Comment by rsj_hn | Hacker News Reader

Comment by rsj_hn | Hacker News Reader

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> Planes don't have to pay any fuel taxes in Germany and other things

> For fuel and electric, trains still have to pay full taxes. So not suprising that planes a cheaper with better tax conditions.

Aviation is heavily taxed in Europe and Rail is heavily subsidized. One fact taken out of context shouldn't be used to paint a picture that is the opposite of this basic reality.

The problem with taxing aviation fuel is that EU directives make it hard for a country to tax fuel on cross border flights[1] (you can tax domestic flights, but almost all flights in the EU are cross border).

Therefore what European nations do instead is apply exit charges to flights as a special aviation tax. They still collect the money, but as a departure tax, not as a tax on aviation fuel. Those exit charges were just increased in 2019. It's just a lot easier to add a departure tax than go through all the bilateral tax-agreements with other EU nations to impose a tax on aviation fuel for all flights out of Germany, so this is really an issue of minimizing paperwork rather than not taxing aviation. And Aviation exit charges are higher in Germany than in any other EU nation - each passenger pays an average of 33 euros per flight leaving Germany[5], from 13 euros for short-haul to 60 euros for long-haul. (Britain has higher exit charges, and because it's not in the EU, it is able to tax aviation fuel pumped in its own borders).

And of course there are already taxes on carbon in the EU, so not sure why there should be a special singling out of one particular use, just because it gets some people riled up. Those taxes have to be paid by aviation fuel producers, so they still go into the cost.

Deutsche Ban, on the other hand, is heavily subsidized -- they are getting a special covid subsidy 6 Billion euros[3] atop regular subsidies over 11 billion[4] and an extra 50 billion euro subsidy for long term capex[2].

[1] https://www.transportenvironment.org/wp-content/uploads/2021...

[2] https://www.dw.com/en/germany-to-inject-extra-50-billion-int...

[3] https://www.reuters.com/article/us-deutsche-bahn-bailout/ger...

[4] https://economics21.org/html/europes-flawed-addiction-to-rai...

[5] https://www.fccaviation.com/regulation/germany/aviation-tax

The subsidies reflect the belief/position/ideology that the train brings a net benefit to all of society, and so should be paid for by everyone, not just those who ride. This is intended to be in contrast to flying, which brings more costs than benefits.

You can certainly argue that these beliefs are incorrect if you feel like it, and it's not as if there isn't a case to be made. But it's not just a simple matter of "we tax this, and subsidize that".

The parent post I was responding to was saying that the reason trains cost more is that that aviation was being subsidized at the expense of trains. That's just wildly incorrect. They supported that position by taking one out of context fact. I remedied that by providing the overall context.

I was not making a judgement as to whether trains should be subsidized or not. That's a whole separate discussion. But since you bring it up, I'd say that in general, transportation of all kinds provides such massive positive externalities that it should probably be subsidized. Then we can debate how much more trains should be subsidized over airplanes, but both create massive net positive externalities, IMO.

I think it's really hard to argue that for planes. In saying that I don't mean that I think it's clearly not true. I mean that the case for net positive externalities for air travel is dependent on things like (a) the geographic scope you consider (b) the temporal scope you include (c) value judgements about time-efficient travel and much more. One could legitimately take quite opposite positions on all these aspects (and more), and would end up reaching very different conclusions.

Something like this applies to trains also, but much less so because their inherent geographic scope, environmental impact, sociological impact and effects on reducing travel time are much less than flying.

So you are correct that externalities is something that is really ill-defined, which is why all claims to impose externality-based taxes should meet a high bar of rigor.

In most cases, that's just impossible and the taxes end up being applied for political or emotional reasons rather than objectively taking all costs and benefits into account.

But when it comes to a few areas, we know that there are massive positive externalities in anything involving transportation or communication. Anything that makes the world smaller generally has big positive effects.

Even if you never buy a foreign good, the fact that a good was brought in will lower the price and raise the quality of the domestic good you do buy. That generates employment and income. Anything that lowers the price of bringing in that good will have a huge positive effect on the economy.

With planes, the fact that they make transportation easy and affordable generates massive revenue for tourism, trade, employment. European Airports alone generate about 675 Billion in GDP -- 4% of the EU's GDP when both passenger and freight is taken into account[1]. And that's just airports.

An older FAA study concludes that civil aviation generates 5.4% of US GDP[2] and that's a fairly conservative study not even trying to measure too many spillovers.

Then there is a third effect, which is the superiority of point to point designs. Miami Beach was developed in the 30s and 40s because some developers saw its potential as a great beach destination. But it was only with plane flight that the rest of the nation had a chance to enjoy it. Or Las Vegas, another center that sprang out of nowhere.

The fact that I can fly from pretty much anywhere in the country to Miami for $100 massively increases the tourism trade to Miami Beach. To do that with rail, you'd have to overcome n^2 problem. That alone would require laying down ~50,000 miles of track, requiring God knows how many tons of steel, trainyards, and workers. And it would take days to travel there with connections, stopovers, etc. Those are all frictions.

And once you laid it all down, suppose you didn't want to go to Miami, but to Corpus Christi. Thus air travel allows places to spring up in response to market demand, whereas in the old days, cities along the track became the important centers -- e.g. development was infrastructure constrained rather than allowing the infrastructure to meet the needs of development flexibly and quickly. That increased flexibility and convenience, together with the reduced frictions of point to point travel provides trillions of dollars in positive externalities.

