$500 million tax increase -- or more -- for highways?
So far, only one opponent of congestion pricing has publicly stated how he would like to fund expansion of Utah's transportation infrastructure. Sen. Ed Mayne (D- West Valley City) has proposed raising the statewide sales tax rate by one full percentage point. In FY2008, that would generate nearly $500 million.
A one-percentage point increase in the sales tax rate would be FOUR times higher than the sales tax rate increases that were recently approved by voters in Utah and Salt Lake Counties.
Even though the good senator's proposal has serious flaws, we give props to Sen. Mayne for being honest and upfront with taxpayers. Most opponents of congestion pricing have proposals similar to Mayne's but will not express these publicly. Some are even whispering about a two-percentage point increase in the statewide sales tax rate. That would be a $1 billion per year tax increase.
It will be interesting to see what kind of mental gymnastics congestion pricing opponents will perform when they are asked to explain why congestion pricing is a double tax but raising sales taxes by $500 million (or more) isn't a double tax.
Why are general sales tax increases for roads a bad idea?
- Unlike congestion pricing, general sales tax increases do not provide financial incentives for drivers to use transportation infrastructure more efficiently by telecommuting, car pooling, living closer to work, and/or leaving earlier or later for work. As a result, the state will spend more dollars on expanding highway capacity if general taxes are raised than if congestion pricing is implemented.
- Increased reliance on sales taxes requires those taxpayers that use state transportation infrastructure efficiently to subsidize (even more) those taxpayers that don't.
- Sales taxes are not very visible because, unlike property and income taxes, taxpayers do not receive a statement from the government as to how much they have paid or need to pay. Sales taxes are government's way of pretending not to tax us, and taxpayers' way of pretending not to pay.
- A $500 million per year tax increase will impose $155 million in new taxes on business purchases (which businesses pass on to consumers in the form of increased prices) and $345 million on households. In FY2008, Utah will have about 900,000 households which means the $345 million tax increase will equal on average to $383 per household. Obviously, the variability in the impact per household will be high, with some households paying a lot more than others.
By keeping quiet, opponents of congestion pricing are merely delaying the day of reckoning. They will eventually have to publicly state how they plan to fund expansion of transportation infrastructure.