There has to be a better way to fund transportation
Many years ago, sales taxes were increased by 0.25% (actually 0.25 percentage points) along the Wasatch Front to pay for mass transit. This was called the first quarter. Then came the second quarter. A quarter of the second quarter in Salt Lake County is used for roads. As of this April, Salt Lake County taxpayers will start paying the third quarter. Like the second quarter, a portion of the third will be used for roads.
Now transportation planners are calling for fourth and fifth quarter sales tax increases for transit in the next twenty years.
Sales tax rates don't have to be increased to generate additional revenues. Sales tax revenues increase with population/wage growth and inflation.
According to the Utah State Tax Commission's FY2006 Annual Report, Utahns paid $23.8 million in public transit sales taxes in 1987. In 2006, Utahns paid $136.4 million in transit sales taxes, a portion of which (less than 10%) was used for roads. This is an annualized increase of 9.6%. In the past ten years, the annualized increase has been 10.1%, compared to annual combined inflation and population growth of about 5.5%. With the recently approved third quarter in Salt Lake County and second quarter in Utah County, the annualized increases will be even higher in future years.
Each quarter percentage point sales tax increase yields about $50 million in Salt Lake County, assuming that the additional transit tax increases are not imposed on unprepared food purchases.
When tax increases were originally proposed for mass transit, proponents claimed that increased transit spending would allow the state to slow the growth in highway expenditures. Has that happened? No, in fact just the opposite has happened. In FY2008, the state will be spending nearly $790 million in one-time and ongoing general fund dollars for roads, up from nearly zero in 1990, when gas taxes and other user fees covered the costs of transportation infrastructure. Despite the huge infusion of general fund dollars for transportation, the transportation lobby says even more is needed.
Some argue that general fund revenues are needed because the state has not increased gas taxes. Since the gas tax is a fixed amount per gallon, gas taxes need to be periodically increased to offset inflationary losses, unlike sales and income taxes which automatically increase with inflation and population/wage growth.
However, only a portion of the increased reliance on general funds for transportation can be explained by the state's reluctance to increase gas taxes. The nearly $790 million in general fund revenues for transportation would equate to a 56 cent per gallon gas tax increase which means the gas tax rate would be triple what it is now. If the state gas tax rate were adjusted for inflation since the last gas tax increase, the gas tax rate would be about 10 cents per gallon higher, not 56 cents per gallon higher.
What are the solutions? We've proposed three ideas: increased funding for transportation corridor preservation, combined prioritization of roads and rails projects, and congestion pricing. Click [here] to read about congestion pricing.
We have an additional proposal, which we'll discuss within the next couple of weeks.