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Yes, road tolls could unfairly impact poor

But putting prices on goods and services forces people to consider priorities and make hard choices
July 12, 2016
By Edward Keenan

A tiny news flash recently published on page A8 of the Star carried the headline “Road tolls could hit low income drivers.” This bulletin from the Annals of the Obvious may have escaped most people’s attention. I myself might have missed it were I not so obsessive a reader of my colleagues’ work (cough, cough, hi boss!) and were it not pointed out by Twitter user @belgraves.

It carried news of a new federal government finance department study that determined that putting a user fee on roads could disproportionately affect low-income people, who “remain highly dependent on cars to get to work.” Maybe it’s worth discussing for a moment, because:

a) This is a point that comes up again and again in policy debates (and will yet again as we begin earnestly discussing revenue tools in Toronto this fall); and

b) Someone in our federal government felt the need to commission yet another study (a “secret” one, the report says!) to draw this conclusion.

Let us now agree, shall we, that we require no further such studies. The conclusion is self-evident. Tolls, congestion charges, user fees on roads: These things disproportionately hurt poor people. Because they are prices. And prices disproportionately hurt poor people - if by hurt, we mean “force them to consider their priorities and make difficult choices.”
That’s what prices do. That’s how prices work.

This phenomenon is not limited to road tolls. And it is not, in itself, an argument against implementing them.

The prices on transit, for example, disproportionately hurt poor people. The prices of cars and gasoline and insurance disproportionately hurt poor people. The prices of community recreation programs disproportionately hurt poor people. The prices of sales taxes and hydro rates and garbage collection fees disproportionately hurt poor people.

Prices hurt poor people more than rich people for the simple reason that poor people have less money with which to pay those prices than rich people do. This fundamental unfairness is a built-in feature of how our economy works. Food and housing and medication are essential to people’s ability to stay alive, and yet those things have prices on them.

And the reason we tolerate those prices, in full awareness of the unfairness they impose, is precisely because they force people to consider their priorities and make choices, often difficult choices. Because the job of prices in the economy is not to provide justice and make society more fair, it is to ration scarce resources.

Prices force people to make a meaningful choice about what (and how much) they want or need. Those choices are made more difficult the less money a person has and the higher prices are.

It is possible to imagine various government-imposed prices that would disproportionately or almost exclusively affect the rich - say, a high tax on private jets - but most of them yield little revenue because there are so few obscenely rich people available to pay them and because the things they buy and do that no one else does are by definition luxuries they can choose to do without if the price gets too high even for them.

Instead, we generally try to achieve fairness, or justice, not through eliminating prices, but through other means. We use things like income taxes, which are the most truly progressive tax, to raise a big chunk of revenue and then we use spending policies - like welfare or child benefit payments or targeted subsidies - to redistribute money to poorer people so they can better afford the prices of things.

We waive recreation fees in lowincome areas. We send tax rebate cheques to low-income people to refund the sales taxes they pay. We aim scholarships and grants at low-income students. We send bigger child benefit cheques to more impoverished people to deal with the high costs of family life.

In the case of road pricing, were we to impose it, perhaps a certain percentage of toll money collected should be paid out to lower income people as cash payments - cash that they can then use to either pay tolls to continue driving, or to pay the higher rent to live closer to where they work, or to take longer, cheaper trips on transit so they can spend the money on groceries or whatever else they choose. Perhaps some other way of dealing with this injustice is better.

But that’s a policy analysis more worthy of government study than the same old one about whether or not tolls will hurt low-income people. Because they obviously will. That’s not new or useful information.

The question, as we consider actually implementing some form of tolls, as it is with every other price people pay have to pay in society, is what to do about it.