Wednesday, March 26, 2008

Buildin' Roads, Burnin' Bridges

Well, I suppose that each legislative session would be incomplete if it didn't have a major conflict. This year, the biggest conflict, as all of you probably already know, is funding for transportation.

Transportation funding has to be considered in three categories.
  1. Maintenance of existing roads and bridges
  2. State funding of new road construction
  3. Local funding of new roads and public transportation

Within each category, the potential solution differs. In the past few years, State funding for new road construction has revolved around GARVEE bonding. GARVEE bonding is essentially the process of receiving future federal road funding today. The State pays interest on the advancement of the money. This year the Legislature approved an addition $134 million through this funding mechanism.

The funding mechanism regularly considered for local funding of new roads and public transportation is the local option tax. Local option taxes can take a variety of forms, but are usually in the form of a sales tax. Because I've written about this before, I will skip it for now.

Now, as for the maintenance of currently existing roads and bridges, this is where things get complicated and political. Lets get a couple things out of the way from the outset. First, no one wants to pay more taxes. Second, maintenance is way past due. These two conditions are seemingly juxtaposed. The real problem surrounding this issue is the fact that everyone has a different solution. Some folks, like the Governor, want to rely solely upon increases in vehicle registration fees to get new revenue. Others want to have a more balanced approach by raising vehicle registration fees, semi truck fees, license plate fees (like the one I am debating against right now), and of course taxes on gasoline. I for one do not like the idea of putting all the eggs in one basket. That being said, I also don't think it is appropriate to charge those that drive little the same as those that drive more. I also have a fundamental problem charging someone that has 2006 Ford Focus the same as someone with an 2006 Audi A4.

More than this, it is incredibly frustrating when those that advocate for more funding (which is absolutely necessary) fail to recognize that funding doesn't occur in a vacuum. What I am saying is that when the Legislature passes a huge tax break for businesses worth $120 million (H 599) it exacerbates the problem. This $120 million will have to be made up someplace and that will likely be to the individual taxpayer. Now, we are going to ask you to dig deeper. When does it stop?

So, what should we do? In my opinion, I'd do the following:

  • Increase fees on registration based upon value of the vehicle rather than the current practice of looking at the age. I think that this is better because as I demonstrated model year is not indicative of actual value. Yes, it may be more indicative of miles driven, but this is also an issue of fairness.
  • Increase fees on semi trucks. I'm not sure how much this should be, but it should be valued at the amount of damage that semi trucks cause to our roads.
  • Add a small sales tax on the sale of fuel. This would be a better proxy to the use of the roads. This would be beneficial to our community members, especially the elderly, that tend to take short trips.

One solution that I didn't mention, but I think needs serious consideration is the use of toll roads. This wouldn't be necessary in most places in the State, but it could provide some additional revenue in stretches of interstate that need the help.

To conclude, I don't like the idea of putting more of the burden on individual taxpayers when the tax burden is already so heavily on their shoulders. Ultimately, a total review of the tax system must be conducted.

Thursday, March 20, 2008

Grocery tax not a done deal

While it is true that the Senate just concurred with the House on a bill to increase the income tax credit for groceries, I sincerely hope that this doesn't stifle the discussion in the future. While some may disagree, I can not justify taxing something as necessary as food. If the legislation has the impact of making the tax on groceries a non-issue, then the Legislature has failed the people of Idaho.

For the purposes of transparency you should know that I supported the legislation, albeit reluctantly. Still, I hold out hope that future legislatures will have the political conviction to put individual taxpayers above political wrangling. What you may not know, however, is that the proposal that I (along with the rest of the House minority caucus) put forth was never given a hearing. The proposal called for the repeal of the sales tax on specific grocery items at a rate of one cent per year until such time as the tax were no longer around. At the same time, the grocery tax credit would be phased out. This solution was fiscally responsible and represented a real solution, but alas politics won.

I have been asked by some where the money would come from to make up the loss of revenue. This is a very legitimate question and I would like address it in this public forum, so here it goes.

First, lets identify the underlying assumptions. Number one, food is a necessity. Number two, revenue neutrality is preferable. Number three, everyone pays sales tax. Number four, money now is nearly always preferable to money later.

Okay, now that we have those out of the way, lets get to the options for funding. In order to fund a repeal of the tax on groceries, or as my colleague Rep. Liz Chavez (D-7) insists the tax on food, I believe we should attempt to address each of the underlying assumptions. The inverse of a necessity is a luxury and this, I believe, is the key to our solution. As was noted, everyone pays sales tax, that is not the case for income tax, however. This, along with the fourth assumption explains why the tax credit doesn't make as much sense. While it true that most everyone will get access to the new grocery tax credit, regardless of income tax filing status, it is also true that those that those really need the break will find it difficult to wait for the day when the check comes in the mail (assuming that they submit a request for it). This time lag is not advantageous in budgeting for any organization including a family (why do you think that banks get so up in a tizzy when you try to spend money you don't have?!).

Now, we know that everyone pays the sales tax on groceries regardless of their income. Unlike some, I disagree that wealthy folks should still have to pay. After all, if the first assumption is true, it applies equally to everyone. That means if you say that you can discriminate based upon income, I believe that you lose the ground of the argument that you shouldn't be taxing something that is necessary. Instead, I believe you should consider taxing something that isn't necessary. Luxury taxes would be ideal because the consumer would have to opt-in. Unlike food, where opting-out isn't really feasible, a luxury tax gives the consumer plenty of leeway. I am not sure what the luxury tax would look like, but presumably it would apply to things that are big ticket items that are nice to have. However, I would never advocate putting more taxes on housing because shelter is a need. Conversely, a new Beamer, while attractive and seemingly difficult to live without, would not result in significant trauma.

