Contradictory policies – buying votes vs. saving the climate

The Austrian government plans to increase the subsidies for commuters. People who live at least 2 km away from their working place have, in principle, the possibility to obtain a tax discount on their fuel expenses.

The current level of subsidies is shown in the following table:

Distance           EUR/year

2-20 km           373

<40 km             1476

<60 km             2568

>60 km             3672

For the sake of completeness we have to say that the above-mentioned subsidy level applies only if there is a) no means of public transport available, or b) using public transport would lead to an extensive traveling time.

Let us examine the case of a commuter living 60 km from his/her place of work. He travels 5 days a week, the car consumes about 6 l/100 km and the current price of gasoline is about 1.50 EUR. The total gasoline expenses will therefore be around 2400 EUR per year. The expected tax benefit compensates his entire travel costs.

In case the commuter has the option of using a different means of transport the subsidy levels are somewhat lower as shown in the table below:

Distance          EUR/year

20-40 km        696

<60 km             1356

>60 km             2016

This is the current state of affairs. The government is now to increase the subsidy by 1 EUR per km. Thus, the tax benefit for our example will climb up to 2628 EUR, making it even more profitable to use the car for going to work.

Critics say that this move by the two governing parties is due to the upcoming elections later this year. There may be some truth in it, as it is common practice to distribute benefits during the electoral period. In that context it may be worthwhile to mention that Austria has about 1 million commuters. This is a non-negligible part of the electorate given that the total population is about 8 million.

There is, however, one more striking issue which should not be overlooked. Austria has committed herself to strict carbon emission targets. Now the policy of making car use even more beneficial is in stark contrast to these environmental goals which are never missing in public statements by the very same politicians.

These subsidies which have a long-time tradition are supposed to compensate people for their extra expenses for going to work at a distant location. It goes without saying that, over the time, commuters have got used to this kind of state subsidy. Nevertheless, there is no real justification for this sort of tax benefit. People always have to choose between options. And the alternative to commuting is moving to a location which is closer to the place of work. In an ideal world the higher cost of living in a city would more or less be equivalent to extra expenses for travelling to and from the job.

Now as the subsidies come into play the choice between living in the city or in the countryside is distorted by the simple fact that people who do not have to commute have to pay higher taxes in order to compensate for the cost of traveling of the commuters.

This is not only a waste of public money, it also creates more traffic, thus more energy consumption, more carbon emissions, more accidents etc.  And it reveals the true priorities of the political class.

2 comments on “Contradictory policies – buying votes vs. saving the climate

  1. “In an ideal world the higher cost of living in a city would more or less be equivalent to extra expenses for travelling to and from the job.” I suspect the real world is far from ideal.

    I don’t know the situation in Europe very well. But here, suburban sprawl was stoked by the perception that the cost of living close to urban centers — particularly for housing but also other attributes like schools, environmental quality, etc. — was greater than the cost of commuting.

    That started to shift somewhat after the big spike in fuel prices in 2008. (The rise in energy prices also led to a rise in public transit costs.) The subsequent Great Recession sharply cut fuel prices, but also jobs and housing prices.

    In the last few years, there seems to have been some shift in demand toward urban living, especially among the younger generation, and to cities that offer the amenities and work opportunities that the young find attractive. Those ‘cool’ cities though tend to be the ones that maintained higher economic activity and hence higher housing and other costs.

    • Ok, there is more than just the difference in cost of living between towns and suburban areas. It´s also a matter of attitude, philosophy, upbringing etc. Without going into too much detail, one can say that living in a city is about 10 to 20 percent more expensive than being a suburban dweller, depending on the travel distance. In some (even more remote) cases, the difference may be even larger.

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