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By Clay Shentrup<\/em><\/p>\n I had coffee with Portland City Councilor Mitch Green this morning. We talked about the Transportation Utility Fee (TUF) \u2014 the proposed<\/a> $12 per month charge on every single-family household and $8.40 on every apartment to keep PBOT from going under. Like most people following this, we agree PBOT needs revenue. The question is whether the current proposal is the best we can do.<\/p>\n It isn\u2019t. And the lot-size alternative floated by Strong Towns PDX<\/a>, while well-intentioned, isn\u2019t either.<\/p>\n I\u2019m a software engineer and co-founder of the Center for Election Science<\/a>. I live in a craftsman house in District 3 with my wife. We work remotely. We barely drive. I bike as much as I can. Under the lot-size proposal, I\u2019d pay more than an apartment dweller who commutes by car every day\u2014because my lot is bigger, even though my impact on the road network is smaller. That\u2019s an\u00a0ecological fallacy<\/a>: charging individuals based on a statistical average of their housing type rather than their actual behavior.<\/p>\n The flat TUF is a head tax, and head taxes are bad. We\u2019ve seen this movie \u2014 the Arts Tax<\/a> charges every adult $35 per year regardless of income, has dismal collection rates, and requires a means-testing apparatus for low-income exemptions that costs almost as much to administer as it collects. The TUF as proposed would land in the same territory.<\/p>\n But scaling the fee by lot size doesn\u2019t fix the problem. It creates new ones. Lot area correlates heavily with land value, which makes it legally vulnerable under Measures 5 and 50<\/a> \u2014 a plaintiff could argue it\u2019s a property tax with extra steps. And lot size doesn\u2019t cause road damage. Traffic volume, vehicle weight, and weather cause road damage. A 10,000 square foot lot doesn\u2019t deteriorate the road in front of it any faster than a 5,000 square foot lot. You\u2019re pricing the wrong thing.<\/p>\n So what should we actually do? Decompose the problem into two instruments, each doing one job well.<\/p>\n Imagine the city gives you a $100 gift card to a store you don\u2019t like. You\u2019d rather have $85 in cash \u2014 you\u2019d get more value from it. The city spent $100; you got $85 worth of benefit. That $15 gap is what economists call deadweight loss. It\u2019s invisible waste that happens whenever you give someone a benefit they value less than it costs to provide.<\/p>\n Free on-street parking is one of the most brutal examples of this. The city provides a scarce, valuable public resource \u2014 street space \u2014 for free. The cost of that subsidy is real: it\u2019s the revenue the city doesn\u2019t collect, the congestion it doesn\u2019t price, the transit riders and cyclists who subsidize drivers through their taxes. But nobody sees it, because we think \u201cyay, free parking!\u201d without considering that we\u2019re paying for it through higher taxes, worse roads, and fewer services elsewhere.<\/p>\n Donald Shoup spent his career documenting this. The late UCLA economist \u2014 widely respected across the urbanist spectrum \u2014 showed that free parking is essentially a massive in-kind transfer to car owners, and like all in-kind transfers, it\u2019s worth less to recipients than it costs everyone else. Demand-responsive pricing fixes this by converting an invisible subsidy into visible revenue.<\/p>\n Expanded parking pricing is the single most impactful thing the city can do right now. It\u2019s essentially congestion pricing by another name \u2014 you\u2019re charging for the direct use of transportation infrastructure, in real time, with prices that respond to demand. The nexus is legally airtight. And crucially, it captures non-resident vehicles \u2014 which Joe Cortright has shown cause the majority of road damage in Portland. The TUF can never touch those drivers. Parking pricing can. Portland already does demand-responsive metering in several districts. The proposal is simply to extend the principle citywide.<\/p>\n For the TUF itself: keep it flat, but pair it with a universal per-person annual credit. No means testing. Everyone gets it.<\/p>\n Here\u2019s the part that surprises people. A flat fee plus a fixed-dollar credit produces a progressive effective rate automatically. Consider a flat 40% income tax with a $10,000 refundable credit. Someone earning $12,000 gets a net payment \u2014 a negative 43% effective rate. Someone earning $40,000 pays 15%. A millionaire pays 39%. The marginal rate is flat. The effective rate is deeply progressive. No brackets, no phase-outs, no means testing. (I\u2019ve written about this in more detail.<\/a>)<\/p>\n Same principle here: the TUF is the flat rate, the credit is the offset. Low-income households come out ahead. High-income households pay net positive. The credit can be delivered through the same infrastructure the city uses for the Arts Tax \u2014 same database, opposite direction. It more than offsets that $35 per year, effectively neutralizing the Arts Tax without touching it.<\/p>\n This isn\u2019t some untested theory. Research from the UBI Center, drawing on OECD (Organisation for Economic Co-operation and Development) data, shows that the US already has the most progressive tax brackets in the developed world \u2014 more progressive than any Scandinavian country. And yet we achieve roughly half the inequality reduction. What those countries do differently isn\u2019t tax structure. It\u2019s transfer generosity. Countries that distribute a larger share of income as universal cash transfers consistently reduce inequality more, regardless of how progressive or flat their tax rates are. Generous universal transfers beat steep brackets every time.<\/p>\n The framework does three things at once. Parking pricing provides the efficiency signal \u2014 pricing the actual externality of driving rather than a proxy like lot size or housing type. The flat TUF provides stable baseline revenue for PBOT. And the universal credit makes the whole package progressive without a single line of means-testing code.<\/p>\n The City Council Finance and Governance Committee of the Whole meeting on April 15th<\/a> is the next decision point. Council has a choice: pass a head tax that will generate the same resentment as the Arts Tax, or build something that actually works \u2014 economically efficient, legally durable, and genuinely progressive.<\/p>\n The full analysis, including the math, the OECD evidence, and responses to common objections, is at\u00a0wonk.blog\/tuf<\/a>.<\/p>\n Clay Shentrup lives in Portland\u2019s Upper Laurelhurst neighborhood in District 3. He is co-founder of the Center for Election Science and has nearly 20 years of experience in electoral and policy reform, including successful approval voting campaigns in Fargo, ND and St. Louis, MO.<\/em><\/p>\n<\/p><\/div>\nThe\u00a0Gift Card Fallacy<\/a>\u00a0and Free Parking<\/h3>\n
Flat Fee + Universal Credit = Progressive Effective Rate<\/h3>\n
Two Tools, Two Jobs<\/h3>\n