Fund Public Transit With Land Taxes, Not Fares

I’m over at Demos with a post on how the land value tax can be used to reduce wealth inequality at the local level, with no need for Congress or state government to do anything. You can get your city government or local school board to do this, which should be a much easier political lift.

This is an increasingly important issue since many economists are warning that in the future, more and more wealth will accrue to assets, and less and less to wage labor. Income inequality is just one part of the problem. We need to focus more on wealth taxes, not just income taxes, and one of the best wealth taxes around is the land value tax.

I think this would be an excellent way to pay for public transportation, as a replacement for fares:

This is a distributionally progressive tax, and it is an especially good way to fund public transportation, as it encourages compact walkable development. The LVT is sometimes referred to as “value capture” financing, when it’s used as a dedicated revenue source for transit, since it works by capturing back some of the land value windfall that nearby private landowners reap from public investment in transit.

This leads us to another idea for the local government agenda on inequality – shifting the burden of transit funding onto land near transit stations, and away from regressive user fees. A few American and international cities have experimented with making transit free to users. The varying results call for more research and policy experimentation, particularly with regard to issues like disruptive passengers and maintenance. But there’s no question that shifting the transit funding burden off of transit riders and onto transit-adjacent landowners would have a progressive impact on the distribution of wealth. Transit users’ real wages would increase as fares shrink or disappear as a household expense.