Could the Elimination of the Gax Tax also Eliminate Transit Fares?

Roanoke Valley Metro Bus 3Well, probably not.  But let’s think about the logic behind the gas tax and what the switch to sales tax funding might mean.

Transit and rail service is generally described as being subsidized, in that the total cost of their initial capital outlay and ongoing operation is not covered by transit fares.  The subsidy in question comes from the gas taxes (and related vehicle and transportation fees) that fund the rest of the state’s transportation system.

So:  the gas tax is the user fee paid by drivers, and transit fares are the user fees paid by bus and rail riders.  Now, we know that gas taxes fall short of paying for the full cost of running our transportation system, so both drivers and transit users are subsidized, but for purposes of this argument let’s pretend that gas taxes do pay for 100% of the transportation system and leave a little left over for transit and other projects.

Now, if Governor McDonnell’s plan passes, we switch from a gas tax to a sales tax.  There is no longer a “user fee” for driving.

But if transit fares persist, there’s still a user fee for bus and rail.

Further, wouldn’t transit users effectively pay twice?  Under the current system, the transit fare replaces the gas tax that the rider would have paid if they had driven.  That’s their contribution to the service.  But under the new system. they would continue to pay the fare, and would see an increase in their sales taxes.

Drivers, meanwhile, have something close to a revenue-neutral proposition: no more gas taxes, but higher sales taxes.

So, again: if the gas tax goes away but transit fares remain, bus and rail riders will be paying twice for the services they use, once through fares and again with increased sales taxes, while drivers will only pay once.

Suddenly, rather than the idea that buses and trains are subsidized by drivers, who are paying for their own infrastructure through gas taxes, it is highways that are subsidized by transit users.

 

Eliminate the Gas Tax, Increase the Sales Tax – a Good Idea?

1024px-Pumping_gas3Governor McDonnell has proposed a solution – or the beginning of a solution, at least – to the transportation funding crises in Virginia.  The most significant element is the elimination of the state gas tax, and its replacement with a 0.8% increase in state sales tax.  Both the Not Larry Sabato blog and the Bearing Drift blog summarize and offer some analysis of the plan, which I encourage you to read.

RIDE Solutions doesn’t come down on one side or the other, here – in general, we feel that anything that gets more money into transportation is a good thing (with the caveat that we believe the commonwealth’s transportation system should be run as efficiently as possible before we plow more dollars into new road-building or congestion management projects).

Here are some of my personal thoughts on some elements of the plan:

1) Eliminating the gas tax, increasing the sales tax.  One of the justifications for the gas tax is that it’s basically a user fee, so eliminating it could make the waters murkier in terms of connecting the public benefit with the public cost.  On the other hand, I’ve repeatedly made the argument that the gas tax falls far short of covering the costs of the transportation system, so getting rid of it might be the best way to stop having that argument – transportation then becomes a public benefit that everyone pays for.  This can also be of benefit to the cycling world, as I often hear the argument that since cyclists don’t pay gas taxes (of course, they do, since most cyclists are also drivers), they don’t have a right to the road.  Elimination of the gas tax would eliminate that argument.

A Facebook post I read suggested one downside is that the burden of a sales tax may fall more heavily on Virginia residents than out-of-state travelers.  This may very well be the case, and I’d like to see data, if it was available, that showed how many out of state drivers fueled in Virginia gas stations.  That said, as Bearing Drift points out, the diesel fuel tax is remaining, so one of the major out-of-state users of Virginia highways, trucking companies, will continue to contribute to our transportation fund.

A move to the sales tax as the primary source of funding would also offset the effect of improving mileage standards on upcoming generation of vehicles, something that has been a problem for some time.

2) Increasing registration fees as a dedicated source of transit funding.  I agree with Not Larry Sabato here that any dedicated source of transit funding is probably a good idea.  I’d prefer it as a dedicated percentage of the sales tax, but any place is a good start.

3) A new $100 yearly fee on alternative fuel vehicles.  Not sure how I feel about this one yet.  Not Larry Sabato makes the argument that this penalizes the cleanest-running cars, which is a good point.  On the other hand, hybrid, CNG and other vehicles haven’t contributed to transportation funding at the same pace as conventionally fueled vehicles for a number of years, and though they have a smaller cost in terms of pollution, they contribute equally to congestion costs, road maintenance costs, the land-use costs of parking, etc.  In the sense that this fee could be playing “catch up” in getting these vehicles to contribute their fair share, I don’t know that it’s a bad idea.  But as a permanent new fee, I’m not sure that it’s fair.  A fee based on vehicle weight might be more appropriate, but I’m not really sure about that, either.

There are a few other elements discussed in the other blogs that you might want to take a look at – these are just the items that I feel make sense to look at from a TDM perspective.

EDIT:  One thing I forgot to add – the benefit of the gas tax, and of raising the gas tax to the levels needed to fund transportation needs, is that it does serve as a disincentive to drive unnecessarily.  In that regard, high gas taxes encourage alternative modes (where they’re available – a lot of rural areas without good transit options are still left with long distance commutes to work and shopping).  That’s the upside of the user-fee element of the gas tax:  you can avoid paying it by driving less and not buying gas.  This has a beneficial effect on pollution, congestion, land-use, etc.

Is Raising the Gas Tax the Solution?

Yes and no.

There is a fairly complex proposal in the Virginia General assembly to raise the gas tax and offset that increase through other changes in taxes and fees.  The Bacon’s Rebellion blog does a good job of summarizing the proposal.  They also point out a fundamental flaw with it:

The underlying assumption is that there is nothing wrong with Virginia’s transportation policies that more money won’t fix.

I dispute that assumption. I maintain that transportation policy is fundamentally broken. And while, yes, we probably do need to spend more money on transportation to increase mobility and access, raising taxes without changing how that money is spent is a fool’s errand. No amount of tax increases will help Virginia build a transportation system for the 21st century if the money goes to the wrong projects.

I think this is right.  As far as it goes, I have no issue with raising the gas tax – it is the closest thing we have to funding our transportation system by those who use it most, and does a better job of collecting revenue from out-of-state drivers than other methods.  But, as is hinted in element of the gas-tax hike that would levy fees on electric and hybrid vehicles, it has a fundamental flaw that as vehicles become more efficient – an indisputable good – it actually reduces funding even as traffic and congestion increases.  Other proposals to get around this, such as the Vehicle Miles Traveled tax, are problematic in other ways.

In other words, raising the gas tax is fine, but it probably doesn’t address the core problem – as James Bacon points out, it might even exacerbate it if land use decisions, developer responsibility, and other issues aren’t addressed first.

From our perspective, transportation should first be addressed through maximizing the efficiency of the existing system whenever possible, through transportation demand management principles, intelligent transportation systems, or other methods.  Every dollar that is wisely invested in something other than new construction is a dollar that won’t bear the interest of future maintenance costs, and doesn’t eat up land that might be productive in ways other than road building.

After that comes better land use decisions.  Whether policies that encourage density and transit oriented development, to making developers take more responsibility over the transportation systems that feed the sprawl they create, to designing better streets and road systems that can more flexibly respond to changes in vehicle choice (for example, the dense neighborhoods in many counties that don’t connect well to commercial centers or basic services, that lack sidewalks, yet can look like any urban neighborhood), the connection between transportation and land use needs to be better understood and better implemented if spending on transportation is truly going to be an investment in the future rather than simply maintaining an outdated status quo.

Ferries and Gas Taxes

Crossing the Ferry | via Bearing Drift

This great post over at Bearing Drift is worth a read as both an interesting history lesson as well as a discussion-starter on the taxes vs. tolls debate.  In short, it explores how the early ferry system went from a private service funded by tolls, to a public service funded by general taxation, then back again:

Taxes became tolls not out of convenience to the traveler, but out of sympathy for the poor. For while tolls were paid only by those who chose to use the service, a general taxation made the poor–especially those so far removed from the service–finance those who could afford it more than it made the wealthy subsidize those who would never use it.

Virginia continues to struggle with adequately funding its transportation system and needed improvements (not just road building, but rail expansion and safe bike and pedestrian accommodations).  That funding is primarily supported by a gas tax that has not been raised since 1986, a general gas tax that hits all areas of the state equally even as mega projects in Northern Virginia would seem to eat a lot of that money up (granted, they need it – the congestion in the Northern Virginia and Hampton Roads area is damaging not just to the quality of life there, but threatens Virginia’s economic vitality).

