"A land tax for transit is fair, because transit service increases land values, and those who benefit the most pay the most."
A recent issue of monthly publication of the Heartland Institute, "Public Transit Creates Value but Fails to Collect," calls for the use of a land value tax to supplement transit funding in order to "avoid (or minimize) service cuts and fare increases" as many transit agencies around the nation "have been in financial difficulty for a long time."
The essay compares the land value tax to more commonly used alternatives like sales tax or automobile registration fee. The question is whether we want consumers, motorists, or landowners to pay the transit subsidy. "To some extent these are the same people, but the economic impacts of taxing them aren't the same." A sales tax may burden the poor people the most and drive commerce out . Increase automobile registration fee may be less regressive than a sales tax, yet it is unfair for low-incomers cannot afford to live in the areas with good transit service, and hard to prevent evasion by people who register their cars elsewhere.
A land tax is considered a much better choice. It is not regressive "because many poor people own no land at all, and if they do own land it is of relatively low value;" it can't be evaded "because land is visible and real estate tax information is public;" it is fair "because transit service increases land values and those who benefit the most pay the most;" and it can't drive away jobs "because it isn't a tax on economic activity."
2 comments:
My first economics course used one definition of efficiency as when the price equalled the marginal cost. The problem with transit is that the marginal cost of an extra passenger (unless it is full) is zero. As a result no transit system could ever pay for itself at efficient pricing, or requires subsidies to do so. Using a land tax to pay for the high fixed costs and user fees for the low variable costs comes much closer to economic efficiency.
In some ways this is returning to the old way railways used to fund themselves by buying up all the land surrounding the railway to be and charging the inflated rents for it after it has been built. In this private instance they are just called rents and in the public case they are called land taxes - but the flows of money are just the same.
Good point. What you described as "the old way" of railway financing is now successfully used in Japan, Hong Kong, and other places. It is time for us to re-think our "socialist" way of transit finance.
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