Magic Carpet Ride Free from Morgue FileAlmost everyone thinks parking is a problem; either there is too much of it or too little; it’s too expensive or too cheap; it promotes auto-dependence or it promotes the success of retail business. And slap a tax on parking and fireworks are sure to follow. In fact, Seattle has recently started a debate about increasing its Commercial Parking Tax (CPT) by 5 percent to a total of 15 percent for each parking transaction. The extra money is for transportation projects to support walking, biking, and taking transit. Downtown businesses are moaning that the increase will hurt business, which sparked my interest in looking through the literature on the issue. Here’s what I found.

  • Parking taxes are unlikely to affect parking demandmuch of the data point to the fact that demands for parking are pretty inelastic—that is, price will have to go up a lot before people stop buying it. People don’t figure out what parking is going to cost downtown and then decide whether to drive or not drive. People come to central business districts because they want what’s there—shopping, work, entertainment—not because it’s cheap to park.

    Parking is a bad use of a scarce resource—parking is expensive to build and maintain. And it takes up a lot of productive space that could be better used for more productive uses. Fortunately, planners are realizing the value of mixing uses together—retail, housing, commercial—rather than pushing them apart and linking them with highways. As downtowns become more dense, property values increase. It makes more financial sense to have customers come in by bus, train, or foot than to build expensive car storage.

    No effect on parking demand means no effect on shopping—the economy is facing the worst downturn in more than a generation. If anything is hurting business right now it’s that the retail sector of the economy is struggling across the board. People are staying away from downtown shopping not because parking is expensive, but because they have less buying power. (I couldn’t find anything in the literature that parking taxes drive down retail demand. If there is something, I’d love to see it.) Once the economy recovers, retail sales will go up again, but I don’t see any evidence that un-taxing parking will improve retail sales.

    More than fifty cities in the United States have commercial parking taxes of some kind or another. Here in the Northwest, the Washington cities of Bainbridge Island, Bremerton, Burien, and SeaTac—along with Seattle—all have commercial parking taxes ranging from 6 percent to Seattle’s current 10 percent. The Vancouver, BC area also has a commercial parking tax. Pittsburgh, Pennsylvania’s parking tax rate is as high as 50 percent!

    The good news is that the magic carpet does exist! It’s called transit, and while it can’t handle all the folks needing to get in and out of the downtown core, it does a lot of what business wants—efficiently delivering customers to shop—without requiring the construction and maintenance of thousands of parking spaces. As it turns out, raising the parking tax by 5 percent raises $10 million to do just that. It’s like magic.

    Photo credit: alvimann from morguefile.com.