Maryland’s gas tax proposal and the politics of subsidies

The WashPo ran a story yesterday on a state commission’s recommendation that the Maryland raise the gas tax by 60 percent. The proposal would raise the tax from 23.5 to 38.5 cents per gallon.

Like just about everywhere else, Maryland hasn’t raised its tax since 1992, which means most of the purchasing power of their state coffers is a fraction of what it was back then. And they have identified about $40 billion in projects to do, with a shortfall of $12 billion.

They would also increase vehicle registration fees and, it sounds like, transit fares.

It’ll be interesting, as always, to see how this recommendation fares. Here’s a quote:

“We’ve got to be adults about this. We’ve got a serious problem. The federal spigot is running dry, and we can’t print money,” Bauman said. “Once assurances are made that the trust fund will be protected, I think this is a package that people can accept.”

Rail interests are already starting in:

For one, the plan doesn’t answer the question of how Maryland will pay for its share of the proposed Purple Line light-rail project connecting Montgomery and Prince George’s counties, which could cost nearly $2 billion, or the proposed Red Line expansion on Baltimore’s transit system. The commission endorsed studying whether the state should also set up regional taxing authorities to fund those and other projects.

So the Feds are devolving transit to the states and the states, in turn, are devolving transit funding to regions.

I got yelled at the other day about refusing to acknowledge the socialistic, subsidized system we have for cars with the huge subsidies that motorists enjoy while rail is just at a huge disadvantage. In general, I interpret this as “I’m mad at you because you should be outraged, and you’re not, that the infrastructure we have is not the infrastructure that *I* want.” It’s reasonable to want different infrastructure, but I’m not sure why I’m meant to get outraged because the truth is, yeah, cars are subsidized, but transit users get subsidies, too, and rail riders get much bigger subsidies per ride than everybody else. They’re special, but not, apparently, special enough to suit this outraged person.

What strikes me as unreasonable is the tendency to want to raise costs on motorists and then expect them not to turn around and demand infrastructure projects that suits them. How many times we gotta do this, folks?

In theory, we should have a high petrol tax that goes straight into the general fund and gets doled out like any other revenue, with projects being allotted out of general fund so that they are debated right along with education and policing, etc. In reality, gas taxes in the US have always been targeted to serving the group that pays the tax into a special fund. So if we want to blame a culprit for overdeveloped auto infrastructure and underdeveloped transit infrastructure, we could blame the way infrastructure is budgeted.

But our financing dustups should be making it more obvious than ever: motorists pay for a lot of what’s going on, including transit investment. Now that the feds are trying to take themselves out of the game, it’s going to become a bit of a hot potato who is going to provide for capital subsidies to transit investment because there are precious few cities that are going to want to dip more into their general fund to help build transit.

In addition to the typical modal hair pulling, we’re starting to see inter-jurisdictional claims of social equity that strike me as utterly specious for the most part. It runs like this: if you are going to tax suburb X, you’d better put a project in suburb X, no matter how stupid and wasteful that project is. Why? Because it’s sinful to expect the residents of suburb X to contribute, no matter how much or how little, to the well-being of the region to which they are attached, without quid pro quo. It’s a recipe for overcapitalization. I’m willing to buy the jurisdictional arguments surrounding equity if we are talking about jurisdictions of poor people: you don’t get to tax south LA to benefit west LA (subway to the sea funded by sales tax, anybody?), unless you really are providing a smart project that really enhances the system (the return argument in favor of sales taxes to fund the subway to the sea.)

Prices, simply, work

For 40 years, the US has spent billions investing in transit systems hoping to get people out of their cars. We have obdurately ignored economists who note that pricing gasoline more appropriately with a gas price floor or carbon tax would raise the costs of driving, would give us revenues to invest in public transit, and would do what everybody wants everybody else to do—stop driving gas guzzlers and stop driving so much.

Instead, we’ve built and built transit that has underperformed for years simply because driving is still so cheap. But we haven’t invested probably enough to prepare for the demand for public transit because we don’t have the revenues to do so, partially because we’ve stuck to the policy of keeping gas cheap.

Argh.

Stupid, short-term thinking.

The Financial Times has a series of very good articles recently on where we are.

Gasoline consumption shrinks vis-a-vis higher prices (what? REALLY?? HOW CAN THAT POSSIBLY BE?) as US Congress questions $2 billion in tax candy handed out Big Oil.

Gas prices spur inflation (of course they do, if everybody is getting around by car, everything from labor to other inputs are higher in prices)

And it’s not helping the trade deficit (again, basic math)