Journal of Planning Literature

Volume 24 Number 1
August 2009 22-36

Paying for Transportation © 2009 Sage Publications

10.1177/0885412209347156
http://jpl.sagepub.com
hosted at
What’s a Fair Price? http://online.sagepub.com

Brian D. Taylor
University of California, Los Angeles
Alexandra Tassiello Norton
Louisiana Recovery Authority

Nearly all transportation policy debates concern money, and nearly all transportation finance debates concern equity.
To some, this second assertion may seem puzzling, even counterintuitive. But the way public officials think of equity
in transportation finance is far different from that of most social scientists or transportation planners. Equity gets
defined differently by different interests at different times. This article examines transportation pricing and finance
equity from a variety of perspectives to clarify what can be a fuzzy and confusing issue. The authors distinguish trans-
portation finance and pricing equity from other forms of transportation equity and then discuss several competing
theories of equity long debated by social philosophers. These theories serve as a basis for understanding the complex
and often inconsistent notions of fairness that the public and elected officials have regarding the distribution of public
resources and particularly transportation investments. Given these competing theories of equity, the authors argue that
most conflicts over transportation pricing and finance are rooted in philosophical differences over justice and equity
and differing notions of the appropriate units of analysis—individuals, groups, or jurisdictions—for evaluating equity.
Accordingly, the authors offer an analytical framework to help planners and policy makers untangle these two issues.
This framework transcends the philosophical characterizations of equity to allow for a more practical consideration of
transportation finance and pricing fairness. They conclude with a discussion of the lessons offered by some recent
debates in transportation pricing and finance for decision makers searching for a fair price for transportation.

Keywords:  transportation; equity; pricing; finance

Overview then discuss several competing theories of equity long

Nearly all transportation policy debates concern
money, and nearly all transportation finance debates
concern equity. To some, this second assertion may
seem a puzzling, even counterintuitive. But the way
that public officials think of equity in transportation
finance is far different from the way that most social
scientists or transportation analysts would define the
term. Equity gets defined quite differently by differ-
ent interests at different times. To paraphrase former
Supreme Court Justice Potter Stewart on the question
of pornography, most of us cannot precisely define
equity or inequity in transportation finance, but we
think that we know it when we see it.
This article examines transportation pricing and
finance equity from a variety of perspectives to clarify
what can be a fuzzy and confusing issue. We begin by
distinguishing transportation finance and pricing
equity from other forms of transportation equity. We
debated by social philosophers. Given these competing
theories of equity, we argue that most conflicts over
transportation pricing and finance are rooted in both
philosophical differences over justice and equity and
differing notions of the appropriate units of analysis—
individuals, groups, or jurisdictions—for evaluating
equity. Accordingly, we offer an analytical framework
to help policy makers untangle these two issues and
conclude with a discussion of recent studies of the
transportation pricing and finance and the lessons they
offer for transportation decision makers searching for
a fair price for transportation.
Putting Transportation Pricing
and Finance Equity in Context
There are two principal ways one can think about
transportation equity; this article considers only one

