Finance

Transportation financing mechanisms can both create and address inequities

Transportation access to opportunity is shaped by the way the transportation system is designed and delivered. Transportation finance or the way in which the system is paid for and maintained is a strong influence on the system itself. Currently, the basis of transportation finance in the U.S. is changing as more states and local regions are relying more heavily on non-federal sources of transportation finance. Previously, transportation infrastructure and maintenance were primarily financed through federal and state motor fuel taxes. More recently, local agencies are turning to options such as Local Options Sales Tax (LOST) to finance transit. Over the past four decades, California has increased reliance on LOST measures; California generates more than $4 billion annually from sales tax to finance transportation construction and maintenance.

The equity implications of increasing reliance on sales taxes as a transportation funding mechanism cannot be ignored. Cities levy transportation sales tax on almost all purchases. Individuals pay sales tax regardless of their use of the road or their ability to pay more for goods or services. LOST measures are regressive, requiring lower-income households to pay more on average. Further equity considerations lie in how the revenues, once collected, are redistributed across modes and other transportation needs. Previous UCLA research focused on other ways of collecting revenue that are tied to the use of roads, like road user charges or paying gasoline sales tax based on actual miles driven versus by the gallon of gasoline. Congestion pricing is another approach to financing the transportation system based on roadway use; although the main purpose is for congestion management rather than revenue collection.

Congestion pricing approaches must also ask whether they can be delivered equitably, given that not everyone has the same ability to pay the charge. On that subject, scholars have argued that congestion hurts the poor more than the rich especially as it relates to the pollution for communities living near freeways. Further, revenue generated by the congestion charge can be redistributed to overcome concerns around disparities in people’s ability to pay. As cities in California continue to seek new ways to finance transportation, solutions should focus on ensuring the approaches are both collected and distributed equitably.

Finance

Transportation financing mechanisms can both create and address inequities

Further Reading from UCLA Scholars