When people are permitted to use a scarce and valuable resource for free, they use it wastefully. Access to congested roadways is a case in point. When motorists can enter such roadways free of charge, the delays caused to others are typically much greater than their own benefit from using the road. The simplest way to eliminate this kind of waste is to charge for the valuable resource.
After a daily fee of $14 was imposed on cars entering central London in February 2003, downtown traffic fell by a third and travel times on some bus lines fell by half. Londoners also saw carbon dioxide emissions fall by 20 percent, and there were substantial declines as well in emissions of particulates and nitrogen oxides, the main components of smog. The combined dollar value of those benefits was far more than enough to offset the total hardships associated with the congestion fee.
Yet a congestion fee inevitably causes some hardship for people with low incomes. And it’s an iron law of politics that the losers from any policy change scream louder than the winners sing. Social critics are right to complain that the poor often get short shrift in electoral systems dominated by big money. But that doesn’t mean the poor get ignored completely.
For example, when New York City Mayor Michael Bloomberg proposed last year to levy a congestion fee on motorists who enter Manhattan on weekdays, many legislators went ballistic. City councilman Lewis Fidler called the plan “outrageous, because they’re saying rich people can come into Manhattan and poor people may not, and that is just wrong, wrong, wrong.”
When such concerns are not satisfactorily addressed, they invariably prevent us from reaping the gains made possible by greater reliance on market mechanisms. The Manhattan congestion fee, which would have created substantial benefits for rich and poor alike, was never adopted. It’s a pity, because the objections to the mayor’s proposal could have been overcome very easily.The classic case study was the New York State Public Service Commission’s attempt to impose fees for directory assistance calls in the mid-1970s. At the time, any telephone subscriber could place an unlimited number of directory assistance calls free of charge. That policy was wasteful because it encouraged consumers to use directory assistance services that were costly to provide, even for numbers they could easily look up on their own. The commission proposed a ten-cent charge for each directory assistance call. By encouraging consumers to use directory assistance only when necessary, the proposal promised to free up operators and equipment for more valuable tasks.
As with the mayor’s proposed congestion fee, the commission’s proposal was greeted by a firestorm of protest. Social scientists appeared before the commission to testify, preposterously, that charging for directory assistance would disrupt vital networks of communication in the community.
With its defeat seeming all but certain, Commission officials then introduced a simple amendment that rescued it. In addition to charging ten cents for each directory assistance call, they proposed a thirty-cent credit on each consumer’s monthly phone bill, a reduction made possible by the additional revenue from the charge and the savings from reduced volumes of directory assistance calls. Political opposition vanished instantly, and today no one questions that the new policy makes perfect sense.
Essentially the same strategy could salvage the proposed congestion fee for Manhattan and other cities. Most people who commute regularly by car into Manhattan are not poor, and most low-income workers in Manhattan already use public transportation for their daily commute. The problem cases are low-income workers who must occasionally drive into the city on weekdays. For such people, congestion fees would indeed constitute a new burden.
But this burden could easily be eliminated by giving every low-income worker in Manhattan an annual allotment of transferable congestion vouchers. On the rare occasions when these workers needed to drive into the city, they could do so free of charge. And they could earn some extra money by selling any vouchers they didn’t need on Craigslist.
Economic efficiency is a good thing for everyone, not just the rich. Any policy change that makes the economic pie bigger necessarily makes it possible for everyone to have a larger slice than before. But often the same policies that make the pie bigger impose difficult hardships on the poor. And in those cases the efficiency gains are likely to go unrealized unless we take specific steps to make everyone whole.
The good news is that such steps are often simple to implement. We don’t need to impose unacceptable burdens on low-income workers to reap the benefits of cleaner air and reduced traffic congestion.
43 comments
Great analysis. To say something similar with more economic buzzwords, we should strive to make fee introductions revenue-neutral so that they can improve efficiency without incurring the wrath that comes with higher taxes.
The telephone fee specifically reminds me of the standard way to make breaking up a monopoly a Pareto improvement (http://en.wikipedia.org/wiki/Pareto_efficiency): you take some of the efficiency gains from breaking them up (or imposing the fee) and give them to the loser of the change.
Nicely put. I saw a related proposal some time ago made by Nicolás Stier, a professor at Columbia, which, instead of vouchers, discussed the possibility of low-income drivers being reimbursed after filing a tax return: http://www4.gsb.columbia.edu/ideasatwork/feature/70161/Can+congestion+pricing+be+fair+and+efficient%3F. The goal is the same, though.