22
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of them. Transportation is and transportation does;
that is, we can conceive of transportation as an end in
itself (is) and as a means to an end (does). With respect
to the latter, transportation analysts typically describe
the demand for transportation as a “derived demand.”
That is, with the exception of walks in the park or
cruising the boulevard on Saturday night, the demand
for transportation is derived from a desire to consume
non-transportation-related products and services and
engage in non-transportation-related activities. One
stands on a crowded subway each morning not for the
thrill of the ride but to get to work on time. And one
searches for a parking space at the grocery store not
for the pleasure of finding an open space but to stock
one’s house with food. As transportation is an impor-
tant, often critical, link to education, paid work, recre-
ation, health care, culture, and many other aspects
of quality living, planners, policy makers, and pub-
lic officials are rightly concerned that most members
of society have sufficient levels of mobility or, more
accurately, accessibility to quality living. So in addition
to public goods and market failure rationales, many
public officials justify public investments in transpor-
tation to provide basic transportation (i.e., access essen-
tial goods, services, employment, and housing) for
disadvantaged members of society, regardless of abil-
ity to pay.
In addition to ability to pay, access is affected by
age, sex, physical ability, cognitive ability, and cultural
background. Indeed, a large body of research exam-
ines how the young and the old, the disabled, and the
poor suffer from lower levels of mobility and accessi-
bility (see, e.g., Blumenberg and Waller 2003; Bullard
and Johnson 1997a; Deka 2004; Clifton and Lucas
2004; Garrett and Taylor 1999; Hodge 1995). The
focus of this review, however, is on transportation as
an end in itself and, in particular, on the public sector
role in transportation. We ask, who pays for transpor-
tation? How do they pay? Who benefits from trans-
portation? Where do they benefit?
Theorizing about Equity
Many transportation economists and policy analysts
characterize equity along two dimensions: horizontal
and vertical. Horizontal equity considers how members
of the same group (the elderly, bus riders, etc.) fare
relative to one another. Horizontal equity is achieved,
for example, when all members of the same income
class pay the same in taxes. Vertical equity, on the other
hand, considers how members of different groups
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Taylor, Norton / Paying for Transportation   23  
(poor vs. wealthy, drivers vs. nondrivers, etc.) fare rela-
tive to one another. Vertical equity is achieved, for
example, when taxes are levied on households propor-
tional to the ability to pay.
Horizontal and vertical equity are central concepts
in taxation and finance. Legal scholars and political
theorists have debated questions of equity and fairness
for millennia precisely because there are so many ways
of perceiving and defining fairness. Questions of equity
in public finance have their philosophical roots in
the much larger concept of distributive justice. Distribu­
tive justice concerns the pricing and allocation of
goods and services limited in supply. The principles
defining distributive justice vary according to unit of
distribution—be it to geographic areas, groups, and
individuals—and the logic of distribution—such as
the rationales of need, merit, and fortune. In addition,
the logics behind different conceptions of distributive
justice are defined by various philosophical theories
that, drawing on the work of Lamont (2003), we sum-
marize here into the following categories: strict
egalitarianism, the difference principle of justice,
resource-based principles of justice, desert-based the-
ory, and libertarianism. we discuss each of these in
turn below.
Strict egalitarianism principles conceive of justice
as in terms of equality of outcome, whereby each mem-
ber of society receives a magnitude of goods and ser-
vices that will result in similar states of abundance
and need. These notions (such as Karl Marx’s famous
aphorism, “From each according to his abilities, to each
according to his needs”) were a foundation of many
nineteenth-century socialist thinkers. The moral cri-
tique of this approach is that individual preferences
vary; people neither want nor need the same goods
and services. Moreover, this principle may undermine
motivations for personal achievement and present
a practical difficulty in coping with wealth accumu-
lation and uneven starting points. Undaunted, advo-
cates of strict egalitarianism counter these criticisms
by being a bit less strict: they suggest indexing tech-
niques to compare goods and services by user pref-
erences, measuring egalitarian outcomes within certain
time frames, and so on (Rawls 1971; Carens 1981;
Kai 1979).
Proponents of the difference principle of justice posit
the equality of individuals as basic rights and liberties
but argue that society is better off if individual moti-
vations for achievement are allowed to benefit indi-
viduals directly. The most well known difference
principle of justice was articulated by Rawls in 1971
and clarified further in his later work. Rawls proposes
24   Journal of Planning Literature
that rational individuals can produce an objective con-
ception of justice so long as they are unaware of what
their station in such a system will be. Were indi-
viduals to establish rules for a system with an equal
probability of being prince or pauper, they would have
an incentive to evaluate fairness from an essentially
objective position. The difference principle states that
while only the political liberties to develop the struc-
ture of society should be dispersed equally, posi-
tions with greater social and economic status must
be available to all and will result in the greatest ben-
efit to the least advantaged members of society (Rawls
1971, 1993).
A set of variations on the strict egalitarian and dif-
ference principles of justice have been dubbed the
resource-based principles of justice. The theory con-
tends that the difference principle does not account for
variation in individual behavior once goods and ser-
vices have been allocated (Dworkin 1981). Since some
individuals in society squander their wealth while oth-
ers save and reinvest in productive activities, it may
seem immoral to require the economically and socially
ambitious to continually cross-subsidize those who do
not produce additional wealth or productive capacity.
For this reason, resource-based theorists advocate equal
distribution of goods and services at the outset but
little or no cross-subsidization from that point forward
(Arneson 1990; Daniels 1990; Dworkin 1981, 2000).
Resource-based theorists, in other words, call for
equal opportunity and expect unequal outcomes.
Criticisms of this theory center on how the unequal
distribution of innate talents adversely affects indi-
viduals in society. Should marginally productive
developmentally disabled adults, for example, be con-
signed by their fates to relative poverty? Variations
in the difference principles theory argue that society
should play a role in mitigating such conditions inside
or outside the individuals’ control.
Nevertheless, proponents of desert-based theories
of distributive justice criticize egalitarian principles of
justice in general for not sufficiently rewarding pro-
ductive behavior. Desert-based theories define a just
social system as one that allocates resources based on
individuals’ contribution to the social product (Miller
1976, 1989), level of effort in productive activities,
or compensation for labor (Sadurski 1985; Lamont
1997). Contemporary desert-based theorists maintain
that those who increase the wealth of society are enti-
tled to directly benefit from some proportion of that
wealth. The desert-based theory of distributive justice
offers a moral foundation for capitalism. Critics of this
theory argue that the innate differences of individuals
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and their stations combine to produce rampant inequal-
ity and unfairly constrain the redistribution of resources
to the less capable.
Libertarian principles go one step further by not
attempting to prescribe a framework for distribution
but instead argue that legal—that is, neither coerced
nor stolen—transfers within a society by definition
result in just allocation (Hayek 1960; Nozick 1985;
Steiner 1981; Bogart 1985; Christman 1991; G. A.
Cohen 1995). Such views hold that individually just
actions, such as purchasing and selling resources,
result in individually, and therefore collectively, just
outcomes. Libertarian principles require no further
metaethics of distribution.
How can we make sense of such a disparate set
of competing theories, and how can they be applied,
separately or in concert, to practical questions of pub-
lic finance? Arguments over transportation pricing
and finance frequently incorporate parts of many of
the theories described above (see table 1), but often in
an internally contradictory, even illogical, fashion.
Many times the public judges policies that distribute
scarce resources based on instinct or feeling formed
by limited introduction to the many theories of dis-
tributive justice. Indeed, public opinion research has
consistently found that most people’s conception of
justice is highly variable and complex; studies of both
stated preferences and actual behavior show that people
switch between characterizations of justice according
to the situation (Frey 2003; Tetlock 2002; Rozin et al.
1999; Gladwell 2002). Members of the public, and the
officials whom they elect, will frequently argue that
roadway tolls, for example, would be unfair because
they would disproportionately affect the poor, and
yet officials campaign for and voters approve highly
income-regressive sales and other non-transportation-
use-based tax increases earmarked for transportation.
This may be because tolls are highly visible, while sales
taxes—levied in small amounts over very large num-
bers of transactions—are not. Or it may be that sales
taxes are common and familiar and therefore escape
scrutiny, while things such as congestion charges are
less familiar, inviting skepticism (Derrick and Scott
1998). But in either case such distinctions are not
based on consistently applied principals of equity.
Making Sense out of Competing
Theories of Equity
As the foregoing theories of justice and equity
are frequently in conflict, one way to resolve this
 Taylor, Norton / Paying for Transportation   25  

