BOHANON & STYRING: If mass transit is so efficient, why the subsidies?

July 2, 2016

Economic AnalysisA public transportation income tax is on the Marion County ballot in November. Similar tax hikes for Clay and Washington townships in Hamilton County (Carmel and Westfield) might not be far behind. The objective is to build a Red Line bus rapid transit connecting Westfield through Indianapolis, as well as fund other improvements.

Which got us to thinking about why transit projects always require large infusions of taxpayer cash to stay afloat. You wouldn’t think so. At first glance, your private automobile is a rather irrational asset. It sits idle 95 percent of the time. When sitting there, it is doing nothing in your garage or a parking lot. It takes up costly storage space. It pouts at unexpected times and requires costly intervention by a mechanic. Mass transit ought to have a lot going for it.

Mass transit in central Indiana once was a thriving private-sector business. Before about 1930, the Indianapolis Traction and Terminal Co. profitably operated electric streetcars throughout the city. A dozen interurban lines ran short-haul intercity trips. For the most part, these private companies asked little of government. Passenger fares paid the cost, plus a profit.

That worked great until governments built usable road networks and automobile ownership became widespread. Autos have one thing no mass transit can ever deliver: private, on demand, point-to-point service. You get in your car when you want, drive to wherever you want, and return whenever you please. Public transit seldom takes you exactly where you want when you want.

Our grandparents opted for cars. In due course, the market bowed to consumer demand and Indianapolis trolleys and central Indiana interurbans disappeared.

Transit can only compete with point-to-point, on-demand automobiles when continually infused with large government subsidies. Bohanan and Styring have no idea what the taxpayers of Marion and Hamilton counties will decide when they vote on these ballot questions. But some alternative future transit scenarios are intriguing.

Suppose it’s year 2025 or 2030. You don’t own a car anymore. You no longer need that inefficient asset. Instead, you subscribe to an app on your smartwatch. You dial up a SuperUber self-driving car. It shows up in a few minutes. You listen to Bach in private on your smartphone while it takes you to your destination.

Point-to-point, on-demand service.

Farfetched? Maybe. If voters approve the referendums, by then you might be paying the taxes to subsidize mass transit.•


Bohanon is a professor of economics at Ball State University. Styring is an economist and independent researcher. Both also blog at INforefront.com. Send comments to ibjedit@ibj.com.


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