Thursday, December 4, 2008

Mobility taxes versus parking requirements

The New York City MTA is in dire financial straits, as are many transit agencies. The state has just announced a plan to avoid deep service cuts that involves bridge tolls and a "mobility tax" that equals 33 cents per $100 of payroll. This tax will be paid by businesses.

Some may scream about this, but this tax does get to the heart of how we pay for our transportation systems. In addition, it's a far better way to finance transportation than the current "mobility tax" on businesses, which is minimum parking requirements. Consider that the proposed tax on payrolls is .0033 percent (.33/$100). Compare this tax rate with what an employer has to pay in order to supply their employees with a parking space. For instance, a reasonable (and conservative) estimate of the cost of constructing a parking space is $75,000 in an underground garage. Not including any maintenance or financing costs, that parking space amortizes to $2,500 per year for 30 years. Now that space is provided to an employee making $50,000 per year. That works out to a "tax" of 5% on payroll ($2,500/50,000). Under this scenario, the employer would save $2,335 per year per employee! And because of network effects the overall transit system would improve due to higher ridership and investment as opposed to the problems associated with people driving everywhere by themselves. Everybody wins! And it's a much better way to pay for transportation.

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