Table 1 Another way of dealing with opposing conceptions

Relating Theories of Justice to Public Finance of equity is to accept that self-interested biases are
inherent and to embrace the dynamic and contradictory
Relation to
Conception of Justice in Notions of
systems of justice and equity that emerge from politi-
Theory of Relation to Public Equity in Table cal pluralism. In the absence of any objective con-
Justice Finance 3 Below ception of justice, political pluralism offers, at the
very least, an invitation to struggle over the costs and
Strict Each individual in Outcome equity
egalitarianism society receives the
distribution of resources. In line with the modern inter-
same magnitude of pretation of liberal democracy, political pluralism
goods and services allows the public sphere to function much like a court-
irrespective of room, where opposing counsel each makes the best
contribution possible case on behalf of competing interests before
Difference Individuals have equality Opportunity a disinterested arbiter (judge, jury, the market, etc.)—
principles in basic rights and equity and from this justice emerges. Under such a model,
liberties, but society is
claims for equity in the public sphere are often, and
better off when
individual success is correctly, viewed as self-interested. Such self-interested,
cultivated and allowed advocacy-based struggles from which justices emerges
to benefit individuals inevitably result in conflicts among competing indi-
directly viduals, groups, and jurisdictions over the pricing and
Resource-based Goods and services are Opportunity allocation of resources. This suggests that participants
principles equally distributed to equity in political debates over equity would tend to define
individuals at the the fairest tax as one levied on someone else and the
outset, but there is
little or no societal
fairest investment as one that goes to one’s self, group,
cross-subsidization or jurisdiction.
from that point forward If it is naïve to think that, in the absence of a veil
Desert-based Individuals who increase Market equity of ignorance, we will never collectively agree on an
theories wealth in society are internally consistent system of justice and equity, it
entitled to benefit is perhaps too cynical to think that all equity debates
directly from that in political pluralism are primarily exercises in naked
wealth
self-interest. A more propitious view holds that indi-
Libertarianism Consensual transfers of Market equity viduals, while self-interested, expect and accept pub-
goods and services
lic policies that may not maximize their individual
between individuals
within a society are benefit but that advance broader societal objectives of
just by definition civil peace and human tolerance (Nicholls 1975). All
but the most dogmatic pluralists will admit that com-
peting interests inevitably create practical and ethical
complexity is to construct a totalist perspective, where dilemmas in public policy but argue that such dilem-
one view of justice is determined objectively correct. mas must “be acknowledged, negotiated, and adjudi-
Rawls attempted to establish a basis for objective cated with due regard to the contours of specific cases
evaluation of justice by employing his well-known and controversies” (Galston 2005,). This suggests
“veil of ignorance” thought experiment, through which that some “third way” of defining equity in transpor-
societal rules and resource distribution would be col- tation pricing and finance—one that is neither hope-
lectively determined by people ignorant of their subse- lessly naïve nor entirely cynical—can emerge from
quent station in the system. While the veil of ignorance citizens who are both selfish and occasionally self-
has proven a useful tool in both theory and experi- less and from a social system governed by both the
ments, it is impossible to put into practice because rule of law and the give and take of political nego-
people do know their stations in life and tend to con- tiation. Individuals may accept redistributive policies
struct their definitions of justice accordingly (Shoup out of self-interest as a kind of social insurance. That
and Vincent 1975). As such, we have no way of know- is, individuals would willingly part with a share of
ing for certain what sort of society and system of their wealth to support the disadvantaged in case they
justice and equity such a disinterested human collec- become disadvantaged through some turn of events. For
tive would construct. policies to be debated and judged as effective solutions

