Testing a pay-per-mile tax in Oregon

Looking for more revenue, Oregon is starting a test program of paying for miles driven rather than gasoline used:

The program is meant to help the state raise more revenue to pay for road and bridge projects at a time when money generated from gasoline taxes are declining across the country, in part, because of greater fuel efficiency and the increasing popularity of fuel-efficient, hybrid and electric cars.

Starting July 1, up to 5,000 volunteers in Oregon can sign up to drive with devices that collect data on how much they have driven and where. The volunteers will agree to pay 1.5 cents for each mile traveled on public roads within Oregon, instead of the tax now added when filling up at the pump…

Private vendors will provide drivers with small digital devices to track miles; other services will also be offered. Volunteers can opt out of the program at any time, and they’ll get a refund for miles driven on private property and out of state…

Drivers will be able to install an odometer device without GPS tracking.

For those who use the GPS, the state and private vendors will destroy records of location and daily metered use after 30 days. The program also limits how the data can be aggregated and shared. Law enforcement, for example, won’t be able to access the information unless a judge says it’s needed.

 

I suspect a number of governments will be interested in how this test works out. One big hurdle to overcome would seem to be privacy, though government tracking of vehicles may not be far off anyhow (through cell phones, insurance company monitoring devices, black boxes, toll booths/devices, license plate readers, etc.). The argument about deincentivizing electric or hybrid cars doesn’t really hold up because these vehicles still use the roads and add to the maintenance burden. Yet, ultimately this will be about revenue: is this a better model for bringing in the money needed for roads?

Illinois gas tax receipts down $380 million between 2007 and 2014

Going green for transportation is good but it does hurt gas tax receipts:

In 2007, Illinois collected $1.59 billion in gas tax receipts, according to a Chicago Metropolitan Agency for Planning analysis of Illinois Department of Transportation data adjusted to 2014 dollars. In 2013, that had ticked down 24 percent, to $1.21 billion, adjusted to 2014 dollars.

One reason: People are driving less. Vehicle miles driven per capita on Illinois roads has fallen 6.5 percent since its peak in 2004, according to Federal Highway Administration and Census Bureau data. The recession was a factor, but studies suggest that the change in driving habits is likely to stick, particularly among younger people who socialize via technology rather than driving.

Those who do drive also are using less gasoline. So far, government analysts say that’s not a huge factor in driving down gas tax revenue. But with new government standards expected to boost average fuel efficiency of new vehicles from 29.7 miles per gallon to 49.6 miles per gallon in 2025, such improvements in fuel efficiencies are expected to increasingly tamp down gas tax revenue.

At the same time, more people are turning to vehicles fueled by electricity or natural gas or are opting for other forms of transportation. Nationwide, bike commuting grew 61 percent from 2000 to 2012.

Chicago more than doubled its rate of bicycle commuting from 2000 to 2012, according to the Census Bureau. Half a percent biked in 2000 versus 1.3 percent in 2012…

The changes in how people are traveling is not good news for Illinois’ crumbling infrastructure. Illinois received a C- rating on the 2014 infrastructure report card from the American Society of Civil Engineers. For roads, the state got a D+, with the society claiming that 42 percent of Illinois’ major roads are in “poor or mediocre condition.”

Taxing gasoline is not a “sin tax” in the same way as taxing cigarettes but the concept is the same: to ensure a steady flow of revenue, consumption has to stay the same (and even then inflation eats away at this) or increase.

I haven’t heard much lately about taxes based on miles-driven rather than gas consumption. But, the article notes that it appears Congress isn’t going to address the issue so we may end up with a bunch of different regulations as states and municipalities look for ways to replenish these funds.

Northern Virginia residents unhappy about paying higher taxes and getting fewer local services

Echoing residents of many American communities, Northern Virginia residents don’t like the idea of paying increasing local taxes and not getting higher levels of local services:

At packed public meetings and in angry phone calls, local officials say, the same message is echoing from all sides: We’re fed up.

“It’s very frustrating, right now, to try to manage expectations,” said Sharon Bulova, chairman of the Board of Supervisors in Fairfax County, which, like neighboring Loudoun County, is locked in a battle over school funding that could lead to a higher tax rate — and even larger monthly payments…

Cuts to libraries, parks, schools and bus routes since the 2008 recession have negatively affected the quality of life of some residents in this part of Virginia, where top schools and amenities have long been a magnet for families. When much-needed infrastructure projects were launched, officials often paid for them by creating special tax districts and other charges that they passed on to increasingly resentful residents and businesses.

