Thursday, May 15, 2008

Thinking “outside- the-box” = Tax Increases

Last night, the guys on KSL Radio’s Nightside Project took Sen. Sheldon Killpack (R-Syracuse) to task for his suggestion on the Doug Wright Show that Utah’s gas taxes may require a 40-cent per gallon increase to meet road construction and maintenance demands. You can listen to the Nightside segment here. (See KSL story, Standard Examiner story. The Standard erroneously calls Killpack the “Assistant Senate Minority Whip.” It’s been a long time since a Republican in Utah has been in the legislative minority.)

Alex and Ethan repeatedly played a couple of sound bites from Doug Wright’s interview with Killpack. And quite honestly, if that’s all you heard, you’d think this guy was into big time tax and spend policies. He said that they were considering “outside-the-box solutions.” He also said that meeting all of the needs with only gas tax increases would require a 40-cent per gallon jump, up from the current state take of 24.5 cents per gallon.

The Nightside guys made it sound as if Killpack’s outside-the-box solution meant increasing the amount of state tax you pay at the pump 163 percent. But if you get the entire context of Killpack’s commentary, you will discover, as the Standard reports, that “Killpack said he's not proposing to increase the gas tax, but wanted to demonstrate that that's what it would take to meet the state's transportation needs.”

In fact, Killpack said that they are considering many different approaches, including congestion pricing on busy highway segments. This would mean toll roads, or at least toll lanes, where users pay higher prices as demand increases. The price goes up during heavy traffic and goes down during lower traffic. Alex and Ethan basically lampooned this idea, presenting a caricature of what Killpack actually said.

For a better understanding of congestion pricing and other market based approaches to traffic congestion, you can listen to Cato’s Randal O’Toole speaking to the Utah Taxpayer Association. For an even more expressive understanding of this, watch the video clip below from the Drew Carey Project on Reason.TV. Solutions can come from private enterprise, but government has to allow that to happen.

Ethan did make a very good point when he said that Utah does not have a conservative legislature that champions small government. We have a legislature that seeks to codify conservative morality, but we do not have a fiscally conservative legislature, regardless of what kind of fiscal ranking it receives compared to other states.

The Nightside Project can be fun to listen to. But these guys damage their credibility when they obscure the facts, twist what people say, and lampoon ideas that are worthy of consideration. While they might not like the concept of congestion pricing, I think if you will watch the Drew Carey clip, you might think otherwise.


Jesse Harris said...

As much as folks complain about the cost of gas, raising gas taxes to cover road maintenance makes a lot of sense as it equates to a user fee. As you use more fuel, you pay more for the use of the roads. It's not perfect (a fuel-efficient car driving many miles could pay less than a guzzler that only goes to the grocery store), but it certainly helps make payment for maintenance more equitable.

y-intercept said...

If gas taxes were a percent of the fuel bill and not a penny figure, they would have risen by about $.40 a gallon.

Indexing a tax for inflation is somewhat different than a tax increase. In the same vein, a failure to adjust deductions and tax brackets for inflation are actually a tax increases.

I have to agree with the statement that Utah has never been on the leading edge of small government conservatism.

Scott Hinrichs said...

Believe me, I do appreciate the user fee concept. But it has its limitations.

Making gas taxes a percentage of the purchase price is not a good solution. Not only is it extremely repressive (i.e. it's marginal cost is much higher for those that can least afford it), but it is also extremely volatile, making long-term planning -- something key to road building and maintenance -- extremely difficult.

Back in 1999 gasoline prices dropped dramatically. Government revenues actually increased because people drove more and used more fuel. Had gas taxes been a percentage of price, revenues would have dropped precipitously, bringing many road projects to a stop and curtailing necessary maintenance.

Right now revenues are in decline because people are using less fuel. But the revenue decrease actually is pretty small and gradual.

The nice thing about some of the solutions discussed by O'Toole and Carey is that they offer a choice. Those that can afford it can opt to pay more to speed up their commute, but no one is forced to do so. The market sorts it out.