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26   Journal of Planning Literature
Table 2
Defining Efficiency, Effectiveness,
and Equity in Transportation Policy
Efficiency The ratio of outputs (lane miles of new roadway)
to inputs (expenditures on land, labor, and
capital)
Effectiveness The ratio of consumption (passengers) to
outputs (vehicle hours of transit service)
Equity The relative distribution of transportation inputs
(transportation revenue collections), outputs
(transportation expenditures), or consumption
(driving on roads)
to our collective challenges, we must begin by iden-
tifying the likely outcomes with the goals of policies
in mind. Opponents use the terms fair and equitable
so often to support and explain their divergent goals,
all the while leaving the public to form their own
rather instinctive evaluations of fairness. Our goal
here is to transcend the often abstract philosophical
characterizations of equity to develop a framework for
the practical and internally consistent evaluation of
equity in transportation finance and pricing. It is to
this framework that we now turn.
From Theory to Practice:
A Framework for Transportation
Pricing and Finance Equity
A common dilemma in public policy involves evalu-
ating the trade-offs between efficiency and equity
(Litman 1996; Minken and Ramjerdi 2008). Policy
analysts sometimes complicate matters further by ana-
lyzing the trade-offs among efficiency, effectiveness,
and equity (see table 2).
But whether considering efficiency alone or in con-
cert with effectiveness, these two measures are often
considered to be in tension with equity. Indeed, pro-
posals to improve the efficiency and effectiveness of
transportation systems—such as through distance- and/
or time-based transit fares or congestion pricing—are
often objected to on equity grounds. Such protesta-
tions notwithstanding, it is not evident that efficiency
and equity in transportation finance are incongruent.
Programs of transportation finance have three broad
effects: they generate revenues, they regulate travel,
and they redistribute income (among people, groups,
and places). For example, distance- and time-of-day-
based transit fares generate revenues for a transit
operator, affect how far and when people travel, and
cost some classes of riders more or less than others.
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Likewise, congestion pricing, which aims to reduce
traffic delay, emissions, and fuel consumption by vari-
ably pricing scarce road space, has long been favored
by economists as a way to substantially increase effi-
ciency by reducing congestion delays (Walters 1961;
Mohring 1970; Small, Winston, and Evans 1989).
Revenues collected for transportation from non-
transportation-based sources, such as the increasingly
popular local option transportation sales taxes, affect
travel as well. By disconnecting the consumption of
transportation capacity from the prices paid for travel,
non-transportation-based finance instruments—such as
sales taxes and general obligation bonds—discourage
travelers from considering costs their travel choices
impose on society (through congestion delays, noise,
emissions, etc.). A relatively large body of research
suggests that travelers with lower incomes are more
sensitive to variations of fares, tolls, and fees than
higher income travelers (Y. Cohen 1987; Giuliano 1994;
Harvey 1994; Richardson and Bae 1998; Santos and
Roley 2004; Ecola and Light 2009). However, a simi-
larly well-established body of research shows that
higher income travelers are more likely than lower
income travelers to travel longer distances in peak
hours and in peak directions—precisely the locations
where congestion tolls are likely highest (Dittmar,
Frick, and Tannehill 1994; CARB 1995; Frick,
Heminger, and Dittmar 1996; Lari and Iacono 2006;
Sullivan 2000). So while a given lower income trav-
eler is more likely to be discouraged by a toll from
making a peak-hour, peak-direction trip, shifting from
sales and other non-transportation-based taxes for
transportation to peak-based fares and tolls in many
cases would shift the burden of transportation finance
away from lower income travelers as a group and
toward higher income travelers as a group (Schweitzer
and Taylor 2008). One sees that improving equity
in transportation finance is not a simple task, and the
most discernable effects are not necessarily the most
important.
Disagreements over equity in transportation pricing
and finance arise from the competing and contradic-
tory ways that equity is both framed and evaluated.
Further complicating matters is the wide variety of ref-
erence units by which one can measure the equity of
a given policy’s effects. For example, financing and
pricing modes on the basis of trips, on the basis of pas-
senger miles traveled, or on a per capita basis all yield
different measures of equity. These factors combine to
intensify confusion and misunderstanding among pub-
lic officials and the public over the fairness of trans-
portation finance.

