Subsidising cycling

Freakonomics reports that an Oregonian politician wants to implement bicycle licensing and registration. He says that cyclists use the roads just like cars, but they don’t have to pay a cent towards maintenance. Cyclists’ comments reveal their disgust at the idea but, as an avid cyclist myself, I must confess that I have some sympathy with the proposal.

It is true that cyclists don’t cause as much wear on the road, or take up as much space as cars. There are environmental benefits from cycling instead of driving, and probably reduced health costs too. However, that’s not a reason to exempt cyclists from paying to use roads: it’s a reason why they should pay far less than cars. Cyclists still benefit from much of the road improvement and creation that is done and there’s no reason why they should enjoy that for free. To suggest that we’d have to come up with a reason why cyclists should be actively subsidised by the government. Unless we think that the number of cyclists is sub-optimal, because people prefer to stick with the status quo of driving their car, then I can’t see a reason to subsidise cyclists.

According to Houston personal injury attorney, in NZ there is a further justification for making cyclists pay. Road users pay ACC levies to insure themselves aganst injury as a part of their road user charge (not the NZ terminology to make this more accessible to overseas readers). Cyclists have a pretty good chance of being hurt on the roads, given their lack of protection and vulnerability. Since they voluntarily choose to ride, shouldn’t they have to pay the expected health cost of their care when they crash? Otherwise we’re forcing all other people who pay ACC levies to subsidise cyclists’ healthcare.

Obviously the cyclists don’t want to pay, but the benefits to the environment of one less car are not a reason to let them off scot free!

18 replies
  1. StephenR
    StephenR says:

    That is…a compelling point. I’m not sure how much (in dollars) of the RUCs are for ACC(?), but I guess the obvious thing is that if it was too high it would de-incentivise biking, either through the annoyance factor at having to pay 20% (say $100?) of the price of a new bike every year, or just the unaffordability factor for people who perhaps can’t afford other means of transport…

  2. Bryan Spondre
    Bryan Spondre says:

    “or just the unaffordability factor for people who perhaps can’t afford other means of transport…”

    I don’t think we should be subsidising cycling for social welfare reasons any more than we should be subsidising public transport for social welfare reasons. Shouldn’t we be recovering the full cost of providing the service ( roads or public transport) and dealing with poverty directly with income transfers ?

  3. moz
    moz says:

    I think the big problem is overhead costs. Adding a small sticker to the bike every year is no big deal, but the process whereby that sticker is obtained, paid for, verified and policed is difficult to do cheaply.

    Take the heavy transport approach, ignore the exponential cost as weight goes up and charge a simple pro rata fee. A two tonne vehicle costs $25/1000km, so a 100kg cyclist+bicycle will cost 1.25 cents per 1000km, plus the $9.65 administration fee for purchasing the license. Call it $10.

    You economist types probably have a way to describe a tax with an administration overhead of 1000x the tax in academic jargon, but I call it totally batshit insane.

    Roughly speaking we sell as many bikes as cars every year in NZ, but the average bike does less than 500km before it’s thrown out. So if every bike is sold with a 1000km licence that will do the vast majority for their usable life. So we’ve just added $10 to the cost of every bike sold. That $99 Warehouse special? Well it’s got $12 GST and $10 RUC in the price now. The $5000 racing bike also has $10 RUC in it. Talk about regressive taxation.

    One side effect of this is that the p*lice now have an excellent way to harass youf. It’s a fair bet that many youf, just like many other cyclists, will not have the requisite sticker. Also, want to bet that a lot of those will be issued to cyclists who “get in the way” of motorists?

    Road user charges discussed here, download PDF for exact fees but this page gives you the admin cost:

  4. rauparaha
    rauparaha says:

    I totally agree, moz. You’d have to know the costs of administration and the benefits of licensing to know if it was worth doing. My point is more that I don’t think there is a good, principled objection to the idea of taxing cyclists. Nonetheless, it may well be the case that there are good, practical reasons not to do so.

  5. StephenR
    StephenR says:

    I don’t think we should be subsidising cycling for social welfare reasons any more than we should be subsidising public transport for social welfare reasons. Shouldn’t we be recovering the full cost of providing the service ( roads or public transport) and dealing with poverty directly with income transfers ?

    I agree, just trying to feel out a ‘government’ point of view. Such a move is certainly subject to politics.

