According to the economists, toll tax should not be repealed since it serves to internalize the externality created by road users. There are costs that vehicle users impose to the society. For example, vehicles pollute through the gases emitted and noise caused by the vehicles. These vehicles also cause accidents. The costs to the society are that people end up in hospitals for treatment. These costs are not born by the vehicle owners. However, the toll tax collected can be used to meet the medical needs of the society considering that the vehicle owners facilitate the health problems suffered by the society. By this, the vehicle owners are able to internalize the costs they did not initially account for.
The government intervenes in internalizing the externalities in that no company or individual is willing to account to the costs caused to the society if freely allowed to. In this regard, the government intervenes because it is responsible for the provision of public goods such as healthcare that are because of externalities.
The 10 percent tax on the value of vehicles is a progressive tax. This is because the tax rate is constant regardless of the income of individuals. This tax is not equitable because the low income earners pay a larger proportion of their income at tax as opposed to the high income earners. The assumption in this case is that all the customers buy vehicles of the same value such that each incurs the same price. The tax is however efficient because it is easy to collect since there are no bureaucracies in their collection. The costs of collecting the tax are low. People are willing to pay this tax since they are charged equal amount of tax. The costs of evading payment are high since one can be easily caught.
References.
Mankiw, N. G. (2012). Principles of microeconomics. Mason, OH: South-Western Cengage Learning.
Vickrey, W. S. (1947). Agenda for progressive taxation. New York: Ronald Press.