Table 3
Confounding Notions of Equity in Transportation Finance
Unit of Analysis Market Equity
Geographic: States, Transportation spending in each
counties, legislative jurisdiction matches revenue
districts, etc. collections in that jurisdiction
Group: Modal interests, Each group receives transportation
racial/ethnic groups, spending or benefits in
etc. proportion to taxes paid
Individual: Residents, The prices or taxes paid by
voters, travelers, etc. individuals for transportation
should be proportional to the
costs imposed
Source: Adapted by Taylor (2004) from Lem (1997).
Borrowing from the theories of distributive justice
previously described, we can say that egalitarian phi-
losophies emphasize outcomes, difference or resource-
based philosophies emphasize opportunities (or vertical
equity), and libertarian philosophies emphasize mar-
kets (or horizontal equity). Each of these philosophies
can, in turn, be applied to different actors, or units of
analysis, in transportation pricing and finance debates—
individuals, groups, or jurisdictions. While “units of
analysis” may seem itself an abstract concept, it makes
it easy for us to understand how and why people so
often talk past one another in debates over transporta-
tion finance. The concept likewise allows for specific-
ity in describing divergent conceptions of equity that
the more common concepts of horizontal and vertical
equity simply cannot (see table 3).
In general, social science scholars of transporta-
tion tend to focus on individual equity (Fullerton and
Rogers 1993; Due and Mikesell 1994; Besley and
Rosen 1998; Derrick and Scott 1998; Bento et al.
2005; Santos and Catchesides 2005; Shoup 2005; Jia
and Wachs 1998; Sanchez, Stolz, and Ma 2003;
Blumenberg 2003), advocates and activists are more
likely to focus on group equity (Blumenberg and
Ong 2001; Raphael and Rice 2000; Raphael and
Stoll 2000; Hodge 1995; Garrett and Taylor 1999;
Deka 2004; Forkenbrock 2001; Martens 2009), and
elected officials are most concerned with geographic
equity. This focus on geography is because represen-
tation in the United States is organized spatially into
a hierarchy of jurisdictions. And because it is elected
officials who oversee the collection and distribution
of transportation funds, most debates in transporta-
tion pricing and finance center first and foremost on
questions of geographic equity.
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Taylor, Norton / Paying for Transportation   27  
Type of Equity
Opportunity Equity Outcome Equity
Transportation spending is Spending in each jurisdiction
proportionally equal across produces equal levels of
jurisdictions transportation capacity or service
Each group receives a Transportation spending produces
proportionally equal share of equal levels of access or
transportation resources mobility across groups
Transportation spending per Transportation spending
person is equal equalizes individual levels of
access or mobility
The Geopolitical Equity Imperative
Geographic equity frequently arises in the context
of federal transport policy. For example, the more
populous, urbanized states tend to generate more in
federal motor fuels tax revenues than they receive
in fuel-tax-funded federal expenditures, whereas less
populous, rural states tend to receive more in federal
transportation funding than their motorists generate in
federal fuel taxes. This redistribution of federal fuel
tax revenues from “donor” states to “donee” states has
been hotly debated in Washington for decades and
actually delayed the passage of both the Transportation
Equity Act for the 21st Century legislation in 1998 and
the Safe, Accountable, Flexible, Efficient Transportation
Equity Act: A Legacy for Users (SAFETEA-LU) leg-
islation in 2005.
Supporters of redistribution argue that it enables
wealthier states to cross-subsidize poorer states and
allows us to have an interconnected national highway
system and a basic level of public transit in most urban
areas; such redistribution is often used to justify fed-
eral involvement in transportation finance. However,
critics of the redistribution of federal fuel taxes have
countered that the redistribution reflects a rural bias
in the federal transportation program (especially high-
ways), and research has shown that the practice actu-
ally redistributes funds from poorer states to richer
states (Lem 1997) and from states with high levels
of transit use to states where driving dominates (De
Cerreno and Seaman 2003).
Critics of the redistribution of federal transportation
revenues further contend that the national highway
system is largely in place and that the most significant
transportation investment needs are in congested urban
28   Journal of Planning Literature
areas. If all federal fuel tax funds were simply returned
to states exactly proportional to their collection, there
would be no rationale for a federal fuel tax; it could be
eliminated and states would then be free to collect as
much as they desire from higher state fuel taxes. Some
have even argued that federal transportation tax col-
lections should be dropped and that each state should
be left to make do on its own (Roth 1998).
Some researchers have noted that many of the cur-
rent systems of transportation pricing and finance
favor suburbs over central cities to the disadvantage of
lower income or racially and ethnically diverse resi-
dents. Chen (1994) argues that the intrametropolitan
distribution of federal transportation dollars and local
non-transportation-based taxes for transportation
tend to favor developing over developed areas and
suburbs over central cities as well as highways over
public transit and rail transit over buses. Chen in effect
criticizes market equity return-to-source rationales in
favor of funding distributions based instead on oppor-
tunity or outcome equity. Likewise, Bullard, Johnson,
and Torres (2004) complain that higher rates of
street and highway expenditures in growing suburban
areas are biased against disproportionately minority
areas and, therefore, racist.
Similarly, Ong (2004) finds that automobile
insurance premiums for drivers with identical driv-
ing records can vary dramatically by metropolitan
area residential location. In general, insurance pre-
miums are higher in central city areas and lower in
suburban locations. While insurance companies may
base such rates on variable claims rates among neigh-
borhoods, Ong argues that it is nonresident drivers
(many of whom commute into job-rich central city
areas from outlying suburbs) who are responsible for
the higher crash rates, and claims rates, in central city
neighborhoods.
Given overriding political concerns with geographic
equity in the distribution of transportation revenues,
distortions arise when transportation use or demand
does not vary comparably across jurisdictions. Public
transit is perhaps the most striking example of this.
Transit ridership is concentrated spatially in the larg-
est, most densely developed cities. About one-third of
all transit passengers in the United States are in the
New York metropolitan area. The ten largest U.S.
transit systems carry over 60 percent of all riders; the
hundreds of other, smaller systems carry less than
40 percent of all passengers (Taylor and McCullough
1998; Taylor et al. 2009). In the realpolitik of pub-
lic transit finance, however, debates center on how
resources are doled out to jurisdictions and the suppliers
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of transit service, with little regard for the enormous
spatial variation in the consumers of transit service.
The New York Metropolitan Transit Authority (NY
MTA) alone carries over 27 percent of the nation’s
transit riders each year (American Public Transpor­
tation Association [APTA] 2003a). During the six years
between 1995 and 2000, federal capital and operating
subsidies combined averaged $0.20 per unlinked pas-
senger trip on NY MTA. In contrast, riders on Chapel
Hill Transit in North Carolina, which carries three ten-
thousandths (0.03 percent) of the nation’s transit riders,
enjoyed federal transit subsidies which average $0.97
per trip during the 1990s (APTA 2003a, 2003b). Such
geographic disparities are not confined to federal
transportation finance. In California, the San Francisco
Municipal Railway carries nearly half (45 percent) of
all Bay Area transit riders but receives just 10 percent
of the subsidies allocated through the state Transpor
tation Development Act (TDA). On the other hand,
Santa Clara Valley Transit Authority in the San Jose
area carries 11 percent of all Bay Area transit riders
yet receives over one-third of the region’s TDA transit
subsidies (Metropolitan Transportation Commission
2003; Taylor 1991).
The reason for these disparities is quite straight-
forward: representation in Congress and most state
legislatures matches the geographic distribution of
voters, not urban transit patrons. Geographic equity,
therefore, allocates public transit funding “equally”
among jurisdictions, often regardless of how they
are used. The centrality of the imperative of geopo-
litical equity in transportation policy and planning
can hardly be overemphasized. It explains why Texas
has received $2.7 billion less in federal fuel tax
revenues between 1956 and 1994 than motorists in
Texas paid in federal fuel taxes. In contrast, Hawaii
has received $2.2 billion more than motorists in
Hawaii paid in federal fuel taxes; for every $1.00 in
federal fuel tax generated in Hawaii, the state has
received $4.11 in fuel-tax-funded appropriations
(Poole 2001). It also explains why new rail transit
systems were built in Atlanta, Miami, and many other
sprawling Sunbelt cities over the past quarter century,
while the long-planned Second Avenue subway in
transit-oriented Manhattan has yet to carry a passen-
ger (Lawlor 1995).
Evidence of the geopolitical equity imperative can
be seen in the equity arguments over transportation
pricing and finance. Arguments in favor of some
transportation finance schema are often made on
jurisdictional equity grounds, while equity arguments
against some given proposal are most often made on
 Taylor, Norton / Paying for Transportation   29  