In the Region region, the tolls vs. taxes debate doesn’t have much meaning, but as the region works to expand transportation options both to improve mobility as well as to stave off potential congestion issues, it’s worth thinking about how the state pays for transportation.  Could we do more to expand transit, pedestrian and bike accomodations locally if less general tax dollars went to Northern Virginia and other large metro areas?  Should road users have more individual responsibility for paying for infrastructure via tolls and other fees, and if so how that affect cyclists and transit fares?  And by relying on gas taxes to fund transportation, and demanding increases in those taxes to fund the growing gap between resources and need, are we really advocating a revenue stream that has a disproportionately negative effect on the poor, like the early Virginia colony found with its ferry system?

The Implicit Contract

Bearing Drift had a post earlier this week entitled The Gas Tax Blues, proposing some ground rules to be applied if the General Assembly were to raise the tax by a dime.  The blogger ends the list of mostly reasonable requests with this item:

Stop using gas tax revenues to pay for mass transit. This is a wealth transfer, plain and simple. Worse, it breaks the implicit contract between the drivers and the government that their gas taxes will be used to maintain roads. It’s time for transit to pay its own way and stop leeching off the guy stuck in traffic.

There are a couple of flaws in this item.  First, I’d challenge the assertion that the “implicit contract” between the driver and government is to use the money solely to maintain roads (and that contract, as far as I can tell, is implicit, whatever its nature; I scoured the Code of Virginia this morning and can’t find where the Code specifies how the taxes must be spent).  Certainly, that would be a major use, but other uses, such as congestion mitigation, would also seem to be appropriate.  Further, the author’s framing of this statement assumes that increasing mass transit somehow has a negative effect on road conditions, when the opposite is true.  It is the thousands and thousands of cars, most of which hold only one person, sitting in traffic that contribute to the wear and tear of roads.  Mass transit – whether light rail or buses – actually relieve the demand on the physical road infrastructure and can prolong its life, reducing maintenance costs over the long term.

Second, transit isn’t leeching off the guy stuck in traffic – he should be thankful for it, in fact, since if it wasn’t there he’d be stuck even longer, on roads that were ever more worn down.  Transit isn’t “leeching” off him any more than concrete-mixers and traffic engineers are leeching off him.  His gas taxes are going to pay for a transportation system that attempts to offer the most mobility for the most people at the best cost.  This seems to be another case of assuming transportation=roads on the part of the author, rather than transportation=mobility.  Time and time again, we see that getting stuck in this mindset doesn’t get us very far and only results in more roads, more demand, more expensive maintenance, more land eaten up for highways and infrastructure projects, and a spiral of expensive and unsustainable building.

Highways are Heavily Subsidized II

There is nothing about this that is financially self-sustaining | Wikimedia Commons

I’ve written before on the myth that highways are self-sufficient while modes like transit and bicycles are “subsidized.”  A recent Governing Magazine article explores this topic by dissecting the idea of the gas tax as a user-fee, a distinction of terminology that is often used to argue that gas-tax money shouldn’t be spent on things like rail, transit, or bike accommodations:

Why do all these labels matter? Aren’t they just semantics? No, because labels influence policies. Road firsters say that high-speed trains, light-rail lines and streetcars need subsidies, which proves their illegitimacy. By insisting that gas taxes be called what they are—taxes—and assessing how roads have really been paid for will help keep these debates honest.

The author, Alex Marshall, makes the same point that I’ve made before:  assuming for a moment that you accept the idea that gas tax is a user fee, gas taxes alone haven’t paid for road building and maintenance without significant infusions of general fund dollars for over a half-century, to the tune of $600 billion dollars.  Right now, gas taxes only pay for about half of all highway work.

Road firsters also are wrong when they claim revenues from the gas tax pay for most of the costs of roads. The United States has one of the finest road systems in the world, more than 4 million miles, built over the past 125 years and paid for almost entirely by tax dollars, of which the gas tax is almost certainly just one small portion. The gas tax did not even begin on a federal level until 1932. Congress passed the first Federal Aid Road Act in 1916.

