The Invisible Sales Tax for Parking

Whether you drive or not, you are paying a sales tax for parking amounting to about 1% of all your retail purchases.

I have long wondered: When I shop, how much am I paying for the parking lot? A supermarket lot is usually as large as the store itself, if not larger. That land doesn’t come cheap. Even plain asphalt has construction costs too. The only way the retailer can recoup that investment is by increasing prices. Free parking therefore amounts to a subsidy from non-drivers to drivers. But is it significant? Can it be calculated?

Calculating the Cost

The largest costs for operating a retail store are typically stock, staffing and rent. According to the Business Development Bank of Canada, rent amounts to approximately 8.5% of all costs.

The cost of rent is proportional to the cost of developing the building in the first place. This includes parking, regardless of whether it is in a parkade (spaces typically cost $40,000 and up) or surface parking (where costs are closer to $10,000 per space). The Victoria Transport Policy Institute cites 10% as the proportion of development costs that go parking for the typical building development.

If, on average, rent is 8.5% of costs, and parking is 10% of rent, then parking is 0.85% of the retailer’s costs. The retailer covers those costs by passing them on to the consumer. You and I are paying that 0.85%.

If, like me, you live in a fairly dense urban or suburban area where land is expensive, the cost of rent and parking is higher (VTPI cites parking costs of 18% in Oakland). One percent is probably too low.1

Of course this only applies to bricks and mortar stores. Amazon does not provide free customer parking. This is one factor making it possible for them to charge less. It also doesn’t apply to stores with pay parking or without parking lots. Free street parking, however, is no more free than store parking: we all pay for that through our taxes, whether or not we drive.

It’s a Tax

This subsidy is like a tax, as governments require developers to build parking. For consumers the effect is the same as if the government collected the tax and built the parking itself. This is effectively a privately administered sales tax.

As a result, drivers are being subsidized by those who walk, bike, or take transit. When you walk to your supermarket, 1% of what you spend is going to those who drive instead.2

I am hardly in the position to get on my high horse and lecture drivers. I am one of them. I drive regularly to stores where I park for free. I am not blaming drivers for driving. But some drivers assert angrily that they are already paying the full costs of the infrastructure they use and don’t want to contribute to infrastructure they don’t. They are wrong: there are mountains of evidence that cars are heavily subsidized. I humbly suggest it is they who should dismount.

Then perhaps we can figure out what kinds of communities we really want to live in, and how to make it happen. Because there is no such thing as a free lunch. (Restaurants have parking too…)

Notes

1 In Oakland, parking also decreased density by 23%, obliging everyone to travel that much farther to shop. That means burning more gas, spending more money on bus fare, more time in transit rather than working or with family, and so forth. Parking has many costs; I am only trying to estimate those captured by the retailer and passed on in the price of goods.

2 When I say “you,” I am implying someone living in North America, where my statistics are from. There are many places in the world where the shops have no parking lots. First world problems, eh? (Not so much actually: climate change.)

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