Are massive local sales tax increases for transportation “real” taxes?
Are massive local sales tax increases for transportation “real” taxes or just “pretend” taxes?
To most people, this sounds like a strange question. “Of course, local sales taxes for transportation are real taxes”, nearly every one would reply.
We’ve been talking to a lot of people who are concerned about transportation funding, and surprisingly many of them seem to think that local sales taxes for transportation are not "real" taxes. Frequently, they act like sales tax dollars from a taxpayer's perspective are just Monopoly money.
In most cases, they don’t articulate their position that way, but their arguments against congestion pricing indicate that they really don’t think these sales taxes are real, or certainly not worth worrying about.
The Transportation Lobby has really zoomed in on local sales tax increases because – due to near invisibility -- they are incredibly easy to pass. If a well-funded and organized group is pushing for a sales tax increase, voters most likely will not reject it unless it is an especially bad idea. The Lobby understands the boiling-the-frog principle as well as anyone.
The Main Event: Congestion Pricing (and other measures) vs. Increasing Local Sales Taxes Every 5 to 10 years (and increased earmarking of state sales taxes for transportation).
Elected officials and interest groups have already launched their effort to periodically increase local sales taxes for transportation. It began more than a year ago, and it scored early victories last year with sales tax increases in Utah and Salt Lake counties. The goal is to increase sales taxes by several hundred million dollars per year. State Sen. Ed Mayne wants to increase state sales taxes by more than $500 million per year.
This is why the Utah Taxpayers Association has proposed a four-point transportation reform plan. Of the four proposals, congestion pricing is encountering the most opposition, and this is where the issue of “pretend” and “real” taxes comes in. Here are some examples.
Comment: “Congestion pricing is bad because it will cost people and businesses money. We should do sales tax increases instead.
Response: Sales tax increases cost people and businesses money too. At least with congestion pricing, people will change driving habits which means that state and local governments will actually reduce more congestion while spending less than they otherwise would if they relied on sales taxes.
Comment: Congestion pricing is bad because roads should be free. Increase sales taxes instead.
Response: Roads have never been free. Taxpayers have always paid for them, traditionally with user fees like gas taxes but more recently with a combination of general taxes and user fees. When did sales taxes become "free"?
Comment: Congestion pricing is bad because once the road is paid for, pricing will still be there. Increase sales taxes instead.
Response: The same situation exists with state and federal gas taxes. We drive every day on roads that have been paid for, and we pay gas taxes to drive on these roads. The same applies to sales taxes. We won’t be paying less sales taxes when we drive on roads that have been paid for.
Comment: Congestion pricing is bad because we already pay gas taxes. Therefore, it’s a double tax. Increase sales taxes instead.
Response: That means that sales taxes must be double taxation as well since we’ll continue to pay state and federal gas taxes (and motor vehicle registration fees, impact fees, and existing state, county, and city sales taxes of which a large portion goes to roads).
Comment: Truckers will pass on congestion prices to consumers. Increase sales taxes instead.
Response: Business will pass on sales taxes on to consumers, either by applying sales taxes at the register on final purchases or hidden in the prices of the things we buy since sales taxes are applied to many business inputs.