Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

A transport tax would get us moving

with 4 comments

This is an opinion piece from Rob Williams published by the Guardian. He compares the method of raising funds for public transport (what we call transit) in Britain and France.

In Britain, he notes, public transport funding is now uncertain – partly due to the notable failures of what we call P3s to come up with workable solutions,  and cites the collapse of the privatisation of London Underground.

Leeds, Liverpool and Portsmouth, proposed tram schemes were scrapped by the Labour government, after millions of pounds had been spent developing the plans, in large part because of the uncertainties about costs and funding. If funding was one of the main impediments – even before the credit crunch – to providing a public transport system fit for the 21st century, then maybe we should look across the Channel to see why the French have one of the best local transport networks in the world.

Sounds familiar doesn’t it? The three schemes mentioned here might be compared to the on again off again Evergreen Line. Things do get built in the UK – for instance Nottingham has recently announced it will extend it tram system both south and west – schemes which have been in the planning phase for many years. But the contrast with France shows that there is an alternative that gives regional authorities both significant cash flows for capital schemes and support for running costs. It is based on a payroll tax. Not a big one – just 1% of the payroll for employers with more than nine employees, which can go up  to 1.75% if there is a big project (more in the Paris region). And it can only go on transit projects – not roads or bridges.

Those who gain from a good public transport should pay something towards it. As the International Association of Public Transport (UITP) says, “employers and retailers both gain from the provision of public transport services which give them access to a wider labour market and retail market respectively”. The most important source of funding for local public transport projects in France is the versement transport (transport tax), or VT for short.

Interesting view that – retailers actually benefit from transit spending! And again, note that France lead Europe in the development of hypermarchés, the huge big box stores on the edge of town with vast parking lots that sell nearly everything.

I can hear the howls here already. First from the groups like the DVBIA and the local Chambers of Commerce. The exemption for small businesses will be ignored – it will be decried by both left and right as a “tax on jobs” and will be said to kill enterprises. Moreover both will insists that only massive spending on more roads that allow people to drive everywhere can actually help business. You can bet too that the significant lobby that backs highway expansions will start work immediately to undermine the proposal. It clearly runs counter to the interests of the people who sell gasoline, cars and tires – as well as those who benefit from big contracts to build and repair roads and bridges. These are the people who have dominated the debate in North America for years, with the results we see before us now.

There’s also the argument – recently aired by Paul Landry among others – that many people in this region do not get good transit service now so they should not be expected to pay to make it better.  Which I think is a syllogism.

Perhaps someone who has been part of the recent Translink exercise can tell me if the idea of payroll taxes was ever raised as part of those discussions? I cannot recall it getting mentioned in any of the coverage I have seen – and I am sure it would have attracted a lot of notice if it had.

Studies in France have confirmed that the VT does not have a significant effect on labour costs, nor on company location. It has a very limited taxation impact (less than 1% of the overall French tax burden). It is a powerful tool for financing and developing public transport in France, which is why the VT has been introduced in more than 85% of urban areas. Almost 40% of the costs of public transport in France are financed by the VT.

In North America we have become entrapped in a dogma that says all taxation is bad – and all government  spending is inefficient. That taxes must be cut for both corporations and the wealthy must be reduced – or eliminated – in order to promote economic growth, or rather produce increases in the GDP, which is not a very good indicator of well being in my – and many others – view. The fact that the expected results do not happen – that wealth does not trickle down, that corporations end up paying little or no tax, and that government spending is now prioritized to prop up corporate well being while essential social services are allowed to wither – being largely ignored by the corporate owned and controlled media.

It is also significant that France avoids the trap of the “balanced” policy that is often foisted on English speaking nations. Not that the French do not have autoroutes, or have spent lots of government money on car (Renault, Citroen) and tire makers (Michelin). But that they do so at the same time as spending much more on railways and public transport in general. Here the advocates of “complete systems” are really simply trying to divert as much as they can get away with to road spending. In the early days of Translink it was common to hear the argument that – for instance – you can’t put in a bus lane on a two lane highway. And even the very dubious – well the population has grown much faster than the road network in recent years, so now we have to catch up. And of course the entirely specious case for more road spending to improve freight movement. (Even on the Port Mann Bridge trucks are less than 8% of the traffic flow – and that is the busiest freight road in the region.)

Rob Williams ends by making economic arguments to support the idea, but I am not going to take that line. I actually think that we should embrace the notion that we probably have more than enough now – it just is not distributed very well. And we also know that what we have been doing – are doing now – is not sustainable. Exponential growth cannot happen for very long in a finite system – and we human beings have to recognize that we have severely tested the ability of the environment and ecology on which we depend for the essential things in life  – air, food, water – and one of the reasons for this is our relatively recent adoption of personal motorized transportation for everyone. We have known for a long time that this cannot be made to work in large urban regions – but that has not stopped resistance to public investment in better alternatives. We also now realize (or ought to) that reduction of car use and greater development densities are going to be essential components in a more sustainable future – both regionally and globally. Better transit is an essential part of reducing the size of our footprint – carbon or ecological.

Yes, adopting a payroll tax in one region – or one province – may well encourage some firms to think about relocating. But the ones that stay and see the benefits of better transit will be the long term winners. I think Metro Vancouver could actually start to live up to its reputation for a change. It is significant that not only did Microsoft decide to relocate to Richmond recently, but the first ting it did was to set up an employee transit system. Obviously some companies realize that if you want to recruit and retain employees, a favoured spot in the company parking lot may not count for very much in future.

Written by Stephen Rees

August 16, 2009 at 11:15 am

Posted in transit

Tagged with ,

4 Responses

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  1. As one of the people that are regularly surveyed by TransLink I can tell you that the payroll tax wasn’t even mentioned, much less discussed. Surely you don’t expect TransLink, or whoever make their surveys, to know about France? At several open houses about the LRT Evergreen line they had photos and a video about the Strasbourg tram but none of the staff “in suits” in attendance knew much about French transit systems.
    The following link, comparing Paris and New York financing talk about the transport tax.
    One should note that the transport tax rate is not the same across the whole Paris region. The rate for the less populated towns is much lower than for big ones. Employers with less than 9 staff don’t pay it and employers with 9 and more staff don’t pay during the first 3 years.
    If anyone want to know about the STIF (Societie des transports de l’Ile de France–i.e Parisian region)check
    In French of course but you can get an English version at the top right (documents en langues etrangeres) but it takes a long time to open.
    let’s just say that the board of the STIF is made of regional and municipal politicians plus a representative for businesses and a representative for special public services. Quite different from Translink.…/Session02-RIVALTA.pdf is a document in English about transit in Lyon France.It includes info on the budget, on the board managing the system etc. (Lyon transit system, is more relevant to Vancouver’s than Paris or New York…)

    Red frog

    August 16, 2009 at 1:27 pm

  2. To develop a top quality mass transit system the French model of operation may be copied. It is true that population density in Europe and U.S. are completely different. But then development model in the area of mass transit in France is very praiseworthy. So it can be totally copied including the idea of raising fund by taxation of the business establishments.

    [moderator’s note: advertising deleted]

    Amitabha Mukhopadhyay

    August 17, 2009 at 10:39 am

  3. If you look at some of the work done by SmartGrowth BC – Innovative Infrastructure Financing Mechanisms for Smart Growth, payroll taxes and commuter taxes are discussed.
    I thought TransLink reviewed that work!
    Would the Province have welcomed TransLink proposing such a tax?


    August 25, 2009 at 7:10 pm

  4. this tax has been put in place in the 60′ at a time the transit system was mostly conceived to carry blue collars at work…not to ensure people mobility.
    due to this assumption transit service are almost inexistant on week-end and night in french provincial cities and even Paris suburb…and well usage pattern of transit has considerably evolve since the 60′ and tax employer make no sense anymore, when so many sector benefit of good transit system.
    In addition, tax revenue is dependant of payroll not number of employee, so city with high wage get luxury transit service for white collar, while other blue collar city ferries worker in antic bus.

    at the end 1.75% of tax is eventually not too much in a country taxing wage overall 80% or more, but in fact it is 1.75% tax is always too much…and problem of transit is not a tax problem it is a problem of subsidiarization of other transportation mode. stop it (means introduce road pricing), and you will not need to invent new taxes!


    September 4, 2009 at 10:12 pm

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