group or individual equity grounds. For example, calls Table 4

to raise the guaranteed minimum return of federal Program Performance
motor fuel tax dollars to “donor” states prior to the and System Performance Criteria
passage of the recent federal SAFETEA-LU surface
Program Performance System Performance
transportation legislation were nearly always cast in
terms of geopolitical equity. On the other hand, argu- Efficiency Has low Optimizes provision of
ments against congestion tolls, peak-hour transit pric- administrative and transportation service
ing, and weight-distance truck tolls are often cast as overhead costs for a given level of
relative to the expenditure
unfair to the poor or individual owner–operator truck revenue collected
drivers. But as Wachs (1994, p. 19) has noted, con-
Effectiveness Is politically feasible: Optimizes utilization of
cern over the plight of the poor under various pricing has stable political existing capacity
proposals is frequently made by self-interested parties support, is popular
(trucking, auto clubs, etc.) who “seem to have little with voters, and has
concern over the well-being of the poor or of work- little opposition
ing women when considering other policy initiatives, from powerful
stakeholders
such as sales tax increases to support the expansion of
rail lines.” Revenues generated Lowers transportation
meet needs and are costs and promotes
stable and economic development
predictable
Equitable Transportation Equity Is perceived as Provides all users with
Programs versus Equitable treating places and transportation access,
Transportation Systems jurisdictions fairly regardless of
circumstances (age,
This overriding concern with the geographic income, disability, etc.)
equity of transportation funding among states, dis- Major stakeholders Is progressive based on
tricts, and jurisdictions ensures a political focus on and interest groups the ability to pay
perceive they are
the expenditure effects of transportation finance
treated fairly
programs, which makes it all but impossible to
Charges users in
consider how transportation funding decisions
proportion to the costs
affect the efficiency, effectiveness, or equity of they impose on the
transportation systems. So to understand the pric- system and society
ing and finance equity of transportation systems, Source: Brown et al. (1999).
we must evaluate both the geopolitics of the trans-
portation finance program and the effects of this
finance program on the deployment and use of the The Divorce of Pricing and Finance
transportation system. Table 4 offers an overview in Transportation Policy
of how we might simultaneously evaluate the per-
formance of transportation finance program in each With all of the attention paid to the politics of
of these realms. geographic equity, public officials frequently fail to
Program performance criteria evaluate how well a consider how transportation finance programs affect
finance mechanism meets tests of political acceptabil- the use and performance of the transportation system.
ity and administrative ease. These questions tend to Yet the use and finance of transportation systems
be prominent in policy debates. System performance are tightly intertwined and cannot be considered
criteria, on the other hand, address how finance mech- separately. Fees imposed on users in proportion to the
anisms influence the use and performance of the trans- costs users impose on society are typically the finance
portation system itself. System performance criteria mechanisms that will help optimize transportation sys-
acknowledge that finance policies are not just about tem efficiency and effectiveness. User fees make peo-
collecting and distributing money. Pricing and finance ple more aware of the costs of travel (in the form of
instruments also profoundly affect the way transporta- wear and tear on the system, delay imposed on others,
tion services are provided and the way citizens use environmental damage, etc.). Such information encour-
them, though elected officials often act as though this ages drivers to shift low-priority trips to less socially
were not the case. costly times of day, routes, modes, or destinations.

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30   Journal of Planning Literature
But despite the obvious and well-documented rela-
tionship between the pricing of transportation systems
and their use, public officials are frequently loathe to
even consider pricing transportation systems. What
to build and where to build it, for example, are often
treated as entirely separate from who should pay and
how they should pay for it. But how both the supply
of and demand for transportation are influenced by
user costs is neither abstract nor trivial. The fares, fees,
tolls, and taxes paid by travelers affect their decisions
on where to travel, when to travel, how to travel, and
even whether to travel. Use of the transportation sys-
tem in turn greatly influences the maintenance and
new capacity “needs” of the system, which affect the
finance system. Thus, the transportation finance system
and the performance (in terms of efficiency, effec-
tiveness, and equity) of the transportation system are
mutually reinforcing.
The issue of truck weight fees provides an exam-
ple of how the transportation finance system affects
user decisions. Damage to pavements caused by
heavy trucks significantly increases with weight per
axle. Many people are surprised to learn that a rela-
tively small share of trucks with heavy axle loads
does most of the damage to roads (Small, Winston,
and Evans 1989; U.S. Federal Highway Administration
[FHWA] 1997; Forkenbrock 2001). Yet for decades
many states levied truck weight fees based on the
weight of empty trucks, and tollways frequently set
rates based on the number of axles per vehicle. Both
policies encourage truckers to load heavy weights
onto as few axles as possible and thereby maximize
damage to roadways. Such truck fee systems increase
maintenance and rehabilitation costs in comparison
to jurisdictions where fees are assessed in ways to
encourage truckers to reduce axle weights. Thus,
changing the way that fees are levied on trucks would
change truckers’ behavior and, in turn, substantially
lower maintenance costs without necessarily increas-
ing either taxes or revenues.
Why the Push to Reunite
Pricing and Finance?
Most transportation economists agree that transpor-
tation finance programs should, as much as possible,
charge users the marginal social cost of travel (Walters
1961; Mohring 1970; Small, Winston, and Evans 1989;
Murphy and Delucchi 1997). The term marginal refers
to the cost of providing for one additional trip, given
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that others are already using the system at the same
time. For example, when a car gets on the freeway, it
takes up space that other automobiles can no longer
occupy, it imposes some delay on vehicles upstream,
and it also causes some amount of pavement damage.
If there are very few vehicles already on the freeway,
then the cost of providing for that one additional car
is very small. On the other hand, if there are many
cars already on the freeway, one additional vehicle
can slow other cars upstream and increase congestion
to a surprising degree. In such cases, the marginal
cost of accommodating an additional car is large. The
term social refers to the costs that society pays for
providing for that one additional vehicle. These social
costs result mostly from congestion, pollution, noise,
and road wear and tear from a trip. The same holds
true for the provision of public transit. The mar-
ginal cost of providing additional peak-period or peak-
direction public transit is much greater than the mar-
ginal cost of providing transit service in the off-peak
or nonpeak direction. This is because transit agencies
must size their labor force and vehicle fleets to meet
peak levels of demand, regardless of whether these
workers and vehicles sit idle at other times (Taylor,
Garrett, and Iseki 2000).
A large body of research shows that the current
transportation finance programs do not make users
pay the marginal social cost (delays imposed on others,
pavement damage, emissions, noise, nonrenewable
resource consumption, etc.) of vehicle use (U.S. FHWA
1997; Litman 2002b; Delucchi 1996; California
Department of Transportation 1997; Forkenbrock and
Schweitzer 1997; CARB 1995; National Cooperative
Highway Research Program 1994; Pozdena 1995;
Puget Sound Regional Council 1997). Yet as the role
of the motor fuel tax has declined relative to non-
transportation-related instruments such as sales and
other non-transportation-based taxes and bonds, we
are actually moving further away from marginal social
cost pricing of transportation (Goldman and Wachs
2003; Sciara and Wachs 2007; Sorensen 2006).
So in crafting our current system of surface trans-
portation finance, we have often paid careful atten-
tion to geopolitical equity questions regarding from
where revenues for transportation are collected and to
where they are expended. But in doing so we have come
to increasingly depend on highly income-regressive
sales and other local taxes unconnected with transpor-
tation use. As a result, jurisdictional equity is trump-
ing not only transportation efficiency and effectiveness
but group and individual equity as well.

