Is traffic a daily problem for you? Bad news: If you live in a major metropolitan area, chances are that traffic congestion is only going to get worse. The nation’s roads and highway systems are being crushed as Americans flock to urban areas for economic and social opportunities. In the San Francisco Bay Area alone, traffic on some highways has increased over 25% in the past 5 years. With a cost to Americans of $124 billion a year, plus the unquantifiable impact on quality of life, cities must take action to abate worsening traffic congestion. For some ideas on how to do that, they should look to London.
London is a global financial center with a burgeoning population of over 8 million. As London’s economy and population ballooned in the 1990s, so did traffic, earning the city its reputation as one of the most congested cities in Europe. Government officials took notice and hatched a plan to reduce traffic in the city center, boost ridership of the London Tube and buses, invest in public transportation, and improve quality of life. Their solution? A congestion tax.
Officials in London created a “congestion zone,” which motorists are charged for entering. First implemented in 2003, this tax was introduced at £5 per day and has since risen to £11.50. Resulting tax revenues, amounting to over £200 million in 2008, have primarily been invested in public transportation improvements. The number of public buses has increased, bus routes have been modified to take advantage of reduced traffic congestion, and roads and bike lanes have been improved.
13 years after its implementation, the congestion tax has been hailed as a success. The number of cars entering the city center has plummeted by 34%, traffic speeds improved between 20 and 30%, and bus ridership increased by more than a third.
The benefits of the tax are not limited to improvements in transit times and increased use of public transit; it has also been a powerful tool for reducing the environmental impact of transportation. The tax has reduced CO2 emissions by a total of 100,000 tons annually, cut fuel consumption by 40 to 50 million liters annually, and led to greater than 15% reductions in atmospheric levels of major air pollutants NOx and PM10 levels.
London’s success has inspired other cities to consider congestion taxes. Singapore and Stockholm introduced congestion taxes several years ago, and Beijing and Mexico City are in the planning phases. Efforts to implement congestion taxes in New York City have typically failed due to partisan gridlock, but have gained momentum in recent months.
London’s congestion tax is a powerful example of the positive urban development that occurs when revenue derived from the value of land is invested in public infrastructure. Traffic congestion is largely a consequence of economic growth, which is made possible by a city’s populace and infrastructure. Motorists enter London for economic opportunity. The congestion tax functions as a mechanism by which the city can capture a portion of the wealth earned by non-residents and create the incentives to effectively align self-interest with the public-interest.
A number of economic scholars have compared London’s taxation system with the theories of Henry George. Henry George, an American economist and political theorist of the 19th century, postulated that land is social capital, and profits drawn from land should be shared by all citizens via the use of land value taxation (LVTs). In the case of London, government officials are taxing the use of land by motorists and distributing that revenue to public works projects designed to increase the quality of life for the city’s residents.
As metropolitan areas across the world see traffic congestion worsen rapidly with intense development, a congestion tax is a proven solution worth considering. Not only will traffic decrease, but cities will be able to re-capture wealth generated by its land and use it to improve the city for all.