[1] https://medium.com/geophy-hq/airports-as-a-positive-external...

[2] https://www.faa.gov/air_traffic/publications/media/2014-econ...

> Then there is a third effect, which is the superiority of point to point designs. Miami Beach was developed in the 30s and 40s because some developers saw its potential as a great beach destination. But it was only with plane flight that the rest of the nation had a chance to enjoy it. Or Las Vegas, another center that sprang out of nowhere.

I don't think that these are particularly good examples for you to cite. Neither Vegas nor MB developed under the wing (so to speak) of air travel, but rather the interstate system. Air travel made them more accessible and accelerated their growth, but it was not responsible for their development, and the many folks who visited either of them in the 40s, 50s, 60s and 70s without flying would likely not say that they could not enjoy them without planes.

In addition, although it's clear that Miami Beach and Vegas have benefitted from cheap flights, that doesn't mean that the net result for the country (let alone world) as a whole is positive.

> Even if you never buy a foreign good, the fact that a good was brought in will lower the price and raise the quality of the domestic good you do buy.

This sounds like an incredibly hand-wavy claim, and also easily refuted as a general rule. The easy (flight-based) import of foreign goods has, in many cases, led the complete decimation of various US manufacturing sectors. If you hadn't noticed there are essentially no mass-market US electronics companies any more, very few clothes manufacturing companies, and in many manufacturing sectors that do still nominally exist as US companies, their factories are no longer US based. It's false to lay this all at the feet of relatively cheap air freight, but it certainly plays a role, and refutes your overly broad claim that "Anything that lowers the price of bringing in that good will have a huge positive effect on the economy."

> Anything that makes the world smaller generally has big positive effects.

Yes, the positive effects are well known and oft-discussed. The negative effects are less well known, less researched and rarely discussed. This means that it's hard to have a well-informed discussion about the balance between the two.

> In addition, although it's clear that Miami Beach and Vegas have benefitted from cheap flights,

Yes, I am not saying that air travel created Miami Beach, but that Miami Beach benefits from it. This is the definition of an economic externality. We are counting the financial benefit or spillover of some technology, meaning the extra value-add created beyond the purchase of the plane ticket itself. For flight, it's huge.

Then there is a switch to a different argument:

> that doesn't mean that the net result for the country (let alone world) as a whole is positive.

This is not an economic argument. Perhaps a moral argument - it's not clear, as no details were provided. But speculating as to whether some value-add spillovers should or should not be present is not how we count externalities in a pigovian tax. It seems what you want is a sin tax for flight, which is not a pigovian tax.

In fact most people, when they use words like "externalities", actually want sin taxes. They are not trying to come up with some objective measure of economic value-add spillover effects. And that's fine -- we have lots of sin taxes in the world, but then advocacy for them should be honestly labelled as such.

> This sounds like an incredibly hand-wavy claim, and also easily refuted as a general rule. The easy (flight-based) import of foreign goods has, in many cases, led the complete decimation of various US manufacturing sectors.

Now is not the time to get into a debate about trade theory, but suffice it to say that I disagree. Trade is great. Deficits are not great. You can have lots of trade without trade deficits, and trade is welfare improving. If you want to stop trade deficits, then add a tax to net foreign capital flows, not cross border flows of goods and services. But on this point we just have to agree to disagree.

> > that doesn't mean that the net result for the country (let alone world) as a whole is positive.

> This is not an economic argument. Perhaps a moral argument - it's not clear, as no details were provided. But speculating as to whether some value-add spillovers should or should not be present is not how we count externalities in a pigovian tax. It seems what you want is a sin tax for flight, which is not a pigovian tax.

It's not necessarily a moral or an economic argument alone, though it could be. For example, perhaps the massive shift in summer vacation travel from all points of the US towards FL was (while very good economically good for FL) both bad economically for the rest of the country and created substantial externalities within FL itself (environmental, social etc.)

Comparing these costs and benefits can't be done in a value-free way, which means that establishing the overall cost/benefit is not likely to be a task that will lead to a consensus outcome.

> For example, perhaps the massive shift in summer vacation travel from all points of the US towards FL was (while very good economically good for FL) both bad economically for the rest of the country and created substantial externalities within FL itself (environmental, social etc.)

When I said an "increase" in value add, I meant an economy-wide increase in value-add, so the argument of taking business away from other tourist destinations doesn't apply.

If you want to claim there is some economic loss as a result of "social losses", then you need to again demonstrate that loss in terms of economic value-add and it will roll up to the economy-wide value add figure above, otherwise we have once again left pigovian territory and are back in "sin tax" land.

Transportation just has huge positive externalities, and I don't see any of them being entered into the equations when claiming that more taxes are warranted because of externalities.

I don’t get how trains help everyone. By their very nature, they draw lines blessing certain areas with infrastructure, blessing certain cities, while bypassing others. It must be hard for smaller cities in Europe to get much traction when the big cities all have fancy rail. In the US? Even small, super remote places (Aspen, Steamboat, Bar Harbor, Bozeman, Spokane, Jackson Home) have airports and that makes them equally connected to the country as anywhere else.

Europe is more densely populated than the US. Small cities are rarely far from major cities, and they are usually connected by regional rail. Small remote cities don't really exist in areas where rail traffic makes sense.

That’s a very Western / Central European bias. In fact it probably is a big reason why there’s such a major east/west split that persists today, the rich countries keep building themselves more and more of this type of luxury infra.

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