You must live in a city with a public transportation system that doesn't take 2 hours to get you to a destination only 5 to 7 miles away and doesn't require huge taxpayer subsidaries to exist. I would gladly use public transportation if it didn't suck so hard in my city.
On the other hand, cars raise a lot of tax revenue. There's a 400% tax on petrol in the UK. 80p out of every pound spent on petrol is pure revenue for the govt. And people hate the oil companies if the price of a gallon goes up by 1p...
Public transportation tends to be much cheaper for riders than private transportation is for drivers. A year-long ticket for Munich is around $1000. At current prices, that won't even buy you 10k miles worth of gas in a compact car, to say nothing of the price of the car itself, insurance and repairs.
I say that to say this, if people have more money in their pocket, they will tend to spend more money, so the difference could easily be made up in sales tax on all the newly-freed-up disposable income.
Annually my train season ticket costs just over half what my mortgage costs! And I'm talking repayment not endowment here. So while public transport may be convenient, it's certainly not cheap here in England.
