Thought for this Day: Regressive Transport Levy in Auckland?

Monday, 4 May 2015, 10:10 am
Article: Keith Rankin

Thought for this Day: Regressive Transport Levy in Auckland?

Keith Rankin, 4 May 2015

The press release from Auckland Council about the proposed interim levy on ratepayers is ambiguous, possibly intentionally so. First it describes "an interim fixed levy on ratepayers" and on the next paragraph mentions a levy that "has been calculated at an average of $99 a year for non-business ratepayers". The latter quote suggests that the proposed levy is not fixed.

Checking the actual report confirms that the proposal is for a fixed levy of $99 per year on residential ratepayers. But the confusion shows in the various media reports on the topic.

A fixed charge is a regressive tax; it's like the poll tax that ended Margaret Thatcher's political career in the United Kingdom. It impacts significantly more on poor households. And while $99 per week might not be much, if we accept the principle of regressive taxes in this case, then the door is open to other more substantial 'fixed levies' in the future.

Economics 101 tells us that the efficient price for public goods – such as roads – is zero. However, when congested, roads no longer meet the criteria of public goods. It is economically efficient to charge a fee for the use of congested goods.

A congestion tax on vehicles that enter the most congested parts of Auckland's (or Wellington's) roading system at peak times can both lessen congestion and raise revenue. (A good design feature would be to allow one free trip in the congestion zone per week, to reduce bureaucracy for casual use of these roads, and to exempt the small rental cars that are used by tourists.)

Some will object that many of the people who must commute by car to or through Auckland's 'Spaghetti Junction' at peak times are from poor households. Most by far, of course, are not from poor households. Nevertheless, where such a levy represents an unavoidable business cost, there should be a clear expectation that employees can be fully or substantially reimbursed by their employers.

We must be wary of the imposition of regressive taxes by stealth. Further, while the user pays principle does not work well for public goods, it does work when public goods morph into congestion goods.

ends

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Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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