Transportation Pricing Equity:
Compared to What?
As revenues for transportation have lagged far
behind the growth in travel and congestion in recent
years on many transportation systems, elected officials
are looking for new ways to raise revenue for trans-
portation. But a waxing antitax climate amid concerns
with rising fuel prices has made it all but impossible
to increase traditional sources of transportation reve-
nues, such as the motor fuel user tax, which have been
the foundation of transportation finance for nearly a
century.
Amid such a challenging fiscal climate, many pub-
lic officials are for the first time open to considering
various forms of marginal social cost pricing. Such
openness is largely motivated out of desperation for
transportation revenues and not by any newfound inter-
est in the potential for pricing to increase transpor-
tation system efficiency or effectiveness. But these
officials for the most part remain wary of transporta-
tion pricing; wary of something so new, of a possi-
ble political backlash, of something that might be, or
seem to be, unfair (Langmyhr 1997; Kuehn 2008).
It is in this climate that many equity arguments
against marginal social cost pricing of transporta-
tion are posed. Many fear—some sincerely and others
tactically—that poor people will simply be priced off
roads and transit vehicles, leaving free-flowing sys-
tems for the wealthy. Such social equity concerns are
indeed important, but they ignore the social inequities
of our current transportation finance system. This is a
critical point that is often overlooked in debates of
transportation pricing equity.
Under the logic of market equity, equitable taxes are
those levied on each individual in proportion to the
costs imposed or benefits received by that individual.
In practice, pricing benefits received is more complex,
ephemeral, and normative than pricing costs imposed
and would not necessarily result in efficient outcomes
(U.S. FHWA 1997). When marginal social cost trans-
portation pricing has been attempted, it has usually
sought to internalize the normally external costs of
travel. Within this rubric, charging users according to
the incremental social costs they impose on society
when using the transportation system is equitable.
On the other hand, opportunity equity suggests that a
method of finance solely based on costs imposed may
disproportionately burden the poor. From this (verti-
cal equity) perspective, an equitable finance program
will treat fairly people who have different abilities to
pay, with ability measured primarily by income.
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Taylor, Norton / Paying for Transportation   31  
Current transportation user fees, like the motor
fuels tax and driver’s license fees, fare well under
market equity principles but less well under opportu-
nity equity (Chernick and Reschovsky 1997; Lari and
Iacono 2006; Poterba 1991; Wiese, Rose, and Schluter
1995). In contrast, transportation sales taxes—because
they are income regressive and unconnected with
transportation system use—tend to fare poorly under
both market equity and opportunity equity princi-
ples. Given that local option sales taxes for transpor-
tation and electronic roadway tolling are the two of
the most frequently debated new forms of trans-
portation finance (Abrams 2007; Berger 2008; U.S.
FHWA 2009; Transportation Research Board 2006;
Hymon 2008; Hymon and Weikel 2008; Sorensen
and Taylor 2006), they are compared in table 5 with
respect to the multiple dimensions of equity previ-
ously outlined in table 3.
While many scholars have examined equity in sales
taxes (Derrick and Scott 1998; Due and Mikesell
1994; Poterba 1996; Santi 1994) and many more have
examined the equity of congestion pricing (Arnott,
de Palma, and Lindsey 1994; Bonsall and Kelly 2005;
Bureau and Glachant 2008; Y. Cohen 1987; Giuliano
1994; Glazer and Niskanen 2000; Maruyama and
Sumalee 2007; Richardson and Bae 1998; Zhang
2008), only one study has directly compared equity
effects of sales taxes for transportation vis-à-vis con-
gestion pricing (Schweitzer and Taylor 2008). They
examine the household incomes of the toll payers
on the State Route 91 high-occupancy/toll lanes in
Orange County, California, and compare them to the
household incomes of who would have paid had the
four lanes of expressway capacity been financed with
revenues from Orange County’s local option sales tax.
They find that two kinds of transfers would occur with
such a change. First would be a transfer of burden from
middle- and upper-middle-income households to the
highest and lowest income households. And second
would be a transfer from people who travel in the cor-
ridor frequently to people who drive very little. With
regard to the first burden transfer, the switch from
congestion tolls to sales tax payments would cause
the very highest income households to pay more in
absolute terms (because high income people spend so
much on goods and services subject to the sales tax),
while the lowest income households would pay sub-
stantially more in relative terms (because such a large
share of purchases by low-income households are sub-
ject to the sales tax). And with regard to the second
effect, the users of the toll lanes (who voluntarily
pay a toll ranging from $1.25 to $10.00 depending on
32   Journal of Planning Literature