  6. moz
    moz says:

    As far as a principled objection to taxing cyclists, I agree. I’d love that it were otherwise because I’d really enjoy not paying the transport portion of my taxes, gst on my bike and all the other imposts that I face.

    As far as special taxes on cyclists I think there are a range of solid arguments against. The admin cost above is just the most trivial.

    – Cycling has a negative health cost in that the health benefits of cycling far outweigh the costs associated with it (eg. So a fair ACC levy on cyclists would result in a small payment (again, probably dwarfed by the administration cost).

    – cyclists are less likely to suffer mental illness, although the studies on this are currently unable to show the direction of causation. While exercise as a technique for managing depressive illness is well established, the more general statement is not.

    – The RUC part of cyclists use is so small as to be negligible.

    – cycling has a net cost reduction effect on road transport, as cycleways are much cheaper per passenger-kilometre-year than roads (insofar as the term “passenger” can meaningfully apply to active transport). Thus, each cyclist is consuming “negative road space”.

    – bicycles create more, and more local, employment than motorised transport. This creates both jobs and taxes in excess of other transport modes (with the exception of walking) even excluding the marginal change in food intake.

    – cycling is more social than moving about in cages. Studies on bicycle policing show this directly, but community engagement is generally higher amongst cyclists. This is one reason for Thatcherites to suppress cycling 🙂

  7. Owen
    Owen says:

    I tend to ride to work most days on local roads paid my share for I believe primarily via the rates I pay, along with the petrol taxes and levies on registration for the car I also own and the PAYE taxes…
    Although if you can quantify the costs I impose above the very generous amount of taxes I pay then I would gladly contribute.

  8. rauparaha
    rauparaha says:


    I totally agree that biking is way less costly than car usage. But that’s why the charges would be a lot lower. Most of your points support that. To show that cyclists should not have to pay a tax (in principle) you’d need to show that it is cheaper to have cyclists on the road than not. If the health cost, including the cost of crash care, is negative and greater than the cost of providing and maintaining the roading then that would be enough. But I’d need to see numbers to be convinced of that, although it doesn’t seem implausible.

    Either way, I think that calculation should be done rather than just exempting cyclists from paying their way as a matter of course.

    I think the disparity is between the payment for the car usage and the payment for bike usage. As a car user you pay a charge for the privilege of driving on public roads. Yet, as a cyclist, you pay nothing. While the marginal cost of a cyclist is tiny, the average cost of providing good roads is not. Why should car drivers pay the entire cost and cyclists pay nothing? Perhaps they should pay a lot less since their marginal impact is less, but less isn’t the ame as nothing.

    PS. Are you the same Owen who rides a fixie in Wgtn and is friends with Josh Wrigley? Just curious 🙂

  9. moz
    moz says:

    rauparaha, that’s why I gave you links to see for yourself. Dr Mason is a friend of mine who does work like this for hospital types in Sydney (amongst other things). Getting money out of the health care system for preventive treatment is not easy, so the studies justifying it do have a certain amount of rigour about them.

    The US has a few jurisdictions that have compulsory bicycle registration and that is both habitually ignored *and* primarily used as a tool of harassment by the state. Critical Mass rides have had this in at least one city, the p*lice turn up and issue on the spot fines to every cyclist without the sticker. Much as they do for helmets in NZ but without the safety justification.

    Also, car users pay a charge for the damage they do to other road users (ACC levey) plus an administration fee. Roads are paid for out of general taxation NOT the registration of private motor cars. Which is what I alluded to above – if I as someone who doesn’t drive but cycles instead do not have to pay for roads, that rebate will be seen in my income tax rather than in my road user taxes which are already zero. The registration fee is exactly that – it covers administration and ACC only. Compare pricing to a firearms licence, for example, to get some idea of what a “pure administrative overhead” license fee is.

    Whatever tax system is proposed, one issue not yet mentioned is grandfathering. There are a prodigious number of bicycles in New Zealand right now, none of which has had this new tax applied. So, will the tax apply only to new bikes? How will it apply to bikes not used on public roads? What constitutes a bicycle for tax purposes: a bare frame; a spare set of wheels; a rusting bike with vines growing on it; a race bike only used on velodromes; do tandems count twice? How will anyone tell? If the tax is per-kilometre based, who pays for the odometer? What licensing applies to those, and who approves each model? Are odometers required in all situations, or only on public roads? What penalty will apply for non-payment or non-presentation, and to whom will it be applied? If the bicycle is confiscated, who stores it and where? If not, what happens to habitual offenders? For example, my niece recently got a bicycle for her fifth birthday. If the tax is made law, who is liable for it: my niece, her custodial parent, her non-custodial parent, her primary caregiver or me? If the tax is not paid, who is punished for that? If imprisonment is an option, who goes?

