Is free parking really not free at all? If you believe the theory of Geof Glass, a Ph.D. student at Simon Frasier University, we’re all indirectly paying for free parking when we shop at nearby stores.
Glass’ hypothesis is that the cost of free parking is built into the retail store or restaurant’s overhead, and is then passed on to the consumer as part of the cost of items sold. Glass refers to this as an ‘invisible sales tax’ of about 1%.
According to The Washington Post, Glass estimates that rents account for 10% of a retailer’s overall cost, and parking accounts for about 10% of rent, giving a cost of 1% for parking. That retailer then passes that 1% on to consumers.
Glass believes that since governments require developer to building parking, it’s the same effect as if consumers paid a tax and then the government built the parking.
The Post’s article points out that ‘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).’
The main takeaway from the article is that if you don’t drive, you’re essentially subsidizing drivers, since you’re paying that extra 1% to retailers and not getting the benefit of that 1%. It’s analogous to people who don’t use NYC subways or buses subsidizing those who do use public transportation through the portion of the Highway Trust Fund that covers mass transit. And it’s the same for single people or families who send their children to private school still paying school taxes.