The case for taxing surface parking

Surface parking generates multiple externalities. If left to the market the supply of parking is likely to be suboptimal. But parking requirements ignore most of the externalities. This paper suggests that a tax approach may be a more efficient method to internalize the externalities associated with parking provision, thereby assuring an optimal supply of parking. However, in practice it is infeasible to value all externalities in monetary terms and to set such a tax. Hence, a suboptimal flat surface parking tax is advanced. In addition to its contribution to the reduction of externalities from land cover, this tax is likely to have several noteworthy positive attributes. It is simple to assess. It will provide an incentive for intensifying the use of parking. It may also increase the attractiveness of providing underground parking relative to surface parking, thereby reducing the attractiveness of suburban retail centers relative to central cities. A discussion of implementation issues suggests that a surface parking tax may face relatively low transaction costs. These will be largely a function of the use of revenues. Hence, the use of revenues should be specified when such a tax is proposed.