In Fairfax, sewer rates have nearly doubled since 2008, to $6.62 per 1,000 gallons of water, while real estate property taxes have climbed nearly 20 cents during the same period to a current level of $1.085 per $100 of assessed value. That means a house worth $500,000 in 2008 would have had a property tax bill of $4,450, and a house of the same value today would have a bill of $5,425.

Fairfax officials recently advertised a new residential property tax rate cap of $1.105 per $100 of assessed value, which will allow the county to raise the rate by up to two cents to fill a $64?million funding gap projected by school district officials. There is also a push to raise the tax rate in Loudoun, to bridge a $40?million school funding shortfall.

When there is plenty of suburban growth, new money is rolling in from developer fees and new taxpayers. But, in prolonged economic downturns, it is difficult to generate the same levels of money.

I wonder if either of these arguments would work with suburban taxpayers:

1. The reduction in service levels is probably quite limited.

2. These are still some of the wealthiest counties in the United States.

It is not as if these relatively wealthy counties will suddenly become like Third World countries. However, neither of these might matter as residents moved there in part to benefit from these local services.

Note: this is not just a problem in northern Virginia. For example, New Jersey leads the country in property taxes and the bill keeps growing in a number of New Jersey communities.

Illinois property taxes second-highest in the nation

A new report shows at the end of 2012 Illinois had the second-highest property taxes, just behind New Jersey:

Property taxes in Illinois average 2.28 percent of a home’s value, according to the Urban Institute. In New Jersey, they’re 2.32 percent, and in lowest-taxing Hawaii, they’re 0.27 percent. (The lowest among mainland states is Alabama, at 0.46 percent.)All the states that ranked ahead of Illinois in the 2007–11 chart saw their tax rates go up in 2012. But the rate in Illinois went up more…

What’s moving us up the list? Home values are down but taxing bodies’ appetites are up, as Costin sees it. Illinois home values fell farther and are improving more slowly than those in many other states. The latest Case-Shiller index data, which came out on New Year’s Eve, showed that while home values in the nation’s ten major cities have recovered, on average, to June 2004 levels, they’re only back to February 2003 levels in Chicago. At the same time, Costin says, “most local taxing bodies do the maximum increase they can do under the law each year.” Lombard and Lake County are notable exceptions, he says; both have reduced their rates.

When they’re asking for more total dollars in taxation on a smaller pot of aggregate home values, the tax rate is what goes up. It doesn’t necessarily mean that the amount of tax you have to pay goes up, as Cook County pointed out earlier this year.

While there are concerns about the federal budget as well as the monetary issues of the state of Illinois, these rising property taxes hint at another concern: the need for tax revenues for lower levels of government. These property taxes primarily go for local schools, cities, and other local services. See where property taxes go in one town in DuPage County. Or how one Chicago suburb is thinking about privatizing more of its roads to pay for their maintenance.

It is interesting to note that property taxes are higher in specific states but not others. For example, much of the Northeast and upper Midwest has higher property taxes but while Kansas and Texas do, Oklahoma does not. And, California does not. In a state where one city went bankrupt are others have looked to outsource municipal services, the property tax revolts of the 1970s (see Prop 13) have successfully kept property tax rates down (though home values are still high). Yet, if the money doesn’t come through property taxes, it likely comes from other sources.

Illinois revenue issue: “sin taxes” can’t keep pace

Even as legislators raise “sin taxes,” it is difficult for the state to bring in as much revenue from such taxes:

While state lawmakers continue to increase taxes on liquor, cigarettes and gambling, revenues from the so-called “sin taxes” aren’t keeping pace. At $1.95 billion, 2012 revenue from those taxes was almost on par with that of 2003, even though most tax rates increased significantly, according to a Daily Herald analysis of Illinois Department of Revenue financial reports…

Since tobacco taxes were raised in 2002, revenues steadily have declined to pre-hike levels as cigarette purchases dropped in Illinois. Legislators last year doubled tobacco taxes, but revenue did not keep up. After getting $609 million in tobacco taxes in the previous fiscal year, the state generated $856.5 million from tobacco taxes in the fiscal year that wrapped up a few months ago, according to the state legislature’s Commission on Government Forecasting and Accountability…

While taxes on things like cigarettes and liquor are relatively easy to sell to many taxpayers, critics say a failure to maintain these revenue levels ultimately results in higher taxes for everyone. It’s no surprise to Illinois Policy Institute Executive Vice President Kristina Rasmussen that sales and income tax rates have also increased in recent years…

The state’s sales and income tax projections are also eroded by buyers going elsewhere for alcohol, cigarettes and similar products. Rasmussen said legislators are taking a shortsighted approach to revenue enhancements instead of solving long-term debt problems.

It is more popular politically to go after sin taxes than to look at larger spending or taxing issues.

