Is it fair to have different taxes for different modes of transportation?
Every now and then, we encounter the above argument while cycling on the road. Cyclists neither pay gas tax nor motor vehicle tax like car drivers do. Therefore, gas tax, one could argue, covers road damage caused by cars. Is it fair that there is no such tax on biking?
To figure out a reasonable taxation on the basis of road damages, one would have to calculate which road damage is caused by which means of transportation and determine the amount of taxes on that basis. Road damages are related to the weight of the vehicle. The heavier, the more force affects the road. The damage does not increase linearly, but with the fourth potency. This means that, for example, two tons compared to one ton cause not about twice as much damage but 16 times as much. Which vehicles then cause the most damage to our roads? To a very large extent it is trucks. Due to their weight, one single truck causes as much damage to roads as 100,000 (!) cars.
And bikes, which are much lighter than automobiles, cause no significant road damage at all.
If you looked at the weight of the vehicle only, trucks would pay radically higher tax than cars and bikes, which would be hardly taxed at all. Perhaps car drivers should therefore start to complain about truck drivers, rather than cyclists.
However, this calculation considers only one aspect: road damage. It would be more comprehensive to conduct a more complete analysis of all the external costs of different modes of transportation. External costs are those costs not directly paid by the driver but by society. Instead of taking into account the operating costs of a vehicle (in case of cars that would be for example gasoline), it means looking at social costs – such as the risk for pedestrians to be injured by cars.
External costs emphasize that one party (the driver) has a benefit (to get from A to B), but the costs of the usage (the accident) are carried by a second party. And the second party has no use of the automobile herself. Thus, the second party subsidizes the behavior of the first.
The aim of an economy should be, however, to achieve the optimum economic benefit of all modes of transportation. To achieve this optimum, car drivers pay taxes on gasoline. Wouldn’t those taxes exist, it would be economically worthwhile to use a car much more frequently. The societal costs then would be (even) higher, which is undesirable from an economic perspective: people die in accidents, air pollution challenges our health system, traffic jams our cities etc.
Therefore, taxes are the attempt to get a price that takes into account both internal and external benefits and internal and external costs. Those prices should lead to a car being used as often (not more, not less) than it is economically optimal – at least that’s the idea. Due to a large number of parameters those ‘optimal’ taxes are really hard to calculate. Most studies however conclude that from an economic perspective driving is too cheap, despite its high taxation. (See also here)
And what if you look at cycling from an economic perspective? Cycling has high external benefits, especially through the extra exercise one gets when cycling, saving a lot of healthcare costs. Contrary to the car, bikes also cause significantly lower external costs, since the latter do not cause air pollution, rarely lead to congestion, use only little space and pose only a low risk for other road users.
So if you think this point all the way through, the national economy, aiming to get the economic optimum, should actually pay people to cycle. Lately, an Australian study has shown that for every 20-minute bike ride, an economic benefit of € 14.50 is gained. From this economic point of view, the current distribution of the tax burden between cars and cyclists would be inappropriate for cyclists. Driving should then be more expensive and cycling should be rewarded financially.
There also is data from Switzerland: pedestrian and bicycle traffic has an external net benefit of 400 million Swiss francs (about 2/3 due to pedestrian traffic), while all other types of traffic combined form a negative external net benefit of 8.5 billion Swiss francs, about 6.8 billion francs thereof due to automobile traffic.
The relation described was also recognized in Norway: cyclists and pedestrians were paid according to their economic benefit. In figures, every pedestrian received € 6 per kilometer, every cyclist € 3. A nice, yet unfortunately unique campaign.