Pedro, true, but the voucher system is better because it doesn't require low-income people to have the money up front. If you live month to month, getting money back up to a year later may not be very helpful in making rent or getting groceries in the short term.
Yes, I agree.
This is an interesting post. Conceptually it seems very win-win, and the pathbreaking by London really shows the benefits that all New Yorkers could share. The next debate over who recieves how many vouchers could be an issue on its own. Nonetheless I'd support a program like this in my city. I would be interested to see the Craiglist value of the vouchers as well.
On another topic, I very nearly didn't read this post because of the title. That's a lot of big words for non-economist readers.
And then, five years later, we can start reducing the vouchers given for free to the poor, calling them "handouts" and "welfare" and "unearned." Using this strategy, we can reduce them to nothing!
And then we get the fees from everybody, because as every Republican knows, it isn't fair to the rich to have their tax dollars support the poor. Right?
(I am being sarcastic, of course. These market-based systems always seem to end up getting rigged against the powerless in one way or another).
If I understand correctly, the argument is an appeal to Kaldor-Hicks efficiency.
It's an interesting analysis, and you make a number of good points. But I think it falls short when the motivation switches - perhaps inevitably - from greater good to profit.
Directory assistance is a good example. I wasn't around when the fee was initially levied, but your explanation makes sense. But now, cell phone companies in particular charge exhorbitant rates for *automated* services. You don't even have to talk to a live person; you pay $1.25 to go through an automated process.
Likewise with traffic. I think of a particular bridge in upstate NY that crosses the Hudson in Westchester. The intial agreement was that it would be a toll bridge until a fixed cost was paid for, after which it would be free of charge. But that ~$2 a head was too tempting, and the fee was never removed. *shrug* The government made money off of it. Why change?
Heck, the same argument might be made for speed traps... but I digress.
Tariffs for the social good aren't all bad, though they can be construed as such. I'm much more leery of tariffs raised for the purpose of profit.
Nice article.
What I don't know is whether anybody has worked out some ethical principles that would guide which goods/services should be paid for in this way.
Should market prices or rents be imposed on any scarce good, should there be a public auction, should there be a rationing principle based on some criterion (e.g., equity or equality)?
Fees for entrance to/camping in national parks is an example that's analogous to the London auto traffic case.
But what about fees for basic access to water, medical care, or breathable air?
They did have a plan that is better than vouchers: more public transportation. With the money this brings in, they could cut MTA and other prices. They can't cut NJ Transit prices, but they can cut the fees for using Penn Station (I think), which would cut costs for NJ Transit.
It's really a shame that they didn't pass it because Manhattan is congested as hell: everyone from out of state insists on taking a car. I prefer the train, but everyone says it's too expensive.
Well friends, taking a car is even more expensive in wasted gas, pollution, global warming, and time wasted.
There's also a related proposal to base toll fees on the traffic volume. During rush hour, you could be paying 3 or more times as much as the base toll. Not a bad idea, especially around here where we need money and there is a public transit option. Also, conservatives and libertarians do seem to be in support of such a concept.
Yes, it's a good idea in general. Where it might be particularly useful is in pollution taxes, carbon especially but also others. Slamming a $4/gallon tax on gasoline (or even raising up to it over some years) (and equivalent tax on other fossil carbon sources) would cause lots of hardship.
But what if the revenue from that was redistributed to everyone? "Carbon tax credit" on the tax form might be one way, another would be guessing at the revenue and sending out checks ahead of time. Revenue neutral for the average person, but it's magnify the individual gains from efficiency. "Polluter pays" is a basic economic principle, but who does the polluter pay? In this setup, everyone -- you basically pay rent to everyone else for your abuse of the natural resource of clean air.
Wouldn't the cost of gas and owning a car already do this? yet it doesn't seem to play out the same. Is it too indirect?
"but the voucher system is better because it doesn't require low-income people to have the money up front"
But I think you *have* to make people pay up front for the idea to work. Otherwise you're making it 'free' for X uses, encouraging people to use their X free uses as often as possible.
Even the very first use needs to have a direct marginal cost associated with it. Otherwise you won't get nearly the improvement. In fact, you may even make the problem worse, because people who previously wouldn't use any, may feel tempted to use the 'X' free ones that they've now been given.
The way to enact such a situation in Manhattan is difficult. The concept that first comes to mine would be to reduce city income taxes by the congestion-pricing-cost times 2 or 3ish. Also taking the form of a credit for lower-income people.