    I am personally sure that: the cost of cycling is at worst negligible; that the cost of collection exceeds any reasonable tax payable; and that the externalities are positive (rather than negative as is the case for cars). The research is there and it’s not especially complex.

  10. Bill Bennett
    Bill Bennett says:

    I read somewhere years ago the damage done to the road is proportional to the fourth power of the weight on the back-axle. (Some sources argue it’s an even higher power).

    So if road users were charged on that kind of basis a bicycle + ride weighing say 100kg would pay $1 a year and a 40 tonne lorry would pay $2.5 billion.

    This formula would please both economists and greenies.

  11. rauparaha
    rauparaha says:

    @ moz

    I read your link and it says that the cost of inactivity is greater than the cost of sporting injuries. That doesn’t specifically pertain to cycling, nor does it say anything about the cost of providing roading for cyclists.

    Vehicle licensing fees in NZ primarily go towards roading projects and ACC for those injured in road accidents, not administration.

    You may be certain but, without far more specific evidence, I can’t share your confidence in the outcome of such an analysis.

  12. moz
    moz says:

    OK, in my experience cycling is enough to lift people out of inactivity, but YMMV. When you find decent references I would appreciate some links because I don’t have them.

    Hmm, says $234M of $1.6G came from rego fees, compared to $774M from fuel excise and $793M from road user charges. I can’t see where the split is between admin and others, just explains that there is a split.

    I can’t find anything on relative distances travelled though, which makes it tricky to work out cost allocations. Even more so when you consider the requirements and what drives them. Dedicated cycle paths should cost a fraction of road for motor vehicles just based on loading and usage (and no need to maintain them if the cycleway going north from the Wellington CBD is any guide).

    Road construction costs are hard to find. Via google for a council somewhere in Australia:
    At the bottom attachment 1 says $90/linear metre for dual use footpath compared to $188/linear metre for two lane road. The surfaces are different though, and road includes the kerbing cost. That suggests to me that it would be cheaper to build single lane roads instead of cycleways as that would save $1/m and provide a more capable facility.

  13. Jonathan
    Jonathan says:

    WTF! Cyclists subsidise motorists!

    A cyclist has a car sitting at home that they’ve paid to register, with ACC levies and so on, yet ARE NOT USING IT.

    Next time you see a cyclist, consider that they are paying just as much as you are, for MUCH LESS.

  14. Matt Nolan
    Matt Nolan says:


    Don’t you mean that people who don’t use their car much subsidise those that do – that is definitely a different issue to the one Rauparaha is talking about.

    Now, it would be good if cars paid based on mileage instead of a flat fee – but that doesn’t mean that cyclists in themselves are all subsidising motorists.

    For example – what about cyclists that don’t have a car? As a result, the problem you’ve noted does exist – but I don’t think it is related to the issue at hand.

  15. Louise
    Louise says:

    I think i recall a statistic saying that 2/3 of cycling accidents are caused by CAR DRIVERS. So hardly seems fair to lump cyclists with ACC injury costs caused by cars.

    How far does one take this? Charge pedestrians for the cost of footpaths and streetlighting? Well, who else uses these things?! What about offroad accidents on bikes – probably much more prevalent but they would not face a rego fee including ACC levy. When is cycling a sport (no ACC levy) vs a means of transport?

  16. rauparaha
    rauparaha says:

    I don’t see why it’s unfair. If cyclists are getting injured then why shouldn’t they pay for it? The fact that cars are responsible for many of their injuries is a good reason why they shouldn’t have to pay much, but not much isn’t nothing.

    As for the other activities, I think you’re right that it would be administratively too hard to do that. We just have to accept that the safer souls amongst us subsidise the activities of some thrillseekers under the ACC scheme. That’s not a good reason not to recover the costs when it is possible to do so.

  17. Owen
    Owen says:

    rauparaha :
    PS. Are you the same Owen who rides a fixie in Wgtn and is friends with Josh Wrigley? Just curious

    Nope, I moved to Auckland a few years ago, but I think I know who you mean..

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