But, what counts as a “sin” is also interesting to note – it is quite a social construction. Cigarettes are seen as a huge threat to public health but are not illegal. Alcohol was once banned on a national level and there were decades of temperance movements but it too is legal and brings in a lot of revenue beyond sin taxes – think what restaurants generate. Marijuana is a growing sin tax alternative as some places look to cut costs: instead of jailing users and sellers, why not just ticket them or tax them, making money off of behavior that is still seen as deviant. Thus, it isn’t surprising as more of these traditional “sins” fail to generate sufficient revenue that new sins are identified, from red-light cameras to speed cameras to soft drinks to junk food and beyond.

When big corporations keep approaching Illinois about tax breaks

ADM and other large companies in Illinois keep pushing the state to offer more tax breaks:

The company has called Decatur home for more than four decades but said it needs to relocate to make international travel and employee recruitment easier. ADM hasn’t said where its new headquarters will be, but Chicago is the preferred location for an operation that would employ about 100 people, according to knowledgeable sources. The company has said it would also create a technology center at its headquarters site that would employ an additional 100…

The ADM tax package is one of several bills introduced Friday that would give breaks to specific companies or industries. The bills seem likely to reignite the debate over targeted breaks that swirled in 2011 when the General Assembly gave tax relief to CME Group Inc. and Sears Holdings Corp. Both companies had threatened to exit the state…

The proposal also would let the company retain state income tax withholdings that employees would have paid the state. Motorola Mobility, Navistar International Corp. and Ford Motor Co. have received the same tax break to retain jobs…

Separately, two other companies are in line to receive tax incentives. Swiss insurance company Zurich plans to build its new North American headquarters in Schaumburg, where it employs about 2,500 people who would shift to the new facility.

More on the story from yesterday’s paper:

ADM, which said last week it is searching for a new corporate headquarters, wants $1.2 million a year for the next 15 to 20 years, company representatives told a State House Revenue and Finance Committee at a hearing in Chicago on Tuesday…

If lawmakers approve the bill, ADM would join a select number of companies that can retain their employees’ income tax withholdings. That group includes Motorola Mobility, Sears Holdings Corp., Navistar International Corp. and Ford Motor Co.

To get there, companies have lobbied lawmakers to amended the language of the state’s Economic Development for a Growing Economy tax credit program, or EDGE.

The print version also noted that about two-thirds of Illinois companies don’t pay corporate income taxes.

Such requests put politicians in a difficult position – which I suspect is one reason businesses make such requests. The politicians quoted in the stories sound fairly negative about the tax breaks; they think the companies are simply asking to avoid taxes they could afford to pay. At the same time, politicians don’t want to be the ones who are viewed as anti-business (which is related to being anti-growth or anti-jobs) and the ones who let big name companies get away. If other states or localities are offering better tax breaks, they have to compete with tax breaks or highlight other advantages (an educated workforce, access to a global city – Chicago, clusters of other nearby corporations and services, etc.). It can then become a race to the bottom as governments undercut each other to attract corporations which are then less valuable.

Chicago suburb to raise revenue by selling guns

St. Charles, Illinois has one solution for communities looking to raise revenues: sell confiscated and used guns back to the public.

But while some Chicago-area communities host buybacks where weapons are turned in and destroyed, one suburban police department is poised to sell about 20 firearms to two licensed dealers, including some guns seized from criminals.

“There’s value in these guns,” said police Chief James Lamkin of west suburban St. Charles. “They’re not illegal guns. Quite honestly, it’s a bottom line for us.”

Though Arizona has just enacted a controversial state law requiring local departments to sell firearms that are surrendered or go unclaimed, the practice appears to be unusual in the Chicago area. The Chicago Police Department and several suburban law-enforcement agencies, as well as Illinois State Police, say they destroy weapons after they’re turned in or no longer needed as evidence…

The choice for a public agency to sell or destroy seized weapons underscores the push in many suburbs to find new ways to generate revenue without raising taxes. The issue also places St. Charles in an unusual position among law enforcement agencies at a time when the gun control debate has been re-energized by the Sandy Hook school shooting and, in Illinois, by the current effort to enact a concealed carry law before a court-imposed June deadline.

My guess is that the negative publicity from a story like this – having a fairly well-off suburb make the front page of the Chicago Tribune for selling guns – outweighs the revenue that may come from selling 20 guns. This is the sort of negative attention that suburbs try to avoid. Yet, this is what happens when many American communities are desperate to find revenues. It would be interesting to see what St. Charles residents think of this. Does this story that could make their community look bad overpower the efforts the local government is making to avoid raising taxes?

Infrastructure mental image of the week: “America is one big pothole”

Transportation Secretary Ray LaHood may be retiring but he made clear yesterday the infrastructure issues he believes face the United States:

Outgoing Transportation Secretary Ray LaHood lamented the amount of infrastructure spending that was approved by Congress during his tenure at the Department of Transportation (DOT) on Wednesday.

“America is one big pothole right now,” LaHood said in an interview on “The Diane Rehm Show” on National Public Radio.

“At one time … we were the leader in infrastructure,” LaHood continued. “We built the interstate system. It’s the best road system in the world, and we’re proud of it. But we’re falling way behind other countries, because we have not made the investments.”…

LaHood said Wednesday that whoever ends up replacing him will have to think outside the box to find more transportation funding.

LaHood is not alone in suggesting that America’s lack of attention to infrastructure could be quite costly down the road. Infrastructure is the sort of thing that greatly benefits from good funding and planning upfront rather than trying to patch problems down the road. It reminds me of the stories in recent years in Illinois about how asphalt gets used on tollways because it is cheaper upfront but concrete is costlier upfront yet saves money in the long run.

I wonder what it would take to convince politicians and the public that infrastructure needs should get priority when other issues look larger in their perception. I don’t think people would say money shouldn’t be spent on basic issues, particularly when safety is involved, but infrastructure tends to get left behind among other concerns. Can someone create a sexy pothole repair or bridge repair marketing campaign?

Behind the suburban scenes: Warrenville asks Naperville School District 203 to stop expensive lawsuit

I posted last November about a Warrenville newsletter where the mayor expressed his displeasure that a new Cantera business had invited the mayor of Naperville to its opening but not the mayor of Warrenville. I was surprised at the reaction, which was quite unusual to see in a newsletter to the whole community, but I wonder it might be tied to a eight-year expensive lawsuit over tax revenue from Cantera:

Warrenville officials are campaigning to end an eight-year court battle over taxes with a Naperville school district.

The case returns to court Thursday, two days after leaders of five government bodies in Warrenville presented the Naperville Unit District 203 school board with a letter saying the lawsuit concerning a special taxing district has cost all parties involved more than $803,000 since 2005…

The lawsuit was filed by the district in March 2005 over the use of funds from the Cantera tax increment financing district. The Cantera development now includes a theater, shops, restaurants and corporate offices and provides about $3.2 million a year in revenue to District 203. Dave Zager, the district’s chief financial officer, said the Naperville district will continue to collect property tax revenue from the development into the future, but the amount will vary.

However, the school district alleges in the suit it is owed more than it has received. Brummel maintains the funds from the TIF district have been distributed legally and at the advice of attorneys.

The case has been dismissed twice, but the school district appealed twice, and litigation has continued.

Warrenville, its park district, fire protection district, Wheaton-Warrenville School District 200 and the public library district have spent a combined $357,000 defending the case. Naperville Unit District 203 has spent about $446,000. Part of the Cantera site is in District 203, and part is in District 200.

On one hand, this sounds like a lot of money to spend on a lawsuit that has still not concluded, but, on the other hand, tax revenue is hard to come by these days and lots of school districts could use this kind of money. I wonder if the length of the lawsuit is also tied to the economic crisis of recent years; in better times, District 203 might be better able to lose this revenue.

This is the first time I’ve heard of this lawsuit. Large battles between suburbs or suburban governmental bodies are fairly rare.

Argument: cities could find more revenue by taxing people who commute in

Michael Pagano details the tax revenue issues facing American big cities and proposes a solution: tax commuters for the city services they use.

Over the past several decades, municipal tax systems have changed in many ways to try and capture the revenues needed to support essential services. But most cities continue to base their tax systems on dated notions of how local economies work and what drives income growth and wealth. Cities must be given the ability to develop tax and revenue systems that match the unique characteristics of their local economies, and that allow them to diversify revenues in ways that protect them from fiscal crises.How might that request be accommodated? Tax structures should be created that link cities to their underlying engines of growth or to income and wealth, similar in design to what the property tax attempted to accomplish two centuries ago. In Ohio for example, cities tax earnings at the place of employment and the place of residence. By taxing at the place of employment, users of city services (that is, employees who physically work at a site) contribute to the resource base for service provision.

Imagine if users of city-government services actually were required to pay for the full cost of those services? Imagine household decisions on where to live that is based on their paying the full cost of services. Imagine the decision calculus by individuals who would be responsible for paying their fair share. It could be revolutionary.

I wonder if changing the tax structure in this way would only serve to push more organizations and firms to the suburbs. Take the example of Chicago cited by Pagano. In the last few years, several companies, like Motorola, have announced they are moving workers back into the city. Would changing the tax structure make them reconsider?