Marshall’s purpose in understanding the terminology we use is an important one.  The goal with transportation policy should be to increase mobility and connectivity, to shorten transport times, and to connect goods and services to markets.  Referring to burning gasoline as a user-fee for transportation distorts the relationship among these things, redefining transportation as merely driving regardless of whether it meets any goal of mobility, efficiency, connectivity, etc.

If we can just get to the point where we agree that all transportation modes are subsidized, and that transportation shouldn’t be burdened by some impossible cost-recovery model, it will go a long way to making sure we are discussing the right modes (and, yes, this will include single occupant vehicle travel) and the right infrastructure (and, yes, this will include highways ) for the right purposes.

Governor McDonnell Implements Telework Tax Credit

Buried within this recent press release is this bit of great news businesses that want to offer telework:

HB 2197 (Comstock) – Creates a telework tax credit

  • Provides a $1,200 per teleworking employee tax credit to employers for expenses incurred in allowing employees to telework pursuant to a signed telework agreement for taxable years beginning on or after Jan. 1, 2012, but before Jan. 1, 2014. The total credit amount any one employer may take for 2012 and 2013 is $50,000.

This should be a nice incentive to help some employers offset the cost of telecommunications infrastructure and services to allow their employees to work from home (like I am right now!).  Telework is, of course, the best commute option, even better than bicycling – the quality of life benefits of allowing employees to forgo the drive to work and the office experience altogether are numerous, as are productivity gains.  One of the benefits employers often find is that managing teleworking means managing on outcomes more than presence; that is, they but measures in place that actually capture an employee’s productivity better than standard measures and overstate the value of “face time.”  Often, they find that teleworkers are more productive because of this – regardless of the time they actually spend doing the work – because they have a better understanding of their expectations.  Meanwhile, managers often confuse in-office employees who spend a lot of time looking busy as actually being busy.  Implementing similar measures helps them set better expectations and performance guidelines for in-0ffice employees.

In other words, a teleworker can often get more done in less time, and still get the benefit of picking up their kids from school every day, saving money on commuting and daycare expenses, all because their managers learn how to focus on the work getting done.

In Virginia, the Telework!Va program can provide free services to Roanoke-area companies looking to implement a telework option.  Not only do those companies get the advantage of those free expert consulting services, now they can tap into the tax credit to fund the technology.

Highways Are Heavily Subsidized

Supporters of transit are often challenged to explain why the public should subsidize buses and trains when they don’t subsidize roads, which are paid for by gas taxes.  Bicycle advocates occasionally hear the criticism that cyclists don’t belong on the roads because they don’t pay the gas tax (ignoring the fact that most cyclists also own and drive cars) and are using the roads for free.

So, is this true?  Do highways pay for themselves through gas taxes, tolls, and user fees while transit and bike accommodations only exist on the shoulders of the taxpayers?

Absolutely not:

Since 1947, researchers have found that the amount of money spent on highways, roads and streets has exceeded the funds raised from gas taxes and other user fees by $600 billion, “representing a massive transfer of general government funds to highways.” In fact, as of 2007, fees charged to motorists covered only about half the cost of building and maintaining the country’s roads. The rest is financed with other taxes and bonds.

In fact, the Highway Trust Fund – the federal fund that pays for road building and maintenance – has been bankrupt since 2008, kept alive with an infusion of $34 billion in general-fund revenue and debt.

This is not to say that there’s a problem with this.  Public infrastructure should be paid for with public funds, regardless of what specific tax they’re tied to.  But it does open up the debate to consider which modes are more appropriate for which areas and more deserving for funding.  If everything is subsidized – and, clearly, it is – the discussion should be which modes allow for the most mobility and most efficient system in a given area.  Transit, bike infrastructure, rail, and so forth still won’t always be the answer, but I bet you they will rise to the top more often than not.  And it forces highway advocates to explain, for example, why its better to spend millions widening highways to relieve rush hour traffic congestion when additional buses might do the same job at a better return on the investment.

You’re Not the Boss of Me

As one might imagine, I get into discussions of public funding for alternative transportation infrastructure quite a bit – online and offline, though the online conversations tend to be some of the most frustrating (and perversely amusing).  As the debate moves back and forth and I make my case for funneling dollars towards bike lanes, transit service, park-and-rides, or whatnot, I am amazed at how often and how quickly the opposing argument boils down to, “Well, you just want to control my life.”

Take, for example, a recent thread on Facebook, where River Laker (Roanoke’s Car Less Brit) shared this Roanoke Times article about a VDOT plan, currently unfunded, to spend $20 million adding travel and turning lanes to the Elm Avenue Bridge, Roanoke’s hotspot for congestion (as modest as that congestion is).  A few folks, myself included, commented that $20 million to alleviate congestion for a small number of drivers during rush hour on one tiny span of road might not be the wisest use of money, particularly when the same $20 million could complete the entire span of unfinished Greenway between Green Hill Park and Explore Park.  Yes, I understand that, in reality, government spending doesn’t work that way – the money is broken up into pots and can’t be transferred from project to project, but it’s the principle that’s the point here.

A proponent of VDOT’s plan (we’ll call him K.B.) stepped in to argue against the cyclists and others who were criticizing the proposal, and after engaging him in discussion it took only 7 posts before K.B. shot back, “What you’re really trying to do is force your way of life on me, admit it.”

This response amazes me on several levels.  First, it’s just a dumb argument (I’d like to be more diplomatic than that, but I just can’t):  not funding a road improvement does not equate to denying someone the ability to keep driving as they always have.  At worst, it reinforces the consequences of their choice  – choose drive alone everyday, deal with the traffic.  To be fair, the same can be applied to cyclists and bus riders – choose to ride a bicycle, accept that the trip is going to be more dangerous.  Not providing additional service does not equal taking away service.

Second, I don’t get how providing a bike lane for someone else to use forces the driver to change his behavior.  Now, TDM professionals like myself would love if this were actually true – if putting down a bike lane forced drivers to switch to bicycles (or to adding buses forced them to ride, or HOV lanes to carpool), then our jobs would be much easier.  We’d all be engineers instead of marketers.  Of course, that’s not how it works:  building out accommodations serves as one piece of a complex puzzle of infrastructure improvements, incentives, market pressures, and education to get people to use them.  Almost always, though, there is a built in audience – maybe small, maybe large – who would use the accommodation with little to no prodding.

More important is this:  TDM is about transportation choice – that is, we’re not against cars or driving alone, but we’re for using the right mode for the right trip and educating commuters about the benefits of doing so (significant dollar savings, environmental benefits, health benefits, and so forth).  In fact, surveys in Virginia have shown that commuters who choose to drive alone each day, or do so out of necessity, appreciate other commuters having the option to bike, walk, take the train or bus, etc., as it gets those cars off the road and allows the single-occupant-vehicle drivers to move along more efficiently.  Giving people the widest variety of choice helps the entire system move more efficiently.

In terms of where public money is spent, we take a view of investment equity; that is, public money should be spent in a way that benefits all users of all modes in some respect.  The idea that that spending money on bike lanes, greenways, and other accommodations now is a waste of tax dollars is a bit ridiculous given the number of cul-de-sacs, limited-access-highways and, yes, congestion mitigation projects that have been built over the last several generations.  If the measure of success is the number of people who use it, is a cul-de-sac really that much better of an investment?  Given the lopsided way we’ve spent transportation money the last few decades, we have a lot of catching up to do to reach some level of equity.

But let’s accept for a moment, just for the fun of it, this “you’re controlling my life” argument has some validity to it.  How, precisely, is the reverse not therefore true?  If adding a bike lane is controlling his life, isn’t adding additional driving lanes controlling mine?  So, even accepting that it’s got weight behind it the argument is pretty silly – the two cancel each other out, and we’re back to debating which is the better way to spend public money.

I’m not sure what causes drivers to retreat to this point – are they threatened?  Is it guilt?  Maybe they think they should be riding that bike to the store, but have rationalized not being able to do so because of the lack of a bike lane?  Whatever the case, it’s an unfortunate position that shuts down the important conversation we should be having about public investment in transportation infrastructure.