By on February 28, 2011

Beijing is in a state of confusion after China’s capital drastically slashed the number of license plates available. You literally have to win the lottery to get a plate. Most winners keep the prized (but non-transferable) possession at home. Writes the party organ People’s Daily: “Only about 11 percent of those who won rights to car licenses plates through the new lottery system bought cars in Beijing in January, the first month after restrictions were implemented, according to Chi Yifeng, general manager of Beijing Yayuncun Automobile Transaction Market, the biggest car retail market in China. “

According to the manager, only 2,000 vehicles were purchased citywide after 17,600 plates were approved through the lottery. Instead of buying cars, Beijingers now hoard license plates. The paper found a salesman at a Chery dealership in Beijing who said that just 10 customers with plate numbers visited the shop in January.

Previously, Chi rechkoned that the car restriction regulation would cause about one-third of Beijing’s car dealers to go out of business. Now he forecasts that half will close.

TTAC’s forecast: The limitations will be watered down and will eventually go away.

Chen Jianguo, deputy head of the industrial coordination department of the powerful National Development & Reform Commission (NDRC), already warned that purchase restrictions are not only insufficient to deal with the congestion problem, but could harm consumers and the industry overall, reports Gasgoo. Like many his colleagues in the West, Chen recommends usage-based taxation instead.

On Friday, China passed a new law that decreases taxes on cars with smaller engines, while raising the tax on cars with bigger bore motors, Xinhua reports.

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9 Comments on “Beijing Measures Ease Traffic. At Car Dealers...”

  • avatar

    So am I correct in thinking half the amount of plates were taken away?
    Only half the amount given out per year were distributed?

  • avatar

    I bet the government there wasn’t expecting that.
    One possible solution might be to revoke the license plate if an automobile is not purchased within a specific time-frame (say 2-3 months). This would, of course, create even more bureaucracy.
    The main problem with taxing use (and this is true of almost all examples of this) is that while it appears to play the ‘freedom of choice’ card, what really ends up happening is that wealthier people end up having more real choices than those with less commodity power. Thus, while a wealthy person can afford the higher taxes (and thus can realistically choose to own a bigger, high polluting vehicle if they prefer), the added costs of owning such vehicles will force a person with less commodity power to ‘choose’ a smaller, low polluting vehicle. Since the program is aimed at securing common or public goods (e.g., breathable air, public health, easing traffic burdens, and so on), then it will make it appear as if wealthy people can be exempted from such public policies, while low-income earners have their choices limited even more than they already are (by making things even more expensive than they already are). Rather than all people sharing equally in the promotion of such ‘public goods,’ low-income persons will end up having to bear the greater burden of such programs (thereby creating a increased sense of inequity, unfairness, or injustice within that society).

    When trying to promote or advance some common or ‘public good,’ it is crucial that any restrictions or burdens required for advancing such goods be borne in an equitable manner across all social, political, and economic groups. Anything else will result in an increase sense of injustice within that society, and a sense of injustice among citizens is not conducive to a well-ordered society.

    • 0 avatar

      It is not true that wealthier people are “exempted” from such policies, since they still need to pay for the license and thus pay the biggest part of the taxation burden, while the low-incomes pay nothing and still profit from the public services paid with those taxes.

    • 0 avatar

      Yes the low-incomes definitely do profit.

    • 0 avatar

      But if the taxes are designed to try and prevent certain actions that are harmful to the public good (such a polluting, for example) they basically give wealthier people a kind of ‘license’ to pollute simply because they don’t experience the burden of those taxes to the same extent as those with lower incomes. Thus, the low income person is compelled to follow a policy that prevents public harm (e.g., polluting) while the wealthy person can basically continue polluting as much as they desire, all they have to do is pay for the ‘privilege’ of doing so (which they can do far more readily and with less experience of burden than the low-income earner).
      It’s for this reason that some countries have ‘graduated’ taxes on certain things, to try to make the burden of certain public policies more equitable.