It seems to me that an important component of deciding what is and is not a luxury is related to marginal utility of a dollar. That is, the marginal utility of $50 is much lower on a purchase of a new Beamer compared to other items. I would also contend that price elasticity has something to do with this, but I don't want to get into the economic theory so I'll leave it there. Anyway, this is just one potential approach. Either way, the discussion can't end because unlike what some may say, the mission is not accomplished.

Friday, March 14, 2008

A guide to writing policy through the Idaho Constitution

If members of the House Majority Leadership were to write a book, it should be titled, "A Guide to Writing Policy Through the Idaho Constitution."

Today, in the House Revenue Taxation Committee, majority members pushed through a Constitutional Amendment (HJR4) regarding local-option taxing. HJR4 would modify the State Constitution to dictate the parameters of future policy regarding sales and use tax proposals . It clarifies that local-option taxing must occur in a traditional jurisdiction (county or city). It also clarifies that any local-option tax must pass by a 2/3 vote. Finally, it mandates that enabling legislation must still be passed by the Legislature prior to any local-option tax is proposed.

This made me think of three questions:
  1. Is this the proper role of the Constitution?
  2. What is the value of this proposal?
  3. What impact would this have on future proposals?
Admittedly, the first question is much more philosophical and less practical, but I believe it deserves to be addressed. When our State Constitution was written, I am unsure if the intention was for the document to be regularly rewritten as if it were an extent ion of the Idaho Code. While it is true that bar for amending the constitutional is set higher than other policy, given our current imbalance in the Legislature this not nearly as difficult as it probably should be. This is relevant because by placing something in the State Constitution, it makes it nearly impossible to reverse in future years. I do not believe that it is appropriate to use the State Constitution to write policy that is better suited for the Idaho Code.

The value of the HJR4 is, of course, in the eye of the beholder. In my view, and the view of Bose Metro Chamber of Commerce (amongst many others), there is no value to the proposal. This legislation has been written in order to thwart local communities and their right to self determination by setting the bar so high that it will be unachievable. This is wrong plain and simple.

The actual impact of this legislation is not completely known, but there are some pretty likely consequences. If this amendment were to pass, it would likely cripple the ability of Treasure Valley residents from being able to address its transportation concerns from a regional perspective. This is because it would mandate that the vote for local-option would be voted on at the jurisdiction level, in this case the county. The regional transportation authority (RTA), in the Treasure Valley know as Valley Regional Transit (VRT) transcends the county boundaries. Rather thank taking one vote and reaching the threshold in the RTA, each county would be considered separately. This just doesn't make sense.

HJR4 is headed to the House floor, but I will vocally oppose it. I will urge other lawmakers to do the same.

Monday, March 3, 2008

Growth Management

The mantra, "growth should pay for itself" is continually proclaimed and then quickly ignored. But why? This is probably one of the most important issues facing Idaho families and so I'll try to shed some light.

When a legislator or anyone else says that growth should pay for itself it is important to understand what that actually means. The problem is that I am not sure that everyone is in agreement on that point. Due to this, fracturing occurs and a unified voice is lost. Without this unity the issue dies out and that gets us to where we are today. That is the Reader's Digest version.

Then there is the story behind the story. Namely, it is that the powers that be are vociferously opposed to any changes and work the system to maintain the status quo. As a citizen legislature, we are particularly disadvantaged in being able to weigh the arguments and come to an independent conclusion. We rely heavily upon the information from those with an agenda to push. They are committed to their agenda and they are equally committed to us embracing their perspective. This is due to the fact that most public policy is a zero-sum game. That is, there are winners and there are losers. The vested interest that would pay the freight for the new growth management policies are very clear losers. They act predictably and oppose the changes. From my observations, they are agents of disunity. They pit those that would otherwise agree against one another in an attempt to fracture the cause and put pettiness above practicality. This cripples the process and ta-da, no change in the status quo, mission accomplished. This is harmful for the public policy making process, but more harmful on the lives of Idahoans.

To be clear, I support growth management, but this is not a profund statement. In fact, I would content that there is not a single legislator that would say differently. Growth management can come in many shapes and sizes. There are those that would advocate for a no-growth policy. On the other end of the spectrum there some that insist the market is the growth management mechanism. Ostensibly, there is a middle ground. Unfortunately, it is those in the middle that have the least to gain or lose and thus are the least well organized. A lack of organization is the Achilles heel of moderation. Think about it... When was the last time you heard someone get all pumped up for a moderate policy? It doesn't happen. In a world where the squeaky wheel gets the oil, moderation is well calibrated machine that should be listened to more often.

In the same way, it is the middle ground that is the best solution to the growth management issue. I certainly would not advocate ending growth. I would also contend that the market has been unsuccessful in regulating itself due to failures (asymmetry of information, externalities). I support streamlining the impact fee process so that it is easier to utilize. I also support expanding the right to administer impact fees to school districts and local highway districts. On this last point, lets remember that the executors of these organizations are elected by you and me. That means that they are accountable to the public and if they are acting outside of our will, they can and should be replaced.

I could go on for ever, but like growth, I have to know when to stop. To conclude in the words of Paul Harvey, "Now you know the rest of the story."