What if cities decided to privatize on-street parking spaces? I imagine that this could be a market failure in mixed residential-commercial neighbourhoods. The reasoning is that most cars spend the night at residences and the day at business locations. Maybe it's the case that people who now live in mixed zones manage to park their cars close to home because by the time they get back in the evening, most people who work in this zone have gone home as well (probably a different location). If these spaces were private, it could be difficult to work out the logistics of space-sharing, as commercial drivers wouldn't want to be "locked into the contract" to leaving at, say 6pm, and likewise, residents would want to be free to spend days off at home, and not have to vacate their space. So I imagine that both commercial drivers and residents would want to secure their space, doubling the demand (if they residents and workers are in equal proportions), and raising the price of parking by a lot, certainly more than corresponding the tax break (the town would distribute its revenue from selling/renting the spaces as tax-breaks).
Gustavo P.S.: I just had to throw this in: something else cities could do is clear parking lanes to make room for segways (Dean Kamen's vehicles).
