Saturday, September 6, 2014

The sprawl tax: how sprawl makes us all poorer

One of the main effects of sprawl is the imposition on residents of a lot more miles of travel to satisfy their daily needs, whether it is work,. school, cultural activities or shopping. All these miles add up, and generally the only way to be able to travel around without wasting half of one's waking day walking or biking around is to use cars. The result is that to be a functional member of society in sprawl, you essentially require a car, in fact, one car per working adult in every household.

This comes at a cost, of course. Walking is free, biking is nearly free, transit is comparatively expensive, but cars throne over all of these modes of transport in terms of how expensive they are. According to the AAA, a small sedan used for 15 000 miles a year costs nearly 7 000$ to the owner. If you buy used, you save some money, but not all that much of it. Edmunds, a car website, has a "true cost to own" metric which indicates for instance that the total 5-year cost to own and use a 2009 Honda Civic bought secondhand is around 29 000$, or 5 800$ per year.

Since buying a car is almost a requirement in sprawl because of the distances people have to travel each day, and that cars are extremely expensive to own and run, the result is what I call the "sprawl tax": the fact that building sprawl and living in sprawl comes with a high transport cost that drains people's pocketbooks and which they cannot avoid, just like taxes. People have to work, have to buy food, have to get out of their home sometimes to satisfy their needs, and when they do, they need a car if they live in sprawl.

Transport versus taxes, which cost us more?

I live in Québec, so I'm going to start with Québec. We are often considered the most taxes jurisdiction in all of North America. Income taxes paid to the provincial government top out at 25,75% over 100 000$ of income, which are added to federal income taxes of  up to 24% (it's 29% in the rest of Canada, because Québec has taken on more responsibilities, the federal income tax is 16% lower in Québec than in the rest of Canada). Of course, we have a lot of tax credits, like everywhere else.

Overall, Québec households paid on average about 11 000$ in income taxes, 5 800$ of which went to the provincial government. In comparison, they paid about 10 000$ in transport. The cost of transport is thus equivalent to the cost of income taxes.

In Canada overall, households paid about 11 000$ for transport and 13 000$ in income taxes. Again, the cost of transport would be nearly equivalent to income taxes. However, according to another data source, total consolidated government revenue from income taxes in Canada are about 250 billion dollars, the equivalent of 19 000$ per household.

In the United States, the income before taxes of households is on average around 65 000$, and after taxes, about 60 000$, so income taxes should be about 5 000$ per household Shane Philipps commented below that the amount of federal income tax revenues in the US alone equal 11 000$ per household, he is correct, there is a major discrepancy between data sources that is hard to explain. Maybe government transfers and certain tax credits are counted as negative taxation in the BLS survey. In comparison, households spend on average 8 999$ on transport, which is nearly 80% more than households pay in income taxes. which is more than 80% of what they pay in federal taxes.

So transport costs in North America are as high or higher than what households pay in income tax. Now, not all these costs are directly due to sprawl, some are reasonable transport costs in developed countries, so let's do some international comparisons to see how denser, less sprawling countries spend on transport.

How much money does sprawl cost households?

First of all, according to the OECD, American households spend in total, 1,11 trillion dollars each year on transport, the equivalent of around 3 600$ per capita, including the young and the old. The reality is even worse than it looks, as Americans subsidize transport quite a lot. This amount does not include the cost of parking, whether residential or commercial, nor does it include the tens of billions of dollars spent each year from taxes to pay for the freeway system or local streets. According to the Tax Foundation, of the 155 billion dollars spent each year on highways, only 50% comes from "user fees" that would appear as part of the transport costs reported by the OECD. Once you include those costs, the cost per capita increases to nearly 3 800$ for transport.

Canada is actually even worse, with Canadians spending 156 billion dollars per year on transport, or nearly 4 500$ per capita, 4 100$ if converted to American dollars.

Meanwhile, according to the same data source, Europeans, despite driving being more expensive as it is less subsidized, spend only 2 700$ per capita. An economy of more than 1 000$ per person, per year. According to the OECD, the Japanese pay even less, around 2 500$ per capita.

Transport spending per capita per the OECD, in American dollars

That is only one data source, other data sources often reveal different things. For instance, the Family and Income Expenditure Survey of Japan has much different data, with households reporting an average of about 35 000 yen per month (350$) in transport and communication (yes, the Japanese survey shows the monthly not yearly cost and bundles transport with communication). Once we remove communication costs and annualize the amount, the result is about 3 000$ per household per year, and each household has 2,44 people in it, so the per capita cost would be about 1 250$! Half of what the OECD says, and a third the transport spending of the United States.

For the record, the BLS expenditure survey shows that each American household spend 8 999$ per year on transport, with an average of 2,5 people per household, that's about 3 600$ per person. Though households in core cities spend only a little over 7 000$, and around 3 000$ per person. Suburban residents pay the most, almost 10 000$ per household, 4 000$ per person. People in rural areas have costs in between.

Statistics Canada reveals that Canadian household spend 11 229$ each year on transport, or 10 300$ in US dollars, around 4 000 $ per person. So both these numbers are close to the OECD ones, but not the Japanese numbers.


