Title
Optimal congestion taxes in a time allocation model Optimal congestion taxes in a time allocation model
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Oxford ,
Subject
Economics
Source (journal)
Transportation research: part B: methodological. - Oxford
Volume/pages
45(2011) :1 , p. 79-95
ISSN
0191-2615
ISI
000285035600005
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
The purpose of this paper is to study optimal congestion taxes in a time-allocation framework. This makes it possible to distinguish taxes on inputs in the production of car trips and taxes on transport as an activity. Moreover, the model allows us to consider the implications of treating transport as a demand, derived from other activities. We extend several well known tax rules from the public finance literature and carefully interpret the implications for the optimal tax treatment of passenger transport services. The main findings of the paper are the following. First, if governments are limited to taxing market inputs into transport trip production, the time-allocation framework: (i) provides an argument for taxing congestion below marginal external cost, (ii) implies a favourable tax treatment for time-saving devices such as GPS, and (iii) provides a previously unnoticed argument for public transport subsidies. Second, if the government has access to perfect road pricing that directly taxes transport as an activity, all previous results disappear. Third, in the absence of perfect road pricing, the activity-specific congestion attracted by employment centres, by shopping centres or by large sports and cultural events should be corrected via higher taxes on market inputs in these activities (e.g., entry tickets, parking fees, etc.).
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