Transportation taxation without representation

Dan O’Donnell:

In something of a surprise, the Republican-led Wisconsin Legislature has rejected Governor Evers’ effort to raise the state’s 32.9 cent per-gallon tax on gasoline in an effort to close a projected $1.1 billion budget shortfall.

Assembly Speaker Robin Vos, who has long been open to the possibility of raising the gas tax, told a group of conservatives last week that “an increase…to fund Wisconsin’s transportation projects is off the table,” the MacIver News Service reported exclusively.

This about-face has left Evers scrambling, as he believed that his proposed eight cent per gallon hike was a potential opening for negotiation with an eye toward a compromise at four or five cents per gallon.

Not a chance, Senate Majority Leader Scott Fitzgerald told the Milwaukee Journal Sentinelon Friday.  In a news release later that afternoon, Vos agreed that any increase at all would be “tough to get done.”

As well it should be. Raising the gas tax is a short-sighted solution to a long-term problem. So naturally, Illinois is diving in headfirst.

On July 1, Illinois’ gas tax will double from 19 cents per gallon to 38 cents. That, combined with the 18.4 cents per gallon federal tax, means drivers in Illinois will pay 56 cents in tax on every gallon of gas they purchase—a total of $10.08 every time they fill up an 18-gallon tank.

Assuming that the average driver fills up once a week, he or she will pay $524.16 just in gasoline taxes each year. Illinois’ new tax comprises $177.84 of that; a whopping 34 percent.

Such a dramatic increase in the middle of the summer vacation season will have an immediate impact on driving habits. Generally speaking, when gas prices are higher, people drive less—especially those for whom the added price is a more significant factor.

Gas taxes are among the most regressive in America, as they have a disproportionate impact on those who earn lower incomes (and, not coincidentally, tend to drive older, less fuel-efficient vehicles).  Someone earning $200,000 isn’t likely to notice or care much about having to pay $13.68 more per month in Illinois gas taxes. Someone earning $20,000 certainly will, and they will modify their driving habits accordingly.

An even more significant concern for Illinois—or any state dependent upon a gas tax to fund transportation infrastructure—is the American consumer’s long-term driving habits.Ride-sharing has made private car ownership much less of a necessity in cities like Chicago, while car companies themselves are clearly preparing for a future without gasoline.

By January of 2018, the world’s automotive manufacturers had already spent upwards of $90 billion researching and developing electric vehicles.

“We’re all in,” Ford Motor Company CEO Bill Ford, Jr. told Reuters after spending an estimated $11 billion on electric.

Just two months ago, General Motors—the country’s largest carmaker—announced a $424 million investment in production of a new electric-powered Chevrolet.Earlier in the year, Steve Carlisle, president of GM’s Cadillac brand, said the company was going “all in” on electric vehicles.

“[By the] early to middle part of the next decade, all transportation will be electric,” he told the Chicago Sun-Times.“Once you say that’s the way the world is going to be, it comes down to, ‘So how do we get there?’”

Even online retail giant Amazon, which has been at the forefront of global technological trends for more than a decade, is betting big on electric vehicle technology with an estimated $700 million investment in a company that has been developing an all-electric pickup truck and SUV.

Once this technology is widely available and, crucially, affordable—perhaps in as little as five years—gas tax revenues will plummet, leaving states dependent on them scrambling to plug even greater budget deficits than those they face today.

Wisconsin, then, would be (as per usual) wise not to follow Illinois down this road.Governor Evers believes that an initial eight-cent gas tax hike coupled with a yearly increase of another cent to tie the tax more closely to the rate of inflation could bring in several hundred million dollars in revenue per year, but this estimate just isn’t based in reality.

The easiest way to reduce public consumption of a product is to tax it, and the quickest way to convince consumers to make the leap to an electric vehicle is to make the price of keeping their old gas guzzler too great to justify.

If, as the automotive industry predicts, electric vehicles will dominate the roads in just a few short years, increased dependence on a steadily rising gas tax would leave Wisconsin with a new and even more pressing problem: What can it do when the product it has been taxing no longer exists?

