The Bad Policy Consequences of the No-Tax Pledge: Transportation Edition

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The ideal transportation funding package would be a combination of gas taxes, road pricing, land taxes on transit-adjacent land, phase-outs of tax exemptions for fossil fuels, and sales of state parking assets.

The reason these would be the ideal revenue sources is that each would help alleviate other economic or environmental problems.

Higher gas taxes would reduce driving, and incentivize more transit ridership, car sharing or the purchase of more fuel-efficient vehicles.

Road pricing for busy roads at peak times would reduce traffic congestion, which is a drag on economic growth and a major source of human misery.

Land taxes on land around transit stations would cluster housing and office development around transit stations, rather than pushing it away, increasing ridership and reducing car dependence.

Phasing out tax exemptions for fossil fuels would help reduce greenhouse gas pollution, and create a more level playing field for renewables and fossil fuels.

Selling state parking assets would incentivize better city land use choices and private transportation choices.

One of the reasons politicians don’t prefer these funding sources is that highly visible taxes that fall directly on the ultimate payer tend to be more unpopular than hidden indirect taxes. That is one reason why we see politicians trying to hide taxes wherever possible.

But another reason is that the Governor and many members of his party, and even some Democrats took Grover Norquist’s pledge to never ever vote for a tax increase.

This has turned the transportation funding bill negotiations into a game where the objective is to raise $2.5 billion from sources that Grover Norquist technically doesn’t count as “taxes,” rather than raising the money in a pro-growth way, or maximizing the state’s return on investment in public infrastructure.

That’s one reason we got a Senate transportation funding bill that merely uncaps the oil franchise tax (ha ha Grover not a rate increase!) and raises the rest of the money through a cornucopia of annoying user fees (fees aren’t taxes!).

Uncapping the oil franchise tax is a solid move, but they also cut the liquid fuels tax by a negligible 3 cents per gallon for no apparent reason, and replace the revenue with a hike in all these fees that have no actual policy rationale. By all means charge people what it costs to provide administrative services, but overcharging for this stuff is just a dumb way to raise money.

If you’re going to raise $2.5 billion in new revenues, you need to consider how that’s going to impact individual choices and investment choices. Are your revenue choices going to incentivize behavior that improves the transportation network or harms it?

This entry was posted in Miscellany.

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