“No on Question 1” by John Edward
John Edward teaches economics at Bentley and UMass Lowell. He’s a frequent contributor of columns on economic issues.
Question 1: A YES VOTE would eliminate the requirement that the state’s gas tax be adjusted annually based on the Consumer Price Index.
Proponents of question 1 observe that under current law the gas tax will automatically increase with inflation. They claim this will happen without a vote in the legislature.
The legislature did vote. The legislature took action to improve the state’s ability to maintain our vital transportation infrastructure. The legislature properly identified an on-going need to fix and maintain roads and bridges. They acted accordingly.
The legislature was pro-active. This is a good thing. Too often our elected leaders are reactive. Often they react too late.
Indeed, that is the case here. Prior to increasing the gas tax by 3 cents per gallon, it had been 21 cents per gallon since 1991. In the past two decades, the purchasing power of gas tax revenue has decreased by a third, auto fuel efficiency has improved by a third, and the cost of maintaining roads and bridges has increased by well over a third.
Proponents of question 1 refer to the gas tax as the “forever tax” because it will increase with inflation. Have they never heard of the sales tax?
When prices go up we pay more in sales taxes. When incomes go up we pay more in income taxes. Current law automatically adjusts personal exemptions, standard deductions, and many other tax provisions for inflation.
When prices and incomes go up, paying for government services is more expensive. Accounting for that is good government. Basing the adjustment on the widely used Consumer Price Index (CPI) is reasonable.
Actually, using the CPI will result in a reduction in gas tax revenue in real terms. According to an MIT study, over the last forty years the cost of paving asphalt has increased by 50 percent more than the rate of inflation. In addition, automakers will continue to make cars more fuel-efficient.
Proponents of question 1 claim the gas tax will just continue to grow. It will, but most likely by very small amounts. Lately the CPI has been increasing at a rate of 2 percent per year. At the current rate of inflation, it would take two years for the gas tax to increase by one cent. After one year of adjusting for inflation, someone driving a Honda Fit 10,000 miles a year will have to pay an extra $1.25 over a full year.
According to a study out of New Hampshire, the average car owner pays $323 dollars a year in repair costs due to bad roads. The gas tax is a classic example of a benefits-received tax. Gas tax dollars go to improving the roads we rely on.
Even after the most recent increase in the gas tax, Massachusetts is right in the middle of the pack among states in taxing auto fuel. Maine, Vermont, Connecticut, and Rhode Island have higher gas taxes. At the current inflation rate, it will take almost half a century for our gas tax to catch up with California’s.
Proponents of question 1 are making the absurd claim of taxation without representation. We have representation. We elected our representatives. They passed the legislation. They passed legislation that reflects reality, anticipates change, and demonstrates leadership.
In 2004 the state created the Massachusetts Transportation Finance Commission. Their report, published in 2007, was, in their own words “dire” as they concluded: “The Massachusetts transportation system is in deep financial trouble because we have not faced up to the reality of how much it costs to preserve the system.”
This past May the Governor signed a Transportation Bond Bill. It authorized borrowing of $12.7 billion over 5 years. As observed by the Finance Commission, the reliability of revenue used to pay off the debt influences our bond rating. Without a gas tax indexed for inflation the revenue is less reliable. If rating agencies lower our bond rating the state will end up paying a lot more for bridge and road repair.
In the last few years the Massachusetts Department of Transportation has made significant progress in reducing the number of structurally deficient bridges. Yet, we still have well over 400 of them.
Proponents of question1 say, “The state has a spending problem, not a revenue problem.” The state can only use gas tax revenue for transportation. According to the Tax Foundation, Massachusetts revenue from the gas tax, tolls, and license fees pays for only 58 percent of roadwork costs.
No one can make a credible case that the Commonwealth of Massachusetts invests too much on our transportation infrastructure. Proponents of question 3 have a priorities problem. They are being penny-wise and dollar foolish.
Vote No on Question 1.