Comment 99299

By arienc (registered) | Posted March 28, 2014 at 11:16:55 in reply to Comment 99269

It may not be true in the sense of one distinct set of people subsidizing another set of people. But clearly the use of roads in general is subsidized by other taxes that are not tied to roadway usage.

Hence road use as an activity is underpriced, while property ownership, for example, is overpriced.

This distorts each individual's decisions - where to live, what to buy, what rents to charge, whether or not to invest in improvements, etc. and has ripple effects throughout the economy.

There are other reasons why this misallocation may cause us to underperform economically. As others have pointed out this incentivizes greater usage of our road system than would be otherwise and therefore we incur more negative externalities resulting from it.

Also if, for example, road pricing was adjusted to account for a greater portion of its actual cost, shipping goods from remote locations would become more costly, offsetting some of the advantage of cheaper offshore labour. This would tilt the balance towards more competitive local products (meaning more employment and wealth locally) vs. those from far away.

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