UC Irvine Institute of Transportation Studies

Congestion pricing has many goals and benefits, but one thing is clear: its success depends on wise use of the revenues. The economic theory behind the concept relies on these revenues to help compensate for the payments required of highway users. Practical and ethical considerations similarly dictate that those who would otherwise be harmed by the fees receive tangible benefits from the revenues.

This paper investigates the possibilities for designing a package of congestion prices and revenue uses that can attract wide support. The suggested approach returns two-thirds of the revenues to travelers through travel allowances and tax reductions, and uses the rest to improve transportation throughout the area and provide targeted services to affected business centers. By replacing regressive sales and fuel taxes, this approach offsets the tendency of the prices alone to have a regressive distributional impact. By lowering taxes, funding new highways, improving transit, and providing business services, the package provides inducements for support from several key interest groups.