Table 5
Example: Comparing the Equity of Congestion Tolls and Transportation Sales Taxes
Type of Equity

Unit of Analysis Market Equity Opportunity Equity Outcome Equity

Geographic: Congestion tolls: High if
States, counties, expenditures are targeted to where
legislative they are collected
districts, etc.
Sales taxes: High if expenditures are
targeted to where they are
collected
Group: Modal Congestion tolls: High if revenues
interests, racial/ are targeted to groups in rough
ethnic groups, proportion to their collection
etc.
Sales taxes: Low because light users
of transportation systems are
almost certain to cross-subsidize
heavy transportation system users
Congestion tolls: High if revenues
are used to improve transportation
service in jurisdiction where they
are collected
Sales taxes: Moderate because
revenues collected from all
consumers are likely to improve
service for travelers where the
taxes are collected
Congestion tolls: High if the
revenues are spent to improve
transportation services for groups
from which the tolls are collected
Sales taxes: Moderate if the revenues
collected from all consumers are
used to improve transportation
services for the groups from which
the taxes are collected
Congestion tolls: Low unless
expenditures targeted to areas
with low levels of mobility
Sales taxes: Low unless
expenditures are targeted to
areas with low levels of
mobility
Congestion tolls: Low unless
expenditures are targeted to
groups with low levels of
mobility
Sales taxes: Low unless
expenditures are targeted to
groups with low levels of
mobility

Individual: Congestion tolls: High if revenues
Residents, are targeted to improve facilities,
voters, communities occupied by toll
travelers, etc. payers
Sales taxes: Low because tax
payments are unrelated to
transportation system costs
imposed or benefits received
Congestion tolls: Moderate because
transportation toll revenues are
likely to indirectly benefit
individual travelers
Sales taxes: Low because
transportation expenditures are
unlikely to be returned to taxpayers
in proportion to payments
Congestion tolls: Low unless
expenditures are targeted to
individuals with low levels of
mobility
Sales taxes: Low unless
expenditures are targeted to
individuals with low levels of
mobility

direction and time of day to bypass nine miles of fre-
quently congested “free” lanes) carry the entire bur-
den of retiring the debt on the $200 million (in 2008
dollars) capacity expansion, while sales tax finance
would spread the burden over hundreds of thou-
sands of consumers, most of whom never travel in
the lanes. Weinstein et al. (2006) undertook a general
assessment of the equity of various financing mecha-
nisms for the state of California, including various
tolling options and sales taxes. This report supports
Schweitzer and Taylor’s findings concluding that the
sales tax is the least equitable method of funding trans-
portation, while tolls are more equitable from both
user benefit (market-based) and ability to pay (oppor-
tunity) perspectives (Weinstein et al. 2006). Drawing
on both Schweitzer and Taylor and the broader litera-
tures on sales tax and congestion pricing equity, table
5 presents the transportation finance equity evaluation
framework developed above with regard to the mul-
tiple dimensions across which the equity of congestion
pricing vis-à-vis sales taxes for transportation might
be compared. This comparison takes into account
the implementation realities of the finance program
and transportation system. As the table suggests, out-
come equity is currently considered a radical notion in
public policy. Equal outcomes, given only limited
public policy influence over inputs, require extreme
precision in targeting the particular units of analysis.
While market and opportunity equity do not have to
be incongruous, specific outcome equity objectives
require more trade-offs with other types of equity and
units of analysis. For example, targeting expenditures
to equalize outcomes among geographic areas seizes
funds and consumes resources that might otherwise
be available to increase outcome equity among
groups with low levels of mobility or among indi-
viduals with low levels of mobility. For these reasons,
the evaluation of outcome equity below indicates gen-
erally low performance, unless the policies are pre-
cisely targeted.
Given that transportation sales taxes represent the
most significant change in transportation finance over

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the past two decades, table 5 suggests that, in com-
parison to our current system of transportation finance,
a user fee system based on the principles of marginal
cost pricing would clearly increase market equity and
may increase overall opportunity equity as well. As
noted earlier, travel behavior research has shown that
use of the highway system in congested conditions is
positively correlated with income. That is, higher
income travelers tend to spend a larger share of their
travel time in traffic congestion than do lower income
travelers (Dittmar, Frick, and Tannehill 1994; Deakin
and Greig 1995; Frick, Heminger, and Dittmar 1996;
Sullivan 2000). Thus, a shift to a transportation finance
system that charges drivers more on congested routes
and less elsewhere would fare well under the market
equity system when compared to our current finance
system (Schweitzer and Taylor 2008).
While equity may indeed be in the eye of the
beholder, we have shown in this article that it is pos-
sible to systematically consider and evaluate any
transportation finance instrument in terms of the
many possible dimensions of equity. But careful, sys-
tematic evaluations of transportation pricing and
finance equity remain quite rare. Instead, claims of
inequity or bias are often tossed about in debates over
transportation pricing and finance with little or
incomplete supporting evidence, and sometimes quite
cynically. We have tried to show in this review that
while no scheme can satisfy all possible dimensions
of equity, it is possible to offer comparative equity
assessments of various approaches to transportation
pricing and finance and that efficiency and equity are
not always at odds. Finally, we have shown that the
current trend in transportation finance toward dedi-
cated non-transportation-based taxes (e.g., local sales
taxes) is, by most measures of equity, less fair than
most forms of marginal cost transportation pricing
(e.g., congestion tolls), about which equity concerns
are most often raised.
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Brian D. Taylor, AICP, is Professor and Chair of Urban
Planning, and Director of the Institute of Transportation Studies
at UCLA.
Alexandra Tassiello Norton resides in New Orleans and cur-
rently serves as the Director of Transportation, Coastal Protection,
and Environmental Policy for the Louisiana Recovery Authority
and State Recovery Act Administrator.