This is still problematic as not everyone who works in NY pays NYC income taxes, unless they also live there. Now, those people do file non-resident NY state returns, so you could extend it to the non-resident returns too.
That *might* be enough to overcome objections, but you do have a fair deal of people who travel to NYC frequently (for pleasure or business), who don't officially 'work' there at all, and as such do not file a NYS return of any kind.
Its a great idea, but its hard to find a truly satisfying way to implement it in this case, unlike the directory assistance situation.
@Imp: Wouldn't the cost of gas and owning a car already do this? yet it doesn't seem to play out the same. Is it too indirect?
Part of the problem with mass transit is that using mass transit can have a higher marginal cost than simply driving a car.
Owning a car has a lot of fixed costs, that are independent of usage. First, there's the cost of buying the car. There also ongoing costs of insurance and maintainence. However, if you've decided that it's worthwhile for you to own a car and bought one, these become sunk costs and don't enter the decision to drive or take public transit.
The obvious marginal costs are the cost of gas (and possibly tolls and parking). (The need for more frequent maintainence is rather indirect and probably ignored by almost everyone.) Given that I already own a car, it's usually marginally cheaper for me to drive than to use public transit.
The other difficulty is how the costs scale when there's a group of people. Most trips on my local subway are $2. Driving there is likely to cost $1 in gas and let's add $5 to park. If there's four of us going, the subway is now $8, but driving is still only $6.
several questions:
1. What is the problem being solved? If you are simply trying to take cars off the road to facilitate faster transit by car, this proposal will work for intra-city travel. However, this will have the necessary effect of keeping a certain amount of people out of Manhattan. The increased traffic flow for the other boroughs brings the possibility of improved commerce, but this should be managed and maintained. the danger lies in building up even greater barriers between the boroughs than those provided by the rivers.
conversely, if the goal is a greener, more pedestrian friendly, more interconnected city, this must be but one part of a larger vision for the city that will reduce the number of lanes of traffic, lower prices for public transit, and improve amenities for alternate modes of travel.
2. Where and how will tolls be collected? Placing the booths at the bridges and tunnels will inevitably create a massive daily delay in crossing, whether it be placed at the beginning or end. However, where else would such a receptacle be placed? The obvious choice is to rely on some form of smart tag, perhaps coordinated with the NJ program. Regardless, traffic diverted from the city streets will pile up at the checkpoints, creating massive delays and loss of productivity for those trapped in line. This merely shifts the problem outside the city.
3. Is this proposal advocated only for NYC? I should hope so. Few other central business districts are as compact and densely populated as Manhattan. Where this proposal used in Dallas, TX or Atlanta, GA or Montgomery, AL, the result would be catastrophic for the CBD and the city as a whole.
Something they do in other European cities is allow cars ending in even numbers on some days, odd numbers on the other.
It helps also.
I really don't buy the argument that congestion pricing would burden the poor. I live in NYC and the only people I know who own cars are the owners/landlords of $1 million + brownstones on my block.
If I may, I'd like to do some simple math by comparing the price of car ownership to a year's worth of 30 day passes. Transit passes for a year would cost under $1000 ($81 per card). If you're over 65 or disabled, you can ride the MTA for half that price.
I don't think car ownership could be cheaper than $1000/year. In NYC, car insurance premiums alone are probably twice the annual transit fare. Insurance rates vary of course, but I imagine it would be hard to find insurance for less than $2000/year. On top of the insurance cost, the true cost of a car must include car payments, maintenance, gas, license, occasional parking tickets (if you live in NYC, it's going to happen) and permit. That definitely adds up to a lot more than a grand.
There is the argument that public transportation under serves poor communities. Anticipating this problem, Mayor Bloomberg offered the solution. Increase bus routes in under served communities with the revenue generated from congestion pricing.
A year after congestion pricing failed, New Yorkers are now facing major cutbacks in public transportation. Bus routes in under served communities are some of the first routes to be cut. Is this helping the working poor? Maybe, congestion pricing could have saved more bus routes.
Good to see policymakers are thinking of ways to mitigfate regressivity.
Now if thhey could do likewise when dealing with things like Social Secirity and cap-and-trade.
Without this proposed voucher, congestion pricing would still be a net benefit to the vast majority of the working poor. The easing of traffic from would lead to much faster buses and the revenue/savings from the plan could be spent on a better transit system, allowing more people to commute without the burden of car ownership.
Every policy has winners and losers. Your proposed voucher system wouldn't change that- some people would invariably be just above the cut-off point to qualify. I understand that your goal is to make such a plan more politically palatable, but we need to stop trying to appease every group and adopt policies that are just.
Every level of government in this country subsidizes car commuters in countless ways, from street parking to federal highway funds. Perhaps our cities would grow quite differently if drivers finally had to pay their share instead of externalizing so many of the costs.
As someone who lives in Los Angeles and rarely drives, I'm tired of paying out of my pocket for the privilege of choking on other people's exhaust.
*end(rant)*
James: some cities, including Singapore and London, have an electronic-only toll collection system. In Singapore, every car is equipped with a card reader that interacts with the tolls, and a card with some amount of money on it. Every time the car enters the congestion zone, the toll is automatically deducted from the card. If the car has no card reader or not enough money on the card, cameras near the road photograph the license plate and fine the car owner.
In London, I believe they use the same system, but if the car has no card reader, then the owner is billed just for the toll, rather than for a fine. Unlike Singapore, Britain has multiple cities, so there are plenty of domestic cars that have no reason to have a card reader.
The difference between such a system and the current system prevalent in the Northeastern US is simply that people without EZ-Pass would be billed later instead of waiting in line to pay cash.
There's no reason to have such a direct link. Just as phone companies gave a credit to every caller, give it to every car owner.
Reduce the cost of car tags in New York State by $15. You have to buy the tags before you can drive the car, so you're getting your money up front. You get that money whether you go to New York City or not, so the incentive to not go is the same. And hey, it helps the poor who own cars a lot.
Easy-peasy.
Couldn't you just do the same as a carbon trading scheme. Cap the number of journeys you want to have into the city give away half the permits to the poor then set up an exchange with the government selling the other half along with any of the poor who don't want theirs.
On the specific example. It would only work in the very few areas that could actually support mass transit. Also a simple google search shows all the problems/controversy over the London Congestion Tax. It has been repealed and greatly modified over the past several years.
Someone already hinted at it but this seems like a perfect analogy to the energy issue. Taxing energy to pay for clean energy and then the ensuing debate about how much of a rebate will be need to be fair.
This might be too simplistic but in the end it seems like the classic lines have already been drawn. The Rs naturally don't want more taxes and wish the problem would magically go away and the Ds on the other hand don't mind playing class warfare and continuing to buy voters so where do we draw the line on poor 20% 40% 50%???? Both parties are pathetic as usual.
I should have added for the D portion by having subsidies
"Economic efficiency is a good thing for everyone, not just the rich."
Ok, but this sort of toll is a fantastic thing for the very rich (a regressive tax AND it keeps the riffraff out! do laws get any better than that?) as well as those with enough clout to be exempted, and it is a bad thing for many individuals of the less-moneyed variety even if the money taken from them (or the inconvenience in lieu of money) might theoretically be returned to other some member of their class in some form over which they have little control.
In reality, the vouchers will slowly evaporate, the toll will gradually increase, and the burden will continually increase on those caught in the middle. And this form of restricting access to public thoroughfares will no doubt spread well beyond the inner city.
Quixote: in a city where everyone drives, tolls might keep the riff raff out. In New York, where most ghettos have subway lines feeding straight into Manhattan's richest neighborhoods, they can't. It's not even a regressive tax - New Yorkers of the less-moneyed variety won't ever pay the toll because they don't own cars. If you don't believe me, check what the car ownership rate in the South Bronx is, and then compare it to the car ownership rate in your favorite upper middle class suburb.
I'm kinda torn on this. I can see the argument that everyone wins in the end. And in the case of roads, which I use very little, I'm fine with it. But you could make the same argument for, say, libraries - I waste the librarians' time by checking out books I know there's only 20% chance I'll get to before they're due back, and if they were $2 a piece I wouldn't do that. But I like the library the way it is! There are some things that are nice to just have completely available, for the good and enjoyment of society. Maybe roads aren't one of them.
These are all a bunch of worth while comments, but the post and the comments overlook the real problem. It is not the burden on the poor that derailed the congestion pricing scheme in New York City. It was insider dealing by politicians who are not interesting in the public good. Most notably Sheldon Silver.
Rather then a driving voucher, low income individuals should be instead compensated with mass transit vouchers. Thus further reducing drives into Manhattan to truly necessary trips.
The "policy losers" in this scenario are low income individuals with difficult access to public transport. But I would suggest that this number is tiny (daily inter-boro automobile commuters are only about 13% of the the city population as it is) and these "losers" screams would help drive further mass transit development. There is no reason to induce automobile usage at all.
"Reduce the cost of car tags in New York State by $15. You have to buy the tags before you can drive the car, so you're getting your money up front."
Its an elegant idea, but I'm afraid the geography and local political borders don't allow it to make much sense.
For starters, the amount isn't nearly enough. In the phone example they were getting back 3 times the marginal cost monthly. In your example, you're giving back maybe 2 to 3 times the cost, but only, what, every 4 years (if you make it re-registration fees)?
Then you're left with the geography of NYS issue. Does a person in Buffalo get that back too, or just the NYC area? Political mine-field there.
What about residents of nearby areas of NYC & NJ who are effected many many times more than further areas of NY. How do they get it back? An agreement with NJ/Ct is possible I guess (where they do the same fee reduction in exchange for a cut of the revenue), but it'd be extremely politically tenuous.
Or, just work the city like a restaurant! A restaurant has a certain number of tables, and if they are full, you wait to get in. Meaning, somebody has to leave.
Now, in order to implement the voucher plan, you have to have a toll booth or some kind of roadblock to prevent people entering willy nilly.
But we can increase efficiency (even automate it) by forgetting the fees: Just count the cars entering and leaving the city. When the city is "full" we don't let cars enter until somebody leaves.
The city council or managers can determine the appropriate level, 100,000 cars or whatever it is, and set the system up so it can be modified as necessary; for special events or whatever where congestion is less important than attendance.
We can make exemptions for taxis and buses entering and leaving. Let them have a special window sticker or something. Set up the gates so cars can turn around and head away from the city. Some enterprise (city or private) can put up park-and-ride garages or lots, so people that really have to get in can park their car and then take the bus or a taxi.
And if taxpayers decide they don't want to pay for it, then throw the gates open.
The "gates" of course don't have to be real gates, they can be simple traffic lights, with automated ticketing by license plate and digital camera. Run the light and you get the regular $200 ticket.
An overhead informational sign can estimate the length of wait, so people can decide whether to turn around or not.
Then, I believe collecting on the traffic tickets would pay for the system. Ticketing (and eventual license suspension) is not a market based congestion fee, presumably we do still believe in equal punishment for breaking the law.
Also, I'd like to address the issue of covering every road into and out of a city: We don't really have to do that. Some back road ways in won't ruin the system because they don't have the bandwidth of cars that would cause congestion. A few leaks in either direction won't matter, and if they get crowded then we will gate them, too.
I just wanted to leave a fan note--
OMG-- Bob Frank is blogging at 538!!! His amazing intermediate microeconomics textbook is the reason I got a PhD in economics. I am so excited! I hope to see more great posts covering public finance and how classical economic and behavioral theory intersect when making policy.
I would love to see a post about how to get distasteful legislation (such as fixing Social Security) through congress.
As others have said, this is a truly good analysis of such possible programs. I await more posts and analyses by yourself!
Okay in theory. Drop by Chicago to see endless toll booths jammed with cars that have no alternate nearby route, or the west end of the IN toll road, with twenty minutes wait just to pay, longer in rush hours. OH was due to end tolls on the tpk but decided to expand the road to 3 lanes each direction, retaining and raising the tolls.
The thing about congestion pricing is that it is trying to solve a problem that doesn't really exist. If highways become overly congested people will naturally shift to transit as it will become a faster alternative. The reason this hasn't happened to the extent some policy makers want it to is because the "congested" roads ARE FASTER THAN TRANSIT.
I'm a big fan of mass transit myself, but in ll honestly its just a slower way to travel door to door for most trips. Sometimes there's a terrible traffic day, or bad weather and the road option is slower, but on average you'll kill 15 to 30 minutes more a day trying to take transit than driving.
So why all these congestion charge proposals? It's basically just another tax, one that can be marketed to city residents as something out of towers can pay and will increase their quality of life. It has less to do with transportation planning than raising revenue in the same way red light cameras have anything to do with safety.
When people stop driving and take transit to avoid the congestion charge they paying with the opportunity cost of their own time. The end result is a slower average commute time for the city and millions of dollars in the coffers of city hall.
The answer to the congestion "problem" is to have more of it, not less. Let road and transit reach a state of equilibrium where each mode can be on equal footing. If you want to favour transit over roads then simply fund transit projects more using a system of progressive income taxation. Don't tax those who simply have a high opportunity cost of commuting.
Basic economics: what gets penalized diminishes, what gets subsidized grows.
The freeer it is the more there is.
The big problem with congestion is timeliness and availability- we build roads that are only at their peak for 4 hours per day. Except in California where I've been stop and go at midnight on a freeway.
What will happen with the money? Who gets it?
Why not incentivize companies to stagger their start and end timees more?
Everybody gets on the road at the same time. THAT is a the problem.
"tax and rebate, not cap and trade" -- I like that.
Transit vouchers, feh. Want to encourage transit use? Make it *free*. "Zero fare mass transit." Yes, it requires more money up front. If you had a land value tax like Hong Kong, you could recover at least some of the money from increased property values near stations. (Hong Kong has transit companies that fund themselves by owning real estate near their lines.)
Congestion tax: sometimes people are driving because it's faster for their route, or because they're transporting something; sometimes they're driving just be separated from the masses in the subway. There's something to be said for charging for "elbow room" when it comes at the expense of everyone else.
But I'm more concerned about the pollution tax side of things.
You can't have completely efficient transit -- roads or rail or whatever -- with diurnal schedules. Humans not living in a 3-shift artificial environment means you need to deal with peak transit and power use, no escaping that fact.
The market failure rationale for government intervention in this case is negative externalities. People do not internalize the cost that their car is causing on all of the other cars. So if they drive such that their individual marginal cost is equal to their individual marginal benefit, the social marginal cost (individual costs + negative externalities) will be greater than the social marginal benefit (individual benefits). Everybody will be better off if SMC = SMB. How to get there is more tricky.
Road pricing is a racket. In all but the most transit friendly cities it is a way of pushing the poor off the road to benefit the rich. Like many economic models it works in a world where there is no inequality - far from the actual world we live in.
Think about this - road pricing 'works' by pushing people off the road. They either travel at a different time, take public transit or choose not to travel. Whatever the overall benefits, for these people personally that is arguably suboptimal (otherwise they would have chosen to make the change before road pricing). And who are the people who are taken off the road? Mainly low income drivers, since they are the ones who the roads start to 'effectively' cost the most. If you are in the bottom percentile of income it's likely road pricing will move you off the road entirely.
Now who benefits the most? Those who can easily pay the charge but who are currently stuck in traffic - rich drivers. So road pricing makes the roads care-free for the rich by pushing the poor off the roads.
Now you can try and patch this with a voucher scheme, or some other such nonsense, but it doesn't work. Firstly any benefit given to low income drivers still doesn't diminish the incentive for them not to drive. The voucher basically acts as a bribe to keep them happy. This just turns the scheme into a way for the rich to pay the poor not to drive, managed by the government. Middle income groups get screwed here still because they do not get a discount or voucher and have to pay the road charge.
The key analytic flaw is that road pricing attempts to put the same financial cost on a sparse resource for everyone. But money has different value for different income groups (basically money is more important if you are poor). It takes a resource that is allocated by simply 'who turns up' - something of a great equaliser, and moves it into the domain of being allocated by ability to pay. Talk of 'overall greater efficiency' is usually made by reference to average traffic speed, failing to take into account the cost of lost journeys.
There are some modifications to this argument for very transit heavy places where one could argue that the urban poor do not drive, but even there (e.g. NY) only a third or so of journeys are taken by public transit. The argument makes no sense in the vast majority of America & Europe where the poor drive. Public transit is another complex issue, no space for that here.
There's no reason the voucher or rebate can't be given to all drivers, poor middle-class and rich alike. That's what a revenue-neutral tax does: tax the activity, give the income back equitably, thus raising the incentive to avoid the activity without soaking the system. And if you want to stop congestion, you're going to have to discourage low and middle-income drivers; there aren't that many rich people. You should also be enabling moremass transit, whether public or simply encouraging/allowing more carpooling/taxis/buses.
It moves something (perhaps one of the few things) that is allocated outside the unequal distribution of income and makes it just like any other tradable good.
That means market pricing of roads inherently increases inequality. That's an important point to acknowledge.
You can indeed refund everyone, but as some of the comments show these refunds are on the whole not trusted; many assume that they lose out. Moreover it still fails to prevent the increase in inequality of road allocation, it merely makes it revenue neutral, but not income neutral.
The only way to get around this is through some sort of rationing (e.g only allowing odd or even cars on different days). These arguments killed roadpricing in the recent vote in Manchester, England. Apart from a very few large large cities Road Pricing is dead as a political possibility.
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