Search This Blog

Tuesday, June 17, 2008

Privately owned mass transit

There was a time when mass transit systems were in private hands. And a time when they were profitable without subsidies from the long suffering taxpayer.

Now, it seems that every mass transit system is government owned and loses money. Bus, rail, light rail, and subway systems are all plagued by high capital costs, appallingly low productivity, high costs, and massive losses.

How can this be so? Much of the problem is a result of municipal, city, and state ownership.

Abysmal contracting practices result in excessive capital costs; political power on the part of unions leads to high wages and low productivity; and abject cowardice on the part of politicians leads to ticket prices that are too low to support decent service - even with massive subsidies from the unwilling taxpayer.

It is hard for a commuter to calculate the real cost of driving to work. After all, the car is already paid for and the extra cost of insurance caused by commuting to work is barely visible. Nor is it easy to measure the additional costs of maintenance and replacement parts. The only really visible cost is for gasoline and, in some places, tolls.

The fact that employers often provide free parking - as an untaxed "fringe benefit" - is yet another disincentive to understanding the true costs of commuting by automobile.

Employers may pay up to $220 per month in parking costs without creating taxable income for an employee but may provide no more than $115 in mass transit subsidies without creating a taxable event. Just another distortion imposed on our economy by a dysfunctional tax system.

Given that it is in the interests of all to reduce traffic on the roads, it would, if you believe in subsidies, be appropriate to abolish the exemption for parking and double the exemption for mass transit.

For those who abhor subsidies and wish to allow the economy to give and respond to price signals, it would be better to abolish subsidies whether the subsidy is in cash or in the form of pretending that income is not "income" and therefore is not taxable.

It would be more interesting to see if, after too many years of government ownership, there are private buyers for mass transit systems. Better yet would be to find private buyers who are capable of making profits without the benefits of subsidies.

No comments: