Ben Ross at Greater Greater Washington has an excellent post about the pernicious habit of states (and maybe the federal government?) mislabeling sales taxes as user fees. Sorry for pulling such a long bit, but it’s good:
Maryland is considering raising its gas tax. This long-overdue measure would allow some of the general revenues now subsidizing highways to go to the Purple Line, the Baltimore Red Line, and MARC expansion instead.
This need has unfortunately gotten mixed up with a proposal, originating mostly from the highway lobby and its supporters, to put transportation money into a “lockbox.” The concept is to amend the state constitution to forbid transfers from the trust fund into the general fund.
However, there’s a big hole in the bottom of the “lockbox.” Contrary to what some say, the money in the transportation trust fund mostly come from revenue sources that would have otherwise have gone into the state’s general fund, where it wouldn’t be locked.
If I buy a bicycle in Maryland, I pay 6% sales tax and the money goes into the general fund where it pays for education, public safety, the governor’s salary, and other state expenses. Cars and gasoline are exempt from the sales tax.
Instead, if I buy a car, I pay the same 6%. but it’s called “titling tax” and the money goes into a separate trust fund that is used only for transportation. It’s essentially the same when I buy gasoline, where the tax rate of 23½ cents a gallon comes to a little over 8% of the pretax price. […]
The idea behind the lockbox amendment is that drivers pay for the roads they drive on. This idea is mistaken, but it’s widely held, and it’s an enormous obstacle to sensible transportation planning. The danger lurking in the lockbox is that this damaging misconception could be reinforced, making it even harder to correct failed transportation policies.
Does anybody know how widespread this is? (It sounds like it happens in most states.) I’m curious as to what my fellow libertarian urbanists have to say about this – if there’s no sales tax on gasoline and cars, then are these really user fees?
Shane Phillips says
February 8, 2011 at 9:18 pmThis is very interesting, and yet another great example of non-drivers subsidizing drivers. I’m very curious whether we have the same thing in Washington state.
Alon Levy says
February 8, 2011 at 11:18 pmI’m conflicted about this issue, because it’s completely legitimate to exclude certain staple items from sales taxes. There are no sales taxes (at least in New York) on groceries, non-luxury clothing, or mass transit. I know historically the exclusion of cars from sales taxes is not based on this principle, but nowadays in a car-dependent region there’s a decent argument for it.