Geof Glass, a Ph.D. student at Simon Frasier University, makes an interesting point in a blog post that's been circulating for the last two days among people online fascinated by the economics of parking: The purchases you make at a store surrounded by free customer parking are effectively taxed to make that parking possible.
Glass puts this "invisible sales tax" at about 1 percent, given estimates that parking makes up about 10 percent of the cost of developing a store, while rents make up around 10 percent of a retailer's costs of operating it. That 1 percent, Glass argues, is then passed on to consumers in the cost of goods you buy at said store (which was built with, well, parking). These numbers would obviously shift depending on whether we're talking about a surface parking lot or a more expensive parking garage, whether we're talking about free parking, subsidized parking or pay parking. They would also change depending on the local cost of land beneath that parking. Here's Glass:
This subsidy is like a tax, as governments require developers to build parking. For consumers the effect is the same as if the government collected the tax and built the parking itself. This is effectively a privately administered sales tax.
As a result, drivers are being subsidized by those who walk, bike, or take transit. When you walk to your supermarket, 1% of what you spend is going to those who drive instead.
This is a very simple calculation, and it doesn't take into account for example the fact that rents are also determined by many factors beyond the cost of constructing a building (like the sudden popularity of its location). It also doesn't consider that retailers set prices with many other factors in mind beyond fixed costs (like the desire by, say, CVS, to standardize prices across locations).
But Glass' argument touches on a broader issue: There is a ton of "free parking" in this world, and the costs of creating and maintaining it are baked into many expenses all around us — including expenses paid by people who never drive. (Conversely, Glass adds, retailers like Amazon that don't have to offer free customer parking have an advantage here.)
This happens on a likely larger scale in apartment buildings that include parking spots. There, the costs of parking are inevitably folded into the rent, even if you decline the option of paying an additional monthly fee for a parking spot. That's because monthly parking fees seldom reflect the true amortized cost of creating and maintaining parking. Apartment buildings also frequently build more parking than they need, at the demand of regulation. And that additionally means that if you do pay for a parking spot, you probably also pay something extra for the empty spaces around it. One analysis in the Seattle area found that cheap residential parking may cost some people a rent premium north of $200 a month.
The point here isn't that people should never pay for things they don't personally use. Of course, single people support schools through their property taxes, and people who never ride the subway still help fund it through the portion of the Highway Trust Fund that covers mass transit. But the cheap parking that we see everywhere has a cost that's often much harder to uncover. Of course, also embedded in a retailer's costs are the expenses of lighting a store or stocking it with shelves, but seldom do we think of electricity or building materials as resources that should be free.
(Hat tip to The Direct Transfer)