v'ܩ Taxes for Public Transit; Yay or Nay?
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Taxes for Public Transit; Yay or Nay?

March 1st, 2010

Lately, I’ve been thinking a lot about public transportation and its related subsidies. The reality is that I expect a large amount of money from the ensuing Job’s Bill will be gobbled up be local governments to build out public transportation infrastructure. The federal government certainly doesn’t have the money to pay for this program but that’s not really the point of this article. Rather, I’m interested in whether or not tax based subsidies for public transportation are worth it for the average city. Especially when you consider all public transportation systems operate in the red (at a loss).

Measuring the wrong things

While researching for this article I ran into this site explaining the cost reductions we’d all get by providing a much more comprehensive public transportation service. Unfortunately, I found the research to be mostly useless. The author’s talk about the annual subsidies necessary to run the high quality public transportation service and explains that their research shows people in places with high quality public transportation will drive quite a bit, 30%, less resulting in a substantially lower annual subsidy costs for roads, parking, etc. He shows a savings of about $1000 per capita. Now that’s nothing to thumb your nose at but I just don’t buy it.

While it didn’t appear the author, Todd Litman, included initial costs of providing the public transportation to his report its clear he is one smart cookie. Mr. Litman runs a research group focusing on public transportation policy and he is also on the editorial board for at least one professional research journal. Unfortunately, people from outside the U.S. tend to not appreciate the American obsession with cars, something that is deeply psychological - and not something likely to go away.

Mr. Litman’s proposed cost savings are based on the assumption that cities suddenly endowed with this new, fancy, public transportation will abandon their cars at the same rate as people in cities that already have really nice public transportation. I don’t buy it. Perhaps someday public transportation would reach the same level of adoption in these new cities but not in the near future, perhaps a decade, and in the mean time we’d be subsidizing both the public transportation costs, because we have to always have the nice public transportation to get people to eventually adopt, and the road and car costs because people will still be driving.

At the end of the day, Mr. Litman has to realize that, at least in the U.S., cities with high quality public transportation have a culture embedded in the fabric of the city relating to the use of public transportation; a culture entirely absent from the rest of America.

Are there good reasons to keep paying for public transportation?

I live in Nashville, TN and 1.8% of our commuters use public transportation. Nationwide 5% of workers use public transportation, a measurement that is heavily skewed by the top performers. In my city we have recently been subsidizing the public transportation service at about $20 million a year. What does that 20 million get us? Assuming there is about 250,000 people working in Nashville - 4500 of them commute using Nashville’s public transportation system. With the median household income being $39,000 in Nashville we are generating about $175.5 million in salaries for commuters annually. Is that worth $20 million? I’m not sure. It’s hard to tell if those are people that can’t afford a car and therefore wouldn’t have a job without public transportation. There is no income tax in Nashville, or Tennessee, so the only funds returned to the city come in the form of a heightened sales tax which I seriously doubt returns the entire cost of the subsidy back to the government.

Personally, I lean towards thinking this is a worth while expenditure, even while operating in the red, as long as the subsidies provided by the government to cover this aren’t massive amounts of deficit sending.


Author: T.J. Seabrooks Categories: Uncategorized Tags: