MA Residents Face Among Highest Transportation Costs in US
Thursday, January 09, 2014
According to the data compiled by the Tax Foundation, tolls and user fees, fuel taxes, and license taxees cover less than 60 percent of road spending in Massachusetts.
While debate continues in the state over the recent move to tie gasoline taxes to the rate of inflation, rising transportation costs still stand to outpace fares, tolls, and taxes designed to cover road repairs.
The difference is made up at the local, state, and federal level by general funds raised largely through broad-based taxes on income and sales.
“The story here is that states don't rely on gas taxes or tolls as much as they should,” said Scott Drenkard, an economist at the Washington, D.C.-based Tax Foundation.
Road users ought to pay for upkeep
In a report released this month, that foundation labels transportation costs a key issue for state governors and legislators across the nation.
Joseph Henchman, the author of that publication, contends that the “lion's share” of transportation funding should come from user fees and taxes. When road funding comes from tolls and fuel taxes, the people using that infrastructure bear the cost of upkeep according to Henchman.
By contrast, funding transportation out of general revenue sources raises concerns.
“If you don't ask users to pay for roads, it makes them free,” Drenkard said. As a result “roads are overused because they're underpriced.”
Transportation-related funding comes in the form of fees (for services, such as tolls) and taxes (based on usage like fuel and motor vehicle license taxes).
Massachusetts' fuel excise tax had remained unchanged at 21 cents, near the national median, since 1991. Last year, lawmakers passed a transportation budget that included a 3-cent increase in that tax and tied future adjustments to the consumer price index starting in 2015.
The state of Massachusetts actually leads most of the nation in paying for its roads through transportation funds: User fees and taxes totaled 58.7 percent of state and local road spending in 2011 according to the Tax Foundation, compared to a national average of 50.4 percent.
That proportion of funding in Massachusetts placed the state 6th in the nation, and at the top in New England. Fuel taxes comprise 25.8 percent of total transportation spending in Massachusetts, versus tolls and user fees which equaled 18.2 percent.
Rhode Island's proportion of funding was nearly identical, with 58.6 percent of total funding coming from related user fees and taxes, while New Hampshire (58 percent) was close behind.
The other three states in New England pave their way mostly through broad-based taxes: Maine sources 48.8 percent of funding from transportation-related revenue, Connecticut uses 43.6 percent, and Vermont's total is just 29 percent.
Pushback against tying gas tax to inflation
Passed without Republican support, last year's legislation pegging the gasoline tax to inflation drew the ire of many residents and prompted a statewide petition campaign, “Tank the Gas Tax”. That grassroots drive collected over 100,000 signatures supporting repeal, potentially putting the issue on the ballot for voters to decide this November.
Critics lambast the inflation-adjusted tax as “taxation without representation”.
“We don't think it's a funding issue,” said Rep. Geoff Diehl, a Republican representative from Whitman involved in the repeal campaign, who pointed to current above-benchmark tax collections halfway through the fiscal year.
Diehl said opponents of the adjusted tax didn't contest the 3-cent tax increase included in the transportation bill, but he did say there were other ways to raise revenue still to explore, including a tax amnesty plan or by cutting down on government waste.
“We just feel that we have more steps to take before asking taxpayers to pay more.”
And while lawmakers sometimes need to take the “tough votes” that will raise taxes, the second-term representative decried the inflation-adjusted tax.
“It takes responsibility away from legislators, which is not only a mistake, but it takes the authority away from (representative government),” Diehl said.
Roughly a dozen states across the country tie gas taxes to the rate of inflation. Maine was one early adopter, until that indexing was eliminated in 2012.
The research arm of the anti-tax Americans for Tax Reform group contends that indexing gas taxes is a poor idea for a host of reasons, including the fact that the price of gasoline is included in the calculation of inflation, creating a sort of feedback loop.
And higher user fees and taxes don't correlate with better roads, as evidenced by the Reason Foundation's annual report of states' highway systems. New York, with the highest gas taxes in the nation, also leads with a large amount of rural and urban interstate mileage in poor condition according to that foundation.
“I'm sensitive to the criticisms” about inflation-adjusted taxes, said the Tax Foundation's Drenkard. But “it's not like states are spending less on transportation.”
Road-specific funding down in real dollars
According to a September 2013 report by the Institute on Taxation and Economic Policy, gas taxes account for 85 percent of federal transportation-related spending, but the cost of road maintenance has grown: reducing the value of the federal gas tax by 28 percent since 1997.
While increasing fuel efficiency has taken a toll, “predictable growth in the cost of asphalt, machinery, and other construction materials has been the bigger issue by far,” according to Carl Davis, a senior analyst and author of that institute's study, in a release.
With a decline in the amount of fees and taxes collected for road upkeep in inflation-adjusted real dollars, “states haven't used transportation funds, they've just drawn off general funds,” according to Drenkard.
Given that dilemma, “I think the choice is to tie to inflation-adjusted taxes,” Drenkard continued. He added he would like to see new and inventive ways to fund transportation, citing the privately owned Dulles Greenway toll road in Virginia.
In Boston, the Massachusetts Taxpayers Foundation endorsed the bill tying the tax to inflation as a way to mostly address a roughly $800 million gap for state transportation agencies by 2018.
The Massachusetts Budget and Policy Center calculated last year that had the state indexed the gas tax for inflation in 1991 (the last year the excise tax changed), the rate would be 36 cents per gallon today.
That center acknowledged a greater impact on low and moderate income households by indexing the tax, but cited other beneficial effects, including curbing consumption.
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