Even satellites in geosynchronous orbit are affected by congestion.  It would not be cost-effective for the owners of a particular satellite to need to be concerned about other satellites bumping into theirs.  Each can pay for the exclusive use of a particular bit of the sky.  This is a part of the commons which they need for themselves if they are to supply their product, and it is legitimate for the commons to receive payment for that exclusive use.

Nic Tideman: The Case for Site Value Rating

Both for reasons of social justice and for reasons of economic efficiency, site value rating deserves a continued place in the programme of the Liberal Party.

The case for site value rating in terms of social justice is founded on two understandings: first, that the value of land in the absence of economic development is the common heritage of humanity, and second, that increases in the rental value of land arising from economic development and government expenditures should be collected by governments to finance those activities. What is meant by "land" is the unimproved value of sites and the value of extractable natural resources such as North Sea oil.

While there may someday be institutions capable of implementing a recognition of land as the heritage of all humanity on a worldwide basis, in the absence of such institutions each nation should implement a recognition that land within its boundaries is the common heritage of its citizens. This is accomplished not by making the nation a gigantic Common or by instituting government management of all land, but rather by requiring all persons and corporations that are granted the use of land to pay a fee or tax equal to what the rental value of the land they control would be if it were in an unimproved condition.

The case for site value rating in terms of economic efficiency is founded on the fact that a tax on resources that are not produced by human effort is one of the few sources of government revenue that does not reduce incentives for people to be productive. Two other revenue sources that have this virtue are taxes on other government-granted privileges such as exclusive use of radio frequencies and taxes on activities with harmful consequences, such as polluting the air. An economy will be more efficient if revenue sources that do not diminish productivity are employed to the greatest possible extent before any use is made of taxes that impede productivity.

What makes a tax efficient is that the amount of tax that is due cannot be reduced by reducing productive activities. When incomes are taxed, people can reduce the amount of taxes owed by working less. They do so, and the productivity of the economy falls. When houses are taxed, people can reduce the amount of taxes owed by building fewer house and smaller houses. They do so, and the housing shortage worsens. But when the unimproved value of land is taxed, there is no resulting diminution in the quantity of land. Thus taxes can be levied on land without diminishing the productivity of an economy. And shifting taxes from other, destructive bases to land will improve the productivity of an economy.

Subsequent sections explain in more detail these social justice and efficiency arguments for site value rating, describe procedures for implementing such a tax system, and explain why a variety of potential objections are without merit. ...

The logic of efficient environmental protection applies with few changes to issues of congestion. Parking meters are simple example of the application of land value taxation to solving a problem of congestion. If there is a shortage of parking places (at a zero price) then the introduction of parking meters (charging rent for the use of land) can relieve the shortage. Ideally, the price of a parking meter should vary by time of day to reflect variations in the demand for parking places. The ideal fee would equate supply and demand at each time of day, with lanes of streets devoted to parking only where the revenue generated by the parking fees exceeds the value of the additional lane in speeding traffic. Perhaps in a few years we will have parking meters with prices that vary by time of day. We certainly have the technology. In the meantime, we get by with meters that charge a single price throughout the part of the day when demand is greatest.

Charging rent for parking is only a small step from charging rent for cars that are moving on city streets. The more cars there are on the streets, the slower everyone goes. The marginal cost of having one more car on the streets is the value of the extra travel time that everyone else endures because of the one additional car. In many places, the congestion cost of traffic is less than the cost of administering a system of congestion fees. But this is not the case everywhere. William Vickrey used to say that his estimate of the cost in additional delays of having one more car in midtown Manhattan in the middle of the day was about $20,000 per hour. He would go on to say that this did not imply that people should be charged $20,000 per hour for using the streets of midtown Manhattan. He had estimated marginal cost at the present level of usage. The efficient charge -- perhaps $25 per hour -- would reduce use of the streets so greatly that the marginal congestion cost of street usage would equal the price. Efficient congestion prices for using the streets of Manhattan (or Boston or other large cities) would not merely charge for ordinary usage but would also entail special charges for anyone who double-parked or parked in some other illegal way that created congestion. If we could keep track of the movements of vehicles, then for any vehicle that stood still ahead of backed-up vehicles that wanted to move, there would be a charge for the resulting congestion cost, which would be quite high. Companies making deliveries to downtown areas might decide that it was far better to make deliveries at night than to tie up the streets in the day.

