Transport taxes with multiple trip purposes

Abstract

I consider an urban transport system in which passenger cars and buses are used for commuting trips and for leisure trips, where both transport modes contribute to congestion, and where commuting is a strict complement to taxable labour supply. The optimal tax structure for raising a given amount of government revenue is discussed for the cases where differentiation of the transport tax between trip purposes is and is not possible. Using a stylised dataset for Belgian urban enviroments, the optimal tax structure is computed. When differentiation of transport taxes between trip purposes is possible, a shift to the taxation of relative complements to leisure is observed. When differentiation is not possible, reforming transport taxes generates substantial welfare gains only when the labour tax can be simultaneously reduced.transport; externalities; congestion taxes; general equilibrium welfare effects