London, such as Heathrow airport. But he says he won’t do that until after the next municipal election in one year’s time.

He wants to run for re-election on the promise of charging more people more often for the use of congested roads. This politician knows a winning issue when he sees one.

Lest you think Londoners are peculiar, let me assure you that the road charges play to the self-interest of the majority. Residents within the congestion zones receive a 90% rebate on their fees, for example, and most property owners know their properties will be worth more if their streets are less congested.

This move to tolling roads is not at all limited to London. Some 35 cities – Edinburgh, Glasgow, Leeds, Durham – 35 cities – in the U.K. have similar schemes in the works. In fact, the entire country will be moving to a satellite-based system in the next 10 years or so, under which every vehicle in the country could be charged varying amounts – just like in L.A. – for every mile travelled along congested routes.

This satellite system will be much more intelligent than the London scheme, which is really quite crude – one charge for one large congestion zone – and it’s a good thing, too. London’s mayor realizes his scheme leaves much to be desired and that it can’t do the job for long, not with London’s population growing the way it is. For that reason, London, too, is working toward a satellite system.

Satellite tolling, and other forms of electronic tolling, are coming into play throughout the EU countries – New York Mayor Michael Bloomberg, is an advocate. Quebec, Ontario, and B.C. are all moving toward it. It’s only a matter of time before the Revolution on the Road that we’re seeing across the pond comes to Canada, and to Canada’s cities. When it does, cities will be healthier, because they’ll function with less pollution and with more efficiency.

And because user fees from roads will be able to displace property taxes. More road fees, less property tax. What will that mean?

Economists have a saying, “If you want less of something, put a tax on it. If you want more of something, don’t tax the living daylights out of it.”

Everyone in this room understands much better than I do the destructive effects of development charges and the numerous other arbitrary and egregious taxes on homebuilding. Next to tobacco and alcohol, homes may be the most heavily taxed product in Canada – it’s as if the government considers a roof over your head to be sinful, and does its best to discourage us from having decent shelter.

I applaud your efforts to remove these punitive, hidden taxes, which have no economic and no moral justification. They are tax grabs, pure and simple, and they are able to continue only because they are hidden, or packaged in bafflegab by politicians. If the public ever comes to appreciate the harm done to society through taxation of this kind, the taxes will come to an abrupt end.

But I ask you to work to reduce or remove one other tax as well. The property tax. The property tax is a tax on property, a tax on our homes that is all but unrelated to the services that our homes require. If you want less property, less home, put a tax on property. If you want more property, more home, take that tax off, or at least reduce it.

The property tax has almost no defenders – you will be hard pressed to find an economist on the left or the right who defends it. The property tax is just there, as an accident of history. Because it is the dominant method for financing local government – whether big city or suburb or small town – the property tax is the single biggest destroyer of property, coast to coast. It tells people to buy a more modest new home than they otherwise would, and it tells them not to improve their existing homes, because if they do, they’ll have higher housing costs to carry. It tells us to live without that extra bathroom, without those nicer finishes, without those other upgrades. It robs us of the extra pleasure we could have in our own abodes, the place we raise our families, entertain our friends, and spend so much of our lives.

The property tax robs us of quality of life, and it should be scrapped. The revolution in road tolls, and other user fees that are also more economic and environmental, provides a great opportunity to rethink our system of taxation.

Do we want to lay heavy taxes on something as basic, as benign, as beneficial, and as necessary as housing or do we want to recover the costs of delivering services from charges that relate to the services delivered?

In the coming years, this will become a major debate for society. The immense revenues that local governments will be raking in from toll roads, will make this debate unavoidable. I hope everyone here can get ahead of that coming debate, and help shape it, for the benefit of our environment and for the benefit of the economy.

The property tax system creates losers all around. Tolls create winners all around. The people of London and the U.K. get it, and I’m confident that once we’ve had the debate, the people of Canada will get it, too. Lawrence Solomon is the Executive Director of the Urban Renaissance Institute, a division of Energy Probe Research Foundation . Lawrence Solomon is also a director of PEMA, a non-profit with a patent pending on satellite tolling technology.

Related articles:
Toll roads v. the Canadian Accident Association
London’s green streets
Toll skeptics be damned: London’s rolling
The toll on business
The take from tolls
London unjammed
Don’t tax, toll
Toll today’s roads, don’t build more
How the free road lobby led us astray
Toll road commentary
Road safety
How to cut highways’ human toll

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