Monday, May 3, 2010

Studded Tires, Biking and Pigovian Taxes

A few comments in the blog and through e-mail have prompted me to clarify a few things about my take on the issue and Pigovian taxes in general.

First, let's be clear - a tax on studded tires would NOT BE a new tax. The tax is already there - it is imposed on all of us to pay for the damage studded tires do to our roads. The specific Pigovian tax would do two things: it would assess the tax on the people who engage in the activity that creates the social cost and, more importantly perhaps, it would DISCOURAGE that same activity. This is why such taxes are efficient: in the end only those who really need studded tires will use them and they will pay for the additional wear and tear to the roads.  As a result we should see less of the activity that has negative external costs.

Also in the comments the issue of bikes arose.  As I have stated before, it is likely that biking creates a net social benefit, not a net social cost.   Improved health, lower emissions, less congestion and less wear and tear on the roadways could reasonably be expected from increased biking, so by the same principle we should be subsidizing bike riding.  Which we do of course by investing money in bike paths, bike lanes, bike boulevards, etc.  The Pigovian principle suggests that these are entirely appropriate expenditures.

And finally, Jeff in the comments wonders why such a tax would be considered a 'liberal' fix to the problem.  He thinks of it as a 'conservative' response - just as a number of conservative economists, most notably Greg Mankiw, have repeatedly endorsed Pigovian taxes, this preserves the choice of studded tires for those who really want or need them but it places the responsibility of paying for the added wear and tear on the very user themselves and returns efficiency to the market.  It is a market based response that preserves individual liberty but requires individual responsibility.

To me it is just the right economic response.    


Bill Night said...

In the next-to-last paragraph, you say we should and do subsidize bike riding.

Unfortunately, you're going along with the myth that bicyclists are freeloaders who take up space on roads paid for by gas taxes. There are (at least) two things wrong with that viewpoint. Firstly, most bicyclists also have cars and pay those road-related taxes and fees; secondly, a lot of funding for the road and highway system comes from other sources that everyone pays into.

If anything, bicycle infrastructure is underfunded, not subsidized.

Ralph said...

Firstly, most bicyclists also have cars and pay those road-related taxes and fees;

Apples and oranges. This is the laziest argument that gets made over and over again. Your car is not your bicycle. You choose to have a car, thus you choose to pay those fees and taxes associated with owning a car. Because you choose to pay for a car does not mean you get to say it is paying for your bicycle use.

secondly, a lot of funding for the road and highway system comes from other sources that everyone pays into.

I'd like to see your list of "a lot" of taxes and fees a person whose sole transportation is a bicycle pays to have the road and highway system. Also, what percentage of overall funding does these fees bring to the table?

Patrick Emerson said...


I take exception to your assertion. I don't subscribe to any relative comparison, but I can understand the sensitivity of the issue - in Portland particularly. As you mention, we subsidize car driving as well. I don't think of either as freeloaders. I also didn't mean to say that we should subsidize biking and we are already doing enough. I think we could do a lot more given the size and nature of the social benefit.

I think that using the term 'subsidy' was perhaps too loaded. My point was that it is entirely appropriate for society to encourage biking due to the positive externalities much the same way it is appropriate to discourage things that have a negative externality, that is all.

Now, off I go to ride the Springwater trail downtown...

Bill Night said...

@Patrick: I didn't mean to sound too critical. It's just that there is a widespread belief that the gas tax pays for every square inch of every road, and thus that bicyclists are "subsidized" by motorists. In this sound-bite age, words are important.

@Ralph: I'm not an expert in this area, so the best I can do is point to this Revenue Sources document from the Portland DOT. $67M from vehicle fees and taxes; $109M from various other fees and taxes. Granted, some of those fees are development or business fees that it was a stretch for me to say "everyone" pays into. But it does illustrate that bicycle infrastructure is not taking money out of the pockets of people who want to drive a car everywhere, as you hear from a lot of anti-bicycling crybabies.

Ralph said...


Interesting rundown for the city of Portland, but I'm sure you noticed the the only chunk in that entire list that could be placed squarely on a bicycle user who does not own a car is a portion of $6M (which by the document has now been reduced to $4M a year) from the general fund which is shared by every resident, bicyclist or not. The rest of that comes from gas taxes, parking fees, grants, and contracts the city has with people who require traffic changes and road repair as part of their doing business (construction, TriMet, water/sewer, etc).

So 2.3% of Portland's Department of Transportation's budget comes from the general fund into which all residents pay.

Bill Night said...

Ralph: You're wrong to say that the general fund portion is the "only chunk ... placed squarely on a bicycle user". You think bicyclists are somehow avoiding water and sewer charges, Tri-met fares, building permit fees, etc.?

Your argument can cut the other way also: many motorists won't pay a dime of the $18M parking revenue. Even the $49M "gas tax" figure includes weight-mile taxes levied on the trucking industry, so it's not squarely on the back of auto commuters.

One more minor point: I think you misread the general-fund section. It doesn't say that the general fund contribution will be reduced to $4M. There is some bureaucratese about various sums, but I read nothing that says the $6M in the upper box will be reduced. So the general fund contribution isn't 2.3%, it's 3.4%, compared to the 28% gas-tax contribution.

Ralph said...


When I said "squarely" what I meant to say was a direct relationship to the fee a user pays and the service provided. My apologies for being brief. There is no direct correlation with a bicyclist (or a motorist) on any of the other fees. The other fees are voluntary. You are correct, many motorists, do not pay the parking fees either. I also believe parking fees collected should only be used to maintain or grow the infrastructure as required for parking facilities and parking enforcement.

As to the other fees, we can discuss the $20 million theft the sewer fund some other time. :)