Free Transit: What’s it Worth?

Lining up to pay Credit: Lizz Giordano

Over the holidays, policy analyst David Gordon made an argument for assessing a county-wide payroll tax to make transit free.

I don't know enough about tax revenue to critique Mr. Gordon's math, but the idea of replacing the regressive transit sales tax with a progressive payroll tax is certainly appealing.

Free transit proposals have been bubbling up in lots of places recently. CM Mosqueda called for it a while back. The Seattle Democratic Socialists called it a "basic need" in an blurb for an upcoming candidate night. We've discussed it on multiple podcasts, but haven't written much on the blog. So, should transit be free?

Much like America's health insurance system, Puget Sound transit fares are a patchwork of individually-purchased (ORCA cards & cash), employer-provided (ORCA Business Passport), and targeted subsidies (student and LIFT ORCA). Like "Medicare for All," Mr. Gordon's progressive payroll tax would sweep away this hodgepodge, making transit free for everyone and reducing the regressive sales tax.

Passing such a tax at the ballot box would be a lift. The last time King County tried to raise funds for transit, the 2014 TBD lost 55-45. ST3 did pass in overall in 2016, but failed in Pierce County. Transit votes in this region tend to be tight, and it's not clear that a new transit tax that didn't include any shiny new projects would have 51% support, especially outside of Seattle (and due to the intertwined nature of our transit agencies, it really ought to be all or nothing).

But let's set politics aside for a moment. The reality of climate change, increasing income inequality, and the challenges of fare enforcement all demand that we at least consider putting an extra thumb on the scale in transit's favor.

The first response to any free transit proposal, especially if the service is already popular, usually concerns induced demand. The buses are already crowded, the argument goes, and this will make it even worse. Health care wonks voice similar concerns about universal coverage: the day President Warren signs a Medicare for All bill, it will immediately become obvious that we have a shortage of primary care physicians in America. But this in itself is a problem to be surmounted, not a showstopper, per se. "Too many people will use it" is generally a losing argument against a new public service.

The second challenge is political. Today, an impressive 60% of farebox revenue already comes from Seattle-area employers in the form of ORCA Business Passport. Similar to health care, where employers already foot much of the bill, the trick will be figuring out how to gracefully redirect that firehose of money without extinguishing it.

These first two problems seem difficult, but solvable. By contrast, the best argument for keeping fares is prosaic: fares bring in money. For King County Metro alone, roughly $300 million per year*.

The question, then, is one of trade-offs: if $300 million were to suddenly drop out of the sky, should we use it to make transit free or to improve service? For perspective, $300 million is the equivalent of a new Center City Connector every year. Or if capital spending's not your thing, the money could boost evening and weekend service, which is quite sparse outside of Seattle (and even in some places in Seattle).

Fortunately, much like health care, it's possible to make incremental progress in service of the main goal:

• Metro could lower fares, which I've argued are too high by historical standards
• We could test the induced demand theory by offering free evenings and weekends, or during events like the Seattle Squeeze as Councilmember Sawant has suggested. Empirical evidence is welcome.
• Seattle's Commute Trip Reduction law, which strongly incentivizes ORCA Business Passport for large employers, could be expanded to cover more of the region's businesses
• The $54 monthly fee for the low-income ORCA LIFT card could be lowered
• ORCA LIFT could be given out to everyone living in low-income housing
• Free transit for kids, as Paris is proposing

In short, there's plenty of ways for politicians interested in lowering fares to experiment with ideas and see what gets traction.

* Update: I calculated $300M by taking the 15% farebox revenue from this budget. Commenter BEL points to a budget doc claiming $145M. I regret the error, but either way it's a non-trivial sum.