Actually Want Roads Built? Don't Drink The Kool-Aid

In other column news, I think I’ll be getting into a longer debate with Rep. Shadegg over whether you should take your retirement savings and put them into your mortgage. Here's his response. That’s a battle I’m looking forward to joining. After all, who does a better job of keeping your interests paramount than the financial services industry? Maybe Las Vegas casino owners, but it’s got to be a close call.

Online version of this week’s column is here.

WHERE IDEOLOGICAL RUBBER HITS THE ROAD
East Valley Tribune, May 4, 2008

On Friday, a group filed a petition for a statewide sales tax to raise money for state transportation needs. It seems that as Arizona grows, we need more transportation infrastructure -- and gas taxes aren't keeping up.

It's a total and absolute surprise, of course. Who could have predicted that after we build a new highway, we then have to spend more money to maintain it? Law enforcement, picking up litter, cleaning up after accidents, replacing sun-baked signage, and resurfacing all cost money after you build. I mean, who could have seen that coming?

Gas taxes -- which are fixed amounts, not percentages, and thus don't increase with inflation and require separate, tedious, and supermajority votes to raise -- haven't kept pace with the state's needs. According to the head of the Arizona Department of Transportation, without a new funding source, soon all state gas taxes will be committed to maintaining existing roads; there won't be any money for new ones.

So the solution, according to the TIME Coalition, a group of Arizona business leaders, is to raise the state's current 5.6 percent transaction privilege (sales) tax by 1 percent to generate $42.6 billion over 30 years for new highways, roads and passenger rail service.

The proposal doesn't include increasing the state gas tax. User taxes haven't been enough for road construction in these parts for more than 20 years, since the first Maricopa County transportation tax election in 1985. People who care more about transportation improvements actually occurring than about maintaining their ideological purity recognize that we need broad-based tax hikes.

Which makes the McCain-Clinton proposal for a federal gas tax "holiday" even more pander-rific here in Arizona. Naturally, most of the business leadership in the TIME Coalition supports McCain's presidential bid -- at the same time they insist we raise state taxes to build and maintain more roads, buses and trains.

It's a perfect political syllogism. Arizona has a huge transportation problem, and needs resources to work on fixing it. Existing gas taxes aren't enough, so we need to convince voters to approve a new tax. Meanwhile, let's have those same voters elect a president who will reduce gas taxes because it's politically popular, thereby making Arizona's funding deficit even deeper.

Economists across the ideological spectrum acknowledge that cutting the federal gas tax actually won't save consumers anything. As I've written before (but apparently to be a full-time member of the local media, it's required that you have flunked Econ 101), the supply of gas for the summer is already fixed; there's no available refinery capacity to increase supply in the near term. The current price represents the market-clearing price. Reducing the tax will lower prices temporarily, but lower prices increases demand -- which, because of fixed supply will raise prices, until we return to the market-clearing price. Thus, no savings to consumers, but a bonanza for oil companies.

I don't know about Clinton, but McCain's answer is that the need to increase government revenues is to cut taxes. He's said, numerous times, that cutting taxes raises revenues and that raising taxes cuts revenue. "Every time in history we have raised taxes, it has cut revenues," he claims. (This is false. Maybe it's "straight talk," but it's just flat-out false. See, e.g., 1993-2000, and 1941-45.)

So if you believe McCain, the TIME Coalition proposal to raise the sales tax instead will cut revenues available for transportation. Instead, we should cut state taxes -- and dedicate the gusher of extra revenues to new roads!

I don't get it. All this talk about transportation needs and funding seems pointless, when there's the simple and painless McCain solution. Why go to all the trouble of gathering signatures, running a campaign and getting voters to approve a tax hike, when John McCain tells us that there's a simpler way to have more money to build and maintain transportation infrastructure: Eliminate earmarks and cut taxes.

Who knew that "hard truths" could be so very, very soft and comfortable?