Is a congestion tax pro rich?
Like targeted subsides, targeted taxes are more efficient.
This is a trick question in more than one ways. The first part is an economic proposition while the second part is a political one. Rich or poor are relative concepts with no quantitative definition which will work across all contexts. A more appropriate (but boring) question would be whether a congestion tax results in higher benefits to the top decile (10%) or centile (1%) of the population according to their net wealth. The congestion tax is based on a very simple economic principle that if a commodity (like roads) is under priced then it will ultimately lead to its overuse. We do not think of the street in front of our house like we think of vegetables or books because it seems to be always there are free to use. But as the cliché goes, there are no free rides. The roads have a cost, someone is paying for them and someone is benefiting from it. The key question then is whether the price is right and who pays and who gets the benefit. I am sure you would to not like to pay for your neighbors’ groceries as much as you except them to pay for yours.
A congestion tax is generally applied on private cars. It is not applied on pedestrians, cyclist or two-wheelers (though it can be in theory). The commuting patterns in India are very different from the western countries. Most of urban India walks to work. Those who don’t, either use a bicycle or two-wheeler. Only 3% people use cars. According to a survey done in Pune, monthly household income of two-wheeler owners was more than Rs. 25,000. The average income of people owning a car can be assumed to be much higher. Thus if a congestion tax is implemented in India which excludes the two-wheelers then it will result in four-wheeler owners bearing the costs and everyone (pedestrians, cyclists, two and four wheelers) enjoying the benefit of reduced congestion. Indeed, there is a case for applying congestion tax on two-wheelers as well since they are most likely to switch to public transport.
A tax is levied to generate revenue for the government (and its payment is compulsory). Generally, a congestion tax (though called a tax) is not levied with that intention. It is levied with the intention of what is known in economics are internalizing the external cost. Most congestion tax proposals are created with a revenue-neutral model. Meaning they only cover the cost of their implementation and maintenance. But no such restriction is necessary as such. The tax should be such that it will result in desired level of congestion reduction. If it generates excess revenue it can be used to improve public transport or reduce other taxes.
Though this is the most direct method of reducing congestion, there are other methods which more or less work towards the same goal. One method is to charge for parking. Cars are parked 95% of the time. So charging an adaptive price for parking (higher for longer duration, in peak hours, in congested areas, etc.) will dis-incentivize the use of private cars resulting in reduced congestion. Another method is to charge a very high permit fee while purchasing a car. This has the benefit of easy implementation but once a car is purchased the owner does not have any incentive to reduce the usage. In fact, the incentive might turn out to be exactly the opposite.