    • 0 avatar

      It is not true that wealthier people are “exempted” from such policies, since they still need to pay for the license and thus pay the biggest part of the taxation burden,

      Oh, where to begin, where to begin…
      All right, let’s see. You have two households – one earns $20,000/year, and one earns $200,000/year. Let’s use an arbitrary placeholder ‘usage’ to substitute for driving rather than coming up with tax rates etc… so say a family can drive 1000 units/year of whatever commodity. They might be able to use less – they could drive 250 units by cutting way back, etc. But 1000 is the maximum you’d use if you went on vacation, drove all over, etc.
      Now let’s say it costs $2.00/unit in taxes to drive. And we say that the “low incomes” (as you so wonderfully describe them) drive the minimum 250 units. So the LIs are paying $500/year in road tax (or whatever it is).
      Now let’s say that the high income family is driving the absolute maximum they could drive and still have time to sleep and eat. They pay $2000 for their 1000 units.
      So, the high income family is paying more, right? But that’s not really the true cost – true cost is percentage-of-available-income, not absolute monetary value; this is something that’s usually overlooked.
      Since minimum living expenses have a non-zero floor, the true burden of add-on costs rises dramatically as income falls.
      If we say that the LI household takes home $20k, and the minimum expenditure (bare-bones on housing, food, etc) is $15k – which is optimistic, really – they have $5k left for anything that isn’t food, housing, or medical.
      So the LI household pays 10% of its disposable income on the tax.
      The high-income household technically has the same minimum expenditures – but let’s be generous and say that they have a nice house and eat well and have excellent health insurance, so their “minimum” living expenses are, say, $50k. They have $150,000 in discretionary income, and pay $2,000 in tax.
      So the HI household pays 1.3% of its disposable income on the tax.
      Technically, the HI household pays more. In the real world, the LI household not only has to cut its driving to the bare minimum, but pays almost ten times as much tax relative to its disposable income. And remember – that calculation was generous. If we assume equal terms, that the HI family’s nice house and good food and health insurance are discretionary – which they obviously are – and that they drive the same amount – they’re really paying *.2%* of their disposable income in road tax vs. the LI family’s 10%. On hard numbers, rather than what it’s expected that the HI family will own and pay, the LI family pays fifty times as much. Sound fair to you?

      the low-incomes pay nothing and still profit from the public services paid with those taxes.
      To some extent, sure – they benefit from the stability of a strong country, roads, tunnels, electricity, sewage, the security of law enforcement, and so on.
      But they pay the same amount per usage for electricity and water and heat, and they probably live in a worse neighborhood, so the relative benefits they receive from law enforcement are lower. They have fewer expensive items to protect, they have a lousier place to live, and they drive a beater Corolla instead of a leased 7-series.
      And what about the infrastructure benefits? They can’t go on road trips, so they don’t benefit much from interstate highways, and the government-created GPS network does them no good. They can’t go visit national parks, so they get no benefit from the park service. They have either no internet or lousy internet, so they don’t benefit nearly as much from the original R&D on it.
      And, ironically, in many places, the poor are ill-placed to even use public transportation; if you’re outside a major metro area and poor, you live 30 minutes away in a trailer park, not in the center of town. So what good is the publicly funded bus and rail network that operates in a city of 100k people, when the poorest have to live 20 miles away and not only don’t receive the benefit of public transit, but are forced to spend even more money on driving just to get to work? (It’s also worth noting that whenever gas prices go up, hand-wringing upper-middle-class people are shown complaining that they’ve had to sell their second cars and give up their $5/day latte habits – when the lowest income people not only drive crapwagons, but their crapwagons almost always get worse mileage!).
      The “poor people get benefits from taxes so they’re leeching off the rich” argument is absurd, and fails to take into account that while the poor pay few taxes, they also receive very few of the benefits that the wealthy (or even middle-class, to be honest) do.
      Gas taxes and road taxes are regressive. The poor gain the least benefit from the services they pay for with those taxes, are often required by circumstance (rather than choice) to pay more of them, and pay an income percentage which is often orders of magnitude higher than the wealthy.
      Debate policy if you want. Debate the morals of regressive or progressive taxes if you want. But don’t delude yourself into thinking that the poor somehow get a better deal than the rich and middle class, and benefit from public services disproportionately, because they pay lower taxes in absolute dollar terms.

    • 0 avatar

      @ PeriSoft
      Beautifully articulated. Well done.

  • avatar

    Perhaps in the end the govt didnt want too many cars on the road, clog traffic, more reserved for the real haves not the common bourgeois, then more people buy cars will also help the economy too.
    Life is always a double edged sword! just opt for the lesser evil.

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