In California we drive on freeways. If you drive back east you will note that they are called expressways.
Expressways are designed to be “express highways” with controlled access and no intersections. Freeways, as the name implies, are toll-free expressways.
Substantial portions of expressways are funded by charging tolls. A freeway is so named because it can be traversed for free (i.e., without paying a toll).
Of course no road is truly free to the user. Road construction and maintenance is expensive.
In California, we have historically enjoyed free access to our highways because their maintenance and construction has been funded, in large measure, by fuel taxes. That is the principal reason why our fuel taxes are so high relative to other states.
When I was working, I traveled extensively across the country and drove on many toll roads. Tolls are inconvenient and expensive.
Nationally many roads are built or refurbished using public/private partnerships. Virtually all of these involve toll roads financed by expensive Wall Street money that increases the cost to people who use the roads.
Last year, the California Legislature passed Senate Bill 1, which increased fuel taxes and DMV fees — largely to pay for deferred highway infrastructure construction and maintenance. Since the Democrats had super majorities in the Legislature, they were able to enact a tax increase despite Republican objections.
The Republicans called foul, and in an effort to stir up their base, sponsored a ballot initiative, Proposition 6, to repeal the tax increase and to require that any future increases be passed by a majority of the voters.
Unfortunately, this measure is more about politics than about sound tax policy.
Gas taxes are extremely unpopular because they result in an immediate price increase at the pump.
However, according to a 2013 California Department of Transportation study, in 1970 fuel taxes accounted for approximately 32 percent of the price of gas. By 2010, that dropped to 17 percent.
Had fuel taxes kept pace with the price of gas, fuel taxes would be about $1.20/gallon today.
Prior to 2017, fuel taxes were last increased in 1994. After the 2017 increase, fuel taxes on gas are about 47 cents a gallon. I recently paid $3.75/gallon, so that means about 12.5 percent of my purchase went to state fuel tax.
Furthermore, cars are more fuel efficient, so a gallon of gas can be used to travel further than in 1970. This translates into less tax collected per mile driven.
Unfortunately, road construction and maintenance costs have escalated faster than inflation. According to the U.S. Department of Transportation, California highway construction costs increased 143 percent between 2003 and 2016.
In this historical context, the fuel tax increase enacted in 2017 is not that unreasonable.
In 1970, California roads and highways were the envy of the nation because back then we adequately funded them.
In a recent Signal column, State Sen. Scott Wilk said, “At least 30 percent of SB 1 funds have been diverted to non-road programs such as job training for felons.”
Politifact, an independent fact checking organization, analyzed this claim and found it to be mostly false inasmuch as it “contains some element of truth but ignores critical facts that would give a different impression.” The detailed analysis can be found at www.politifact.com/california/statements/2017/may/19/melissa-melendez/jerry-brown-proposing-divert-30-percent-new-gas-ta/.
According to Politifact, in the 2017-2018 fiscal year about 29 percent of the SB1 funds will be spent on non-road projects. The largest component of the non-road spending (about 26 percent of the total budget) is for allocations to local governments to fund mass transit. Total workforce development training expenditures for the year (presumably including those referred to by Mr. Wilk) are $5 million out of $2.8 billion of taxes collected (less than 0.2 percent).
Possibly the worst aspect of Proposition 6 is the requirement that any future fuel tax/DMV fee increase must be approved by a majority of the voters. While this sounds emotionally appealing, historically voters have only approved tax increases that they think will be borne by the rich. We will never again see a fuel tax increase if Proposition 6 passes.
California’s state finances are overly dependent on an excessively progressive income tax that is a highly volatile revenue source incapable of financing our transportation infrastructure. The inability to raise fuel taxes to keep pace with the cost of expanding and maintaining the infrastructure mandates state reliance on public-private partnerships, which will mean, among other things, more toll roads.
Those public-private partnerships will introduce high-cost Wall Street money as the financier of our transportation infrastructure.
Two years ago, I prepared a white paper on school bond measures and concluded that Wall Street’s influence was driving up the taxpayer’s cost of financing school construction. Why should we believe Wall Street’s involvement in public-private partnerships will not similarly increase our road and highway costs?
Join me in voting no on Proposition 6.
Jim de Bree is a semi-retired CPA who resides in Valencia.