Overall, transport costs are 20% higher in North America than in Germany or France, 40% higher than in Europe and 50 to 200% higher than in Japan (depending on whether one believes in the OECD or the Japanese household expenditure survey). I'm not even going to use the latter Japanese figure, to avoid accusations of confirmation bias and selecting the data most favorable to me.

So to compare with the income tax, the "sprawl tax", the excess transport spending caused by the sprawl mode of development, is equivalent to 15-30% of total income taxes for Americans, and 15-25% of total income taxes for Canadians. 

Which means that if we rehabilitated our cities and moved towards more urban development instead of suburban development, the benefits in lesser transport costs would be the financial equivalent to a 15-30% income tax cut for Americans, and of a 15-25% income tax cut for Canadians. If all the discussions of quality of life, of "public places", of climate change cannot convince you to back urban revival over sprawl, then remember this: turning your back on sprawl would be as beneficial for your pocketbook as a massive income tax cut of up to 25%.

Of course, these savings depend on individual decisions, people who choose to live far from everything else and drive everywhere, even in places with good transit service and high density in urban areas, would still spend as much as before. But the important thing is that people have a CHOICE, to spend money on transport or not, something they do not have in sprawl.

One hint of this dynamic is that spending on transport in the bottom quintile (the poorest fifth of the population) in the United States is around 16% of total spending, which is the same proportion as the richest quintile. This means that though the poor try to cut on unnecessary spending, the necessary transport spending of sprawl makes them unable to lower their share of spending on transport to dedicate to more pressing needs. Meanwhile, in France, the bottom quintile manages to spend just 11% of their spending on transport, versus 16% for the rich. Same thing in Japan, where the bottom quintile spends just 6,0% of their total consumption spending on transport, while the richest quintile spends 11,1% of theirs. So in Europe and Japan, people who want to save money can cut on transport significantly while remaining active and functional, not in the United States.


  1. Great article, but I have to quibble with the US tax numbers a bit. According to the CBO, US federal income tax revenues were about $1.316 trillion last year. With roughly 120 million households, that comes to about $11,000 in federal income taxes per household.

    Payroll taxes are also a big chunk of our annual taxes, and those "social insurance" revenues (mainly for Medicare and Social Security, and maybe Medicaid), were $948 billion. About half of that is paid for by businesses though.

    All-in-all I'd say our average annual federal taxes on income are around $15,000 per household, but even averages can be a little misleading, especially when you have such a high level of inequality.


    1. Thank you for pointing it out, I will try to correct it. I've used different sources of data as no one source had all the info I needed to make the comparison, it seems there are discrepancies there. It doesn't change the conclusion overall, just some numbers.

    2. Perhaps the issue is that the average income tax is much higher than the median? Another issue is whether or not payroll taxes (for Social Security and healthcare) are included. They are not technically federal income taxes, but for the less wealthy 50% of the population the 7% payroll tax is much more expensive than federal income taxes.

  2. What solution would you recommend to deal with small towns that are of reasonable density, but became car-dependent because the sole big local employer closed down, forcing the residents to commute to work elsewhere?

    1. The commute is certainly a big part of all trips for a population, however, it's not the only type of trip, nor are all people employed by manufacturing or resource-extracting companies. So even if people have to leave the area to find employment and have to take their car to do so, they can still do all their other trips on foot. So even if an employer closes, if retail and services are still well mixed in the town among the residential area, it can still be walkable for most trips. From what I find on small towns in Québec, even there most people are employed by retail and services, which do not need to be kept separate from where people live. So even if a big employer closes, a lot of people will not have to exile themselves outside their town to find another job.

      Ideally, big employers who are in industrial parks way out of town could take a page from Google and organize shuttle bus services for their employees instead of providing for free parking.

      Ultimately, I think it may be unfortunate but people who find no employment in their local town might decide to move to a larger town, closer to employment centers. It is not something I want to force people to do, but it is certainly a possibility, and one we must be ready to accept if people make the individual choice to do so.

  3. Have you thought about looking at the cultural origins of sprawl in North America? I'd consider the following factors significant:

    1) North America was largely settled in the 19th century by European immigrants hankering for Lebensraum (which led to a desire for low-density living)
    2) Many political thinkers (such as Thomas Jefferson) as well as religious thinkers had an anti-urban mindset, and the problems of 19th century industrial cities (overcrowded slums, inadequate sanitation and rampant industrial pollution) seemed to give credence to their arguments.
    3) Suburbia in the post-war era was designed to protect the institution of the family from corruption by the outside world. Note that car dependency then effectively enforced patriarchy (because multi-car households were not yet common, so that other family members needed the father's car to go anywhere), and also that the dendritic street arrangements found in suburban sprawl are reminiscent of traditional Islamic cities (albeit at a much lower density).

    Of course, sprawl isn't unique to North America, but wasn't it to be expected that other countries would seek to imitate the United States because they would conclude (from its wealth and superpower status) that it must have been doing something right?