Congestion charges also apply to bottlenecks such as bridges and tunnels. Whenever such a facility has cars backed up seeking to use it, efficiency is improved by applying a toll that reduces demand to capacity. The same output is produced, revenue is generated, and the waste of queuing is avoided.

The efficiency of congestion pricing would also apply to such public facilities as airports and parks. When airlines want to have more take-offs and landings than an airport can accommodate, it is efficient and just to allocate take-off and landing slots by price. Unfortunately, Congress, at the behest of airlines, has prohibited airports from doing this, requiring them instead to allocate take-off and landing slots by non-price means.

In Central Park in New York, there are fewer baseball fields than are demanded at a zero price. There is a private company that has the right and responsibility to organize the leagues that are allowed to use the fields. This company is able to charge fees that implicitly include the scarcity value of the fields. A recognition that the parks are the common heritage of everyone in the city would lead instead to a charge for using the ball fields that equated supply and demand.

There are also applications of congestion prices at an international level. For example, there may be congestion in geosynchronous orbits for satellites. If this should occur, then the just thing to do is to charge market-clearing rents for geo-synchronous orbits and share the proceeds among all nations in proportion to their populations.  ... Read the entire article

Nic Tideman: Using Tax Policy to Promote Urban Growth

Herbert J. G. Bab:  Property Tax -- Cause of Unemployment  (circa 1964)

• If taxes on improvements are low or non-existing and taxes on land are high, the cities are bound to grow vertically and at a fast rate.
• If taxes on improvements are high and taxes on land are low, our cities will spread over larger and larger areas. They will become metropolitan areas and they will grow at a much slower rate.

• It gobbles up a tremendous amount of farm land;
• the farmers have to give up their land before it is really needed;
• the building developer has to go far out to find available land;
• the prospective home-owner has to travel farther;
• traffic on congested roads will increase and
• new roads and schools will have to be built.

Bill Batt: Stemming Sprawl: The Fiscal Approach

Stemming Sprawl: Pricing Measures for Transportation

From the foregoing, it is clear that insofar as the causes of sprawl development are economic, the solution needs to be economic as well. The equilibrium of forces can be restored in two ways:

1) by charging the true marginal costs of motor vehicle transportation to users and
2) by recovering the economic rent from urban site owners that is really the socially created value.

It is easy to distinguish five elements of transportation service cost: capital investment, maintenance costs, regulation costs, environmental externalities, and congestion costs. Each of these calls for a different treatment with respect to revenue design. Capital costs are best recovered by recapturing the land rent proximate to the highway corridors. This is socially created value, which is better used to honor debt service of infrastructure investment than allowing it to be retained as windfall gains by titleholders to property close by. User fees, most aptly linked to the purchase of motor fuel and tire wear, serve as a proxy for the use of the roads and can be designed to be commensurate with use. As the wear and tear of roads as well as police patrol, snow and ice control, and signaling all involve operating and maintenance costs, such charges are easily linked with benefits received. In the future, still more accurate systems of service charges are likely to appear: Singapore, Hong Kong, and New Zealand are already reliant on electronic devices that record road use by time, place, and vehicle weight.

Ensuring the safety of drivers and vehicles through licenses, registrations, and inspections is most appropriately financed by fees commensurate with the costs of their administration. This way, if a vehicle is used but seldom, it is charged on the basis of its identification rather than assuming any projected level of use. Environmental externalities such as pollution costs can be linked to the polluting source, such as diesel fuel and gasoline consumption, to the full extent necessary to equilibrate air quality and other environmental ambiences. Congestion costs, the last of the major components of a pricing design for highway use, are partially paid for by the time loss of those caught in traffic. The costs of time lost due to highway congestion are enormous: In 2000, the average driver spent 62 hours sitting in traffic at a nationwide cost of $68 billion in gas and time lost In Los Angeles, the average driver spent 136 hours stalled in traffic at an average cost of $2,510.[33] Commuting times were also 20 percent longer than they were a decade ago, about 22 minutes one way nationally on average but as high as 32 minutes on average in New York.[34] But not all people's time is valued equally, and people themselves value their time differently at different times, and it is unfair to require people to impose their congestion on others. Therefore, congestion pricing, being explored in several urban regions, provides a rationing of limited highway space. In a sense, that payment for space usage, in time or money, is a form of land rent. ... read the whole article

Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use