When it comes to public finances, government officials tend to live in the moment. They might want to make an exception in this case.
Google, Uber and Tesla are all testing cars in which powerful software, not humans, operates the vehicles. It’s not hard to foresee the danger these self-driving cars pose to automobile sales, which is one reason why General Motors last week decided to invest $500 million in San Francisco on-demand car service Lyft. Smart move, since GM officials seem to be getting ahead of what could be the mother of all disruptions.
Mayors and governors should adopt GM’s forward thinking because driverless cars will inevitably drain hundreds of millions of dollars of revenue from public coffers each year.
Reduced car ownership will mean fewer automobile sales to tax. But perhaps more important, cops and meter maids will write a lot fewer tickets because smart cars presumably won’t double park, change lanes without signaling or bust through the speed limit. Since cars sit empty about 95 percent of time, self-driving cars
can greatly increase efficiency by constantly being in use.
“If vehicles are busy almost every hour of the day dropping off one traveler to pick up another, then parking, towing, traffic violations and speeding tickets revenue will significantly decrease,” according to a report by the Brookings Institute in Washington, D.C.
In other words, less human error equals less money for politicians to fight over. For fiscal 2016, the San Francisco Municipal Transportation Agency estimates 32 percent of its operating revenue, or $300 million, will come from sources like parking meters, fees and fines.
“Once driverless vehicles have a proven track record, local governments will lose a major source of revenue,” the Brookings report said. “In fact, you could say government is essentially left out of the game entirely, aside from still being on the hook for maintaining a transportation infrastructure without revenue sources.”
Until now, the discussion about autonomous vehicles has largely centered on how the technology will impact other businesses, like carmakers, taxi drivers and auto insurance firms. But government stands to lose the most because public bureaucracies don’t adapt well to wholesale disruption, at least compared to the private sector.
‘Gas tax a failure’
“Increased fuel economy and electric vehicles have made the gas tax a failure,” said Richard Wallace, director of the transportation systems analysis group for the Center for Automotive Research in Ann Arbor, Mich. “Yet you see no political will to do something” to replace the revenue.
The potential impact of autonomous vehicles on public revenue has not yet crystallized. A study by the University of Michigan’s Transportation Research Institute said self-driving cars could reduce car ownership by up to 43 percent, from 2.1 to 1.2 vehicles per household.
Roughly speaking, that means losses for state revenue could look like this: the California New Car Dealers Association estimates people registered more than 2 million new cars last year. Since the average cost of a new car totals around $33,000, California generated around $5 billion in taxes from those sales (using a 7.5 percent tax rate). Based on the University of Michigan’s worst case scenario, the state could lose $2 billion in taxes on new car sales.
Cities also raise enormous amounts of money from motorists who screw up. In fiscal 2012, the agency generated nearly $89 million from parking violations alone. Combined with fees from parking meters, the number shoots up to $143 million.
Those numbers will dramatically fall if people fully embrace autonomous vehicles.
Fee for car use
Still, autonomous vehicles hardly represent a zero sum game. If self-driving cars are safer than human operated ones, fewer people will get hurt in accidents, resulting in cost savings for the taxpayer. The National Highway Transportation Administration estimates that public revenue pays 7 percent of vehicle crash costs. Therefore, autonomous vehicles could save taxpayers about $10 billion a year, according to the Brookings Institute.
Throw in less traffic congestion and need for road repairs, the savings could jump to more than $100 billion a year, the think tank said.
But states and cities will still need to offset the immediate loss of direct revenue from parking and traffic violations. One idea is to move to a system where the government charges people who use self-driving cars fees based on usage, including miles traveled. Last year, Oregon became the first state in the country to start such a pay-as-you-use program for all cars, not just self-driving ones, which charges about 1.5 cents per mile.
In any case, officials probably won’t deal with the problem until they see a dramatic drop in revenue, Williams said.
Mayors and governors should adopt GM’s forward thinking because driverless cars will inevitably drain hundreds of millions of dollars of revenue from public coffers each year.
Reduced car ownership will mean fewer automobile sales to tax. But perhaps more important, cops and meter maids will write a lot fewer tickets because smart cars presumably won’t double park, change lanes without signaling or bust through the speed limit. Since cars sit empty about 95 percent of time, self-driving cars
can greatly increase efficiency by constantly being in use.
“If vehicles are busy almost every hour of the day dropping off one traveler to pick up another, then parking, towing, traffic violations and speeding tickets revenue will significantly decrease,” according to a report by the Brookings Institute in Washington, D.C.
In other words, less human error equals less money for politicians to fight over. For fiscal 2016, the San Francisco Municipal Transportation Agency estimates 32 percent of its operating revenue, or $300 million, will come from sources like parking meters, fees and fines.
“Once driverless vehicles have a proven track record, local governments will lose a major source of revenue,” the Brookings report said. “In fact, you could say government is essentially left out of the game entirely, aside from still being on the hook for maintaining a transportation infrastructure without revenue sources.”
Until now, the discussion about autonomous vehicles has largely centered on how the technology will impact other businesses, like carmakers, taxi drivers and auto insurance firms. But government stands to lose the most because public bureaucracies don’t adapt well to wholesale disruption, at least compared to the private sector.
‘Gas tax a failure’
“Increased fuel economy and electric vehicles have made the gas tax a failure,” said Richard Wallace, director of the transportation systems analysis group for the Center for Automotive Research in Ann Arbor, Mich. “Yet you see no political will to do something” to replace the revenue.
The potential impact of autonomous vehicles on public revenue has not yet crystallized. A study by the University of Michigan’s Transportation Research Institute said self-driving cars could reduce car ownership by up to 43 percent, from 2.1 to 1.2 vehicles per household.
Roughly speaking, that means losses for state revenue could look like this: the California New Car Dealers Association estimates people registered more than 2 million new cars last year. Since the average cost of a new car totals around $33,000, California generated around $5 billion in taxes from those sales (using a 7.5 percent tax rate). Based on the University of Michigan’s worst case scenario, the state could lose $2 billion in taxes on new car sales.
Cities also raise enormous amounts of money from motorists who screw up. In fiscal 2012, the agency generated nearly $89 million from parking violations alone. Combined with fees from parking meters, the number shoots up to $143 million.
Those numbers will dramatically fall if people fully embrace autonomous vehicles.
Fee for car use
Still, autonomous vehicles hardly represent a zero sum game. If self-driving cars are safer than human operated ones, fewer people will get hurt in accidents, resulting in cost savings for the taxpayer. The National Highway Transportation Administration estimates that public revenue pays 7 percent of vehicle crash costs. Therefore, autonomous vehicles could save taxpayers about $10 billion a year, according to the Brookings Institute.
Throw in less traffic congestion and need for road repairs, the savings could jump to more than $100 billion a year, the think tank said.
But states and cities will still need to offset the immediate loss of direct revenue from parking and traffic violations. One idea is to move to a system where the government charges people who use self-driving cars fees based on usage, including miles traveled. Last year, Oregon became the first state in the country to start such a pay-as-you-use program for all cars, not just self-driving ones, which charges about 1.5 cents per mile.
In any case, officials probably won’t deal with the problem until they see a dramatic drop in revenue, Williams said.
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