Tuesday, March 10, 2009

Pay Me for Riding My Bike

Perhaps the stupidest public policy idea I have ever heard of is the proposed bike tax. It is not worth talking about the proposal itself as it is not going anywhere and is, as I think I mentioned, stupid. But what is interesting to me is that, in fact, the appropriate public policy is to subsidize bikes, not tax them.

Why? The negative externalities associated with bike riding: virtually none. Minimal wear and tear on roads, sometimes a slight slowdown in traffic and a extra line of paint for a bike lane. Positive externalities associated with bike riding: lots. Reduced congestion and emissions from those that bike in lieu of taking a car, and better health and fitness of riders reducing the toll on the public health system. Public economic teaches us that to get an efficient amount of economic activity that has externalities you have to get the price to reflect the true cost of the activity. In this case the true cost is less than the price of a bike.

Okay, so this will never happen, but we do get part of the way by providing a better biking infrastructure.

2 comments:

Mike said...

Thanks for this post. I have been so dumbfounded since hearing about the proposed bike tax that I've felt mute and unable to respond. As a property owning, tax paying, professional citizen of this state (with paid registration on two cars), I am insulted by the proposal.

It turns out the most curious thing about me is that I commute the four miles from my house to work by bike while one of my registered cars sits unused. Yikes, apparently that means I am so special that I need to pay an additional tax. Fooey!

Robert said...

The way to account for the relative externalities of biking and driving is not to pay people to bike to encourage an activity without externalities, but to internalize the externalities of driving. One method is unsustainable (if everyone bikes, who pays to pay them?) while the other isn't (if a person stops driving, the externalities, and tax, stop).
Another benefit; as the cost of driving increases, people will substitute whichever alternative to driving is best (transit, e-work, walking, biking) without the need for multiple tax credits on each option.