We should rid ourselves of the notion that “profitability” means paying for a service through user fees alone
Cap’n Transit put out an interesting post this morning arguing that transit profitability is possible if fares are increased, but he acknowledged that transit plays an important social service role and that raising fares would place transportation out of the hands of a lot of the poor. He ended with the following comment:
“My beef is that somebody is being less than honest here, and I think we can ill afford to do that. Transit is critical for lots of reasons, and getting large numbers of people to shift from cars to transit would bring tremendous benefits to society at large. But we can’t do that if we can’t afford to run the buses and trains where and when people want to go. What are we actually trying to do, and how can we accomplish that?”
Cap’n Transit is correct in pointing out that much of the debate on transit funding skirts around the fact that raising fares might actually produce a fully-funded transit system, unreliant on subsidies, especially in his New York City. But I think he doesn’t delve deep enough into the meaning of profitability, nor does he describe what an alternative rhetoric on transit funding might entail. I’m going to take this post to address the question of profitability quickly.
It’s quite clear that transit plays a redistributive role in our society, and that’s a good thing. Public transportation provides mobility for all segments of the population, and that mobility is a right. To think otherwise is to suggest that the poor should not have as much of an ability to get around as do the rich. The consequences of placing charges representing the actual costs of providing a transit service on the riders would, in almost every case outside of the densest cities, place an undue burden on the riders and decrease the ability of much of the poorer segment of the population to transport itself.
Today, in addressing the need for subsidies to transit, most politicians and advocates would suggest that transit simply cannot be profitable. In other words, fares cannot cover operating costs. As Cap’n Transit suggests, this isn’t entirely true – raising the fares exponentially would eventually allow fares to meet operating costs.
But the fact is that it doesn’t matter whether transit is paid for by taxes or by fares, it just matters that the service is provided. Fares in themselves are regressive in that they charge the same for everyone, no matter that person’s income, but they’re low enough in most cases that it doesn’t make too much of a difference. Raising fares makes transit systems more and more regressive and increases the pressure on the poor in our society, something we should not be doing at any time, certainly not during a recession.
Increasing the obligation of paying for transit through taxes, on the other hand, makes a lot of sense, because it takes advantage of our progressive income and property taxes (and semi-regressive* sales taxes), which ask more of the wealthy than they do of the poor. When we’re considering how to pay for an essential service, choosing to do so through progressive means ensures more equality of access to services.
Operating costs do not change whether transit funds comes from taxes or from fares; they simply must be somehow covered. We have developed a collective assumption that profitability means paying for something through user fees: supporting transit through fares.
The overriding point, though, is that the meaning of the word “profitable” itself is subjective. We could argue that getting enough revenue to pay for a transit service is profitable if all the money comes from fares, but we could also argue that a transit service is in the black even if most of its resources come from a devoted tax base, as long as all revenue – fares and devoted taxes – eventually pays for the services a transit system provides. We have made a decision in our society to subsidize transit; what that actually means is that our government takes some general revenue and diverts it to transportation, rather relying only on user fees to cover operation costs.
But the rhetoric of our politicians and advocates rarely takes this truth into account. Because of the lack of a strong left in the United States – because of the lack of a political force that believes strongly in supporting the poor – we often resort to the maxim that “transit can never pay for itself.” An alternative rhetoric, one for which Cap’n Transit seems to pine, would suggest that the funding mechanisms for transit must come from a progressive source for the benefit of society, rather than from a regressive source for the benefit of only those capable of affording the “profitable” service.
*Note: in many jurisdictions, sales taxes are not applied to essentials like food, so they’re not fully regressive.