I was interested to read about a recent ‘I Pay Road Tax Campaign‘ (I have talked about this before – Should cyclists pay road tax) At the risk of repeating myself, here are some more thoughts on the issue.
I Pay Road Tax
Of course, nobody pays road tax because it was abolished in 1930. But, most adults will pay Vehicle Excise Duty (which is popularly known as Road Tax)
Cyclists are often criticised for not paying ‘road tax’ and this is a worthy campaign to raise awareness that we all effectively pay for the road and its maintenance. It helps to provide a defence against aggressive motorists who would like to see cyclists pushed off the road, because occasionally they have to slow down to overtake someone.
As well as being a cyclist, fortunately or unfortunately, I am an economist. One particular interest in economics is the concept of optimising social welfare in the presence of consumption or production externalities. In an ideal world, externalities would be internalised through Pigovian taxes or subsidies to reflect the true social cost of different activities.
If I haven’t lost you already, – hang on. What does all this mean in practical terms?
There is a private cost of driving – petrol and taxes e.t.c. But, driving a car also creates negative externalities which are borne by society – not the individual driver. These external costs include:
- - Congestion – estimated to cost the UK economy in the region of £22bn a year. A huge economic cost and also high personal cost of being stuck in traffic jams,
- - Pollution – For example, CO2 emissions which contribute to global warming. Higher rates of asthma e.t.c
- - Accidents. Motorised vehicles cost the lives of over 3,000 a year. Typically, cyclists may cause the deaths of 0,1 or 2 people a year.
- Wear and tear on roads which increases disproportionately with vehicle weight.
For driving a car the social cost is much higher than the private cost. To get an efficient allocation of resources – to help reduce congestion, pollution and accidents, – the cost of driving should be much higher than the free market price. Petrol tax helps redress the balance, but, it is not enough to reflect the social cost.
External cost of driving
By contrast, cycling doesn’t have the same negative externalities. Therefore, the social benefit of cycling is higher than the private benefit. Cycling should be subsidised. The idea of taxing cyclists who don’t create the negative externalities would not make sense
In a free market, we get an overconsumption of cars (best illustrated by interminable traffic jams). When deciding to drive people ignore the external costs of driving. When cycling people underestimate the social costs. Therefore we get underconsumption of cycling.
To cut a long story short, cyclists shouldn’t be paying the same level of tax as motorists. It is possible to argue how high the external cost of driving is. But, I’d rather support a campaign where people who cycle to work get a subsidy equal to say £100 a year – (the cost of Vehicle Excise Duty.)
So maybe I’ll make a bike jersey which reads.
“Higher Pigovian taxes for Motorists! Subsidies for cyclists! Let’s try and achieve a Pareto optimal outcome on our roads!”
- Now if that doesn’t sound catchy I don’t know what does!
BTW: I am a motorist, but, would welcome higher taxes on driving.
It really annoys me this argument about road tax (I have made the same point in another blog post). At home I have a large Mercedes and BMW sitting on the drive – I pay a higher rate than most for road tax on them because of their size. Yet I cycle into work every day (on the days I don’t, I use the train). All told I probably average 15 miles a week driving and about 150 miles on the bike.
So here I am subsidising the other drivers – paying road tax and not using the car on the road – they should be thanking me – not pulling this dull old argument out. I don’t think I am very different from many cyclists except maybe the younger ones – really this argument is just too pathetic for words.
Interesting read. However, I was unaware that there was serious enough argument that cyclists should pay road tax. Still, this is a good defence if I ever come up against it.
I would take issue with this:
“aggressive motorists who would like to see cyclists pushed off the road, because occasionally they have to slow down to overtake someone.”
That’s a pretty comprehensive over-simplification which overlooks the sins of most cyclists (not that drivers are blameless).
Many cyclists are car owners. Whilst they are cycling their car is idle.
Note too that cyclists hardly wear the road at all. Road wear goes as the fourth power of axle load. Say a bike is 100kg and a car is 1tonne and is balanced the same, then a car does 10,000 times as much wear.
If 1 pound of a car’s tax is for road wear then a bike should be paying <1/100p/annum. But their mileage is much lower so something of the order of 1/500p/annum.
So the sales tax that your grandparents may have paid for some brake blocks have overpaid for your lifetime's use of the road.
There is always the old fashioned, simple slogan on the back of the jersey that says “One Less Car”.
Seriously though, if the government wanted to tackle Global Warming seriously if should consider extra subsidies for cycling commuters, or people who use their bike for work instead of their car during the day. My work place offers a flat rate of £1.20 a day for bike use, but 40p per mile for car use related to work. While it’s welcome, it barely covers the cost of wear and tear on the bike and is hardly an incentive to ride for work.
>Pigou Velo – internalising your externalities
Excellent Gareth! like it
Can’t fault the argument – slightly worried that the slogan might not catch on. How about:
Pigou Velo – internalising your externalities
Cyclist do pay for the roads, just like everybody else. Some drivers don’t (have to) pay VED, but shouts at the drivers of new VW Polo’s, “you don’t pay tax get off the road!”
Love it! How about I put “Higher Pigovian taxes for Motorists! Subsidies for cyclists! Let’s try and achieve a Pareto optimal outcome on our roads!” on the inside pocket of the jersey?
a facinating article.
thanks
That’s a very good post. The “lets tax cyclists” argument has been raising it’s head since the turn of the century. They should also give me a rebate on my car tax (well Company car anyway), because it only does about 8000 miles a year. During the winter it does about 10 miles a week and sits on the drive. In fact, my bike does more miles a year than the car does!
That’s one of the best arguments against taxing cyclists that I’ve ever read. Thanks!