THE ROAD PLAN that Speaker Jay Lucas’ ad hoc committee rolled out last month puts the House back in what used to be familiar territory: a pragmatic voice positioned between a rigid anti-tax governor and an anti-reform Senate.
It’s certainly not a perfect plan, and there’s no guarantee that it can even pass the House; we can’t even be sure it will be intact when it’s filed as a bill, expected Wednesday.
The biggest problem is what it doesn’t do: It doesn’t overhaul our loophole-riddled, special-interest-driven tax code. We need to do that before we raise or lower any more taxes, but it’s painfully clear that no one in the Legislature or the governor’s office or much anywhere else believes that; so this a wash when we compare competing proposals.
Once you take comprehensive tax reform off the table, what you’re left with is a plan that is an excellent place to start a discussion. It’s also a plan that could be improved significantly with a few simple (if not so simple to pass) tweaks.
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What it does right
Let’s start with the positives.
• It confines itself to our actual needs. That’s why it raises $400 million a year rather than the $1.5 billion that we’ve all been repeating without asking what it covers; it turns out that the big number includes lots of new roads, among them the proposed Interstate 73 that we do not need. Now, $400 million might not be enough — one House leader says it’ll take us from an “F” system to “C” or “C+,” and says it probably would cost around $750 million a year to get to a “B” — but lawmakers can debate whether they want to go further.
• It has the potential to make our road decisions less parochial and instead focused on what’s best for the state as a whole. First, it requires the State Infrastructure Bank — the entity that borrows money to fund major projects — to use objective criteria to decide which projects to approve, as the Transportation Commission is sort of required to do. Second, it ends the practice of small groups of legislators appointing transportation commissioners to represent their regions, which has resulted in horse-trading at the expense of actual needs. Instead, the governor would appoint commissioners, with Senate approval.
Gubernatorial appointment also puts one person in charge of the Transportation Department, so voters have someone to hold accountable when things go wrong. (When 170 legislators are in charge of something, no one is in charge.) The plan provides a check on this additional gubernatorial authority by requiring the Legislature to sign off on the roads budget, rather than taking the hands-off approach that it does now.
• It attempts to get the state out of the business of paving and repairing purely local roads that never should have been the state’s responsibility, by offering more money to counties that take over the job. For those who object to even the optional version of this plan, supporters note that practically speaking, the state isn’t taking care of those local roads as it is.
• It closes some tax loopholes, which makes our tax system more coherent and our tax collections less volatile, and it has the effect of adding an inflation factor to the gas tax, so revenue increases as the cost of paying workers and buying raw materials increases. Specifically, it raises the maximum sales tax on cars, boats and planes from $300 to $500, and it effectively removes the sales-tax exemption on gasoline.
• It doesn’t steal a lot of money from the general fund. I hate stating positives as negatives, but the fact is that Gov. Nikki Haley kicked off this discussion with such a huge and unaffordable tax cut that just about anything short of that looks responsible by comparison. Unlike the governor’s proposal that will reduce general fund revenue by $1.8 billion a year once it’s phased in, the House plan would reduce the money to pay for schools and courts and child-protective services and pretty much everything else the state does by just $61 million per year. We shouldn’t do even that, but again, by comparison ….
A better way to tax
The plan could be improved by making more significant changes to the poster child for tax reform — the $300 cap on the sales tax on automobiles.
Under current law, someone who buys a $6,000 car pays a tax that’s 5 percent of the sales price, while someone who buys a $56,000 car pays a tax that is just 0.54 percent of the purchase price. Under the House proposal, the person who buys the $6,000 car would still pