The congested logic behind congestion taxes

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Roslyn KuninOne definition of insanity is to keep doing the same thing and expecting different results. Another definition might be to do something different and not expect any changes.

We all have a tendency to do this. For example, we get married and wonder why we no longer have the same services we had in our parental home.

However, most of us learn fast and adjust to new realities.

Scientists are among those who have to be very aware of unintended consequences. A vaccine is developed to generate immunity from COVID-19 but might it also do something else?

Vigilance and testing are required to make sure a vaccine, or any medicine or treatment, doesn’t do more than what it was designed to do, especially if the consequences are bad.

Fortunately, effective watchdogs are in place to protect us from such problems.

Unfortunately, governments may not always look beyond the immediate implications of the policies they implement.

Take for example the congestion tax the City of Vancouver is considering on vehicles entering the downtown core. Details such as the exact area affected, the amount of the charge, and whether it will vary with times and days haven’t been revealed yet.

The desired results include reduced vehicle traffic in downtown Vancouver yielding less pollution and increased tax revenue for the city. No one mentions the trade-offs between these desirable goals. To the extent that there is less traffic and pollution, there will be less tax revenue for the city and vice versa.

There’s an implied assumption that all those who are no longer driving their cars into the downtown will still choose to come there to shop or work, using public transit instead of their vehicles. That assumption isn’t necessarily valid.

COVID-19-related fears aside, many people are averse to using public transit.  Getting a driver’s licence and having a car have been signs of financial and social independence for generations. Sure, some are beginning to move away from the car culture for environmental and other reasons. But even now the easiest and perhaps the only way to get certain places in downtown Vancouver during lockdown or to get a COVID-19 test is to drive in your vehicle.

 Many people in Vancouver will choose not to use the trains or buses, which they call ‘loser cruisers.’ Instead, they will shop and meet their other needs in Richmond, Burnaby or other areas where they can still easily use their car.

And then there are those who, because of infirmities or other limitations, find using public transit difficult. They will simply wipe downtown Vancouver off the map of places they frequent.

There has been no mention of the possible impact of a congestion tax on business in downtown Vancouver. This district has already been hard hit by the pandemic. The offices that filled the downtown towers have been emptied as people work from home. More and more companies are encouraging most or even all of their workers to continue working from home at least part of the time, permanently reducing the demand for downtown real estate.

Schools for international students also generate much of the demand for downtown office space. Providing services and housing for these thousands of students adds to this demand. Because of the pandemic, most international students aren’t coming to Vancouver, nor are the numbers expected to revert to pre-COVID levels now that the technical feasibility and lower costs of distance learning have been demonstrated.

Existing businesses and schools are likely to shrink or disappear from central Vancouver with or without the congestion tax. New and small businesses are unlikely to fill the resulting gaps. Fewer downtown workers and fewer people driving in means fewer customers. The costs of brick-and-mortar operations appear ever more daunting compared to operating online.

Then there’s the ongoing shortage of workers faced by business. Actual and potential businesses in the Vancouver area are already limited by a lack of workers. A major contributor to this shortage is the limited supply and high cost of housing; it’s virtually impossible for those earning average or lower wages to afford to live in Vancouver.

Workers in food services and other service occupations can’t work remotely. Since they can’t live close to their work, they must commute. Adding a congestion tax to the time and other demands of commuting will make it even more difficult for Vancouver businesses to get and keep staff. This will lead to closures.

I haven’t seen any analysis of the benefits a congestion tax could generate in reduced traffic, improved air quality or tax revenue. Nor have I seen any attempt to think about, let alone measure, the negative impacts of such a tax on individuals, businesses and the economy of Vancouver.

I hope these issues are being taken into account.

Troy Media columnist Roslyn Kunin is a consulting economist and speaker. 

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The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

By Roslyn Kunin

Dr. Roslyn Kunin is president of the Vancouver Institute and has been chair of the Vancouver Stock Exchange, WorkSafe BC, and Haida Enterprise Corporation. She has also been on the boards of the Business Development Bank of Canada (BDC) and the National Statistics Council.

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