Why Tolls Help Drivers

The ongoing dysfunction of New York governance was on full display this June when Gov. Kathy Hochul announced an indefinite “pause” to a Manhattan toll plan. The “congestion pricing” toll would have charged drivers $15 for trips in Midtown and Lower Manhattan. Hochul claims she reversed course due to cost-of-living concerns, a frequent critique. New Jersey Rep. Josh Gottheimer echoed her in calling the pause “a huge win for hardworking families.” But tolls ultimately help drivers by reducing the time they waste in traffic, and move cities from a tax-based into a fee-based revenue paradigm. Ultimately, this is a conversation about opportunity cost.

But first, let’s note the fiscal irresponsibility of her decision. The congestion charge was projected to generate $15 billion for the city’s increasingly unreliable transit system. Upon killing the plan, the Governor proposed a payroll tax increase instead, which even congestion pricing opponents slammed as raising costs and harming businesses. What’s more, MTA had already spent $555 million installing tolling infrastructure. If this plan stalls for good, all New York taxpayers— including those who never use the subway—will foot that.

It’s true that congestion pricing has long been unpopular, as have tolls generally. A recent poll found 63% of New Yorkers opposed the charge. New Jersey, where residents commute to New York, is suing over it. A similar proposal in San Francisco has been indefinitely paused.

Opponents point to drivers who can’t switch to mass transit, such as trade workers or deliverymen, or those who’s trip is simply more practical by driving. They argue that it harms low- and middle-income drivers (in the case of New York City, though, workers in the congestion zone who drive have a 30% higher than average median income.)

But in other places that implemented congestion pricing, opposition dropped after it started. Congestion pricing in Stockholm started with a pilot program, with support from just 43% of residents, but came to enjoy support of around 70%. Part of the reason is because tolling reduces the number of cars on the road at one time—or more specifically, spreads them across different hours—making driving easier.

Roads in most of America today are akin to Soviet breadlines. Give a scarce good away for free at point of use, and it will quickly get used by so many people that it becomes slow and inefficient. This is why it’s more expensive to go to a movie or theme park at peak times, and why electricity prices spike when demand does. It’s particularly true of road space in dense urban areas like New York, which is hard to expand.

Driving for “free” has its own costs. The more time someone is stuck in traffic, the more gas they lose – as much as three quarters of a gallon, according to AAA. Wear and tear increases with stop-and-go traffic. But mainly, it comes with the opportunity cost of having to sit in traffic, which especially burdens places like New York City that have high incomes. Carter Rubin, state transportation policy director at National Resources Defense Council, tweeted cogently about this using a group that’s not particularly high-earning yet still affected by delays.

In 2019, the traffic analytics firm Inrix found that New York City’s congestion cost the typical driver $1,988 per year, finding similar figures for other large cities. A Chamber of Commerce study that factored, more than the Inrix one, lost wages pegged this figure at $5,748 on average, and well over $10,000 a year for big city residents.

While congestion pricing is often considered “regressive” in that it imposes costs that are harder for lower-income drivers to bear, congestion itself could be seen as regressive, taking financial opportunities from those who need money most. In some ways, congestion is a “damned-if-you-do-and-damned-if-you-don’t” issue, although populist politicians only present one side of it. They bemoan the cash payout of toll usage, but not the opportunity cost of foregoing tolls. 

In states further south, tolls seem to be more popular, possibly because there’s more room to build both “free” and for-pay road space that competes with each other. It’s become common in Northern Virginia, Texas, Florida, and California. In Northern Virginia, such roads encourage informal carpooling, called “slugging,” where drivers park at outlying lots and share rides, splitting the toll. 

The best form of congestion pricing is when tolls vary dynamically based on traffic congestion. When traffic is low, driving could be free, but when it’s high, prices could spike significantly. (One toll lane program in Northern Virginia has charged nearly $50 for some trips). This allows drivers to shift their trips off-peak. Deliveries could be scheduled outside peak times, limiting cost increases to businesses and consumers. 

By delaying or potentially killing congestion pricing, Gov. Hochul made a choice that may be politically popular, but will make travel harder for drivers and transit users alike. Congestion, long a problem around New York City, is not going away if leaders there are too scared to do anything. It’s another example of how divorcing transportation from user fees leads to a worse experience for everyone. 

Cover image use authorized under the Creative Commons Attribution 2.0 Generic License.

This article featured additional research from Market Urbanist content staffer Ethan Finlan.