Benjamin Yount reports on a worse alternative than raising the gas tax:

Republican lawmakers in Madison are facing more questions from the right over their plan to possibly create a per-mile fee for drivers in the state.

Americans for Prosperity in Wisconsin is the latest to voice opposition to a study included in the Republican’s proposed transportation budget that is ostensibly aimed at the feasibility of a mileage fee.

Eric Bott, AFP’s state director in Wisconsin, says the study is really the first step toward a new tax on drivers.

“This so-called ‘study’ approved by [the Joint Finance Committee] would also give the Committee the complete authority to institute a per mileage fee program without any additional oversight from the entirety of the legislature or the executive branch,” Bott wrote in an open letter to lawmakers. “The language does not limit what the fee could be or how much tracking the government can do of your driving.”

Republicans on the state’s budget writing panel, the Joint Finance Committee, last week voted to include $2.5 million for a study on a mileage fee.

But the proposal they agreed to goes well beyond just a study.

JFC members gave themselves the power to decide if a per-mile fee is needed, what those fees would cost, and whether those fees need to increase at any time.

JFC members would be the only ones to vote on the fees, the full State Assembly and State Senate would not have to act.

“A mere 16 members of a legislative committee would determine if the government can track your mileage and charge you a yet-to-be-determined fee – an unprecedented authority for a legislative committee,” Bott’s letter said.

In reality, 16 lawmakers wouldn’t need to vote to raise the fees, just a majority of the Joint Finance Committee would have to agree to raise the fees.

“Under the proposal, nine votes is all it would take for government to start tracking how we drive and assessing a massive new tax. That’s not democracy as we know it,” Bott said. “Our system of democracy and our state constitution require politicians to vote on tax increases. This is an attempt to shirk that responsibility.”

There is no guess as to how much a per-mile fee on drivers would cost. Though Republicans are looking to raise nearly $500 million more for roads in the new state budget. Much of that money would come from increases in license plate fees, a new hybrid car fee, and an increase in the cost to transfer a car title.

It’s parts of a nearly $2 billion construction plan to build and fix roads across the state.

“The transportation budget passed by JFC includes other revenue increases, paid for by hardworking Wisconsinites. The increases in title fees and annual registration fees can and should be enough,” Bott wrote in his letter. “We need to focus on sustainable transportation funding, which includes many of the reforms to the Department introduced by your colleagues, not an invasive and costly per mile fee.”

Bottom line, Bott said, is that taxpayers deserve better than a shadowy process that could end up costing them for years and years to come.

“The policy included in the June 6th transportation omnibus motion that gives the Joint Committee on Finance unilateral authority to impose a per mile fee on Wisconsinites is a dangerous precedent to set for our democracy, our privacy and our pocketbooks,” Bott added.

It is a gross violation of our rights to give anyone or any group the ability to unilaterally set taxes without a vote by the Legislature. One has to wonder who in the GOP thinks this is a good idea.

The crazy thing about a mileage tax is that out-of-state drivers wouldn’t pay anything (similar to increasing registration fees), but Wisconsin drivers would be taxed on their travel outside the state. At least the gas tax is paid by out-of-state drivers, although this state’s gas tax is already higher than the natural average. Any tax increase that affects products shipped by truck will become more expensive to ship, which will raise the price of that product. A mileage tax certainly looks like an attempt to get people to travel less, which is a strange attitude for a state in which tourism is one of its top three industries.

Automatic indexing of a tax is similarly taxation without representation. Every tax increase should be voted on by the Legislature. (Actually, I would prefer statewide referenda on tax increases, but that requires a change in the Constitution.)

I remain unconvinced that any tax or fee increase is necessary. Spending prioritization certainly is necessary. The state Department of Transportation has convinced no one except the road-building lobby (i.e. the Wisconsin Transportation Development Association) that it has initiated any kind of spending or other reform to make road projects cost less. Until then, the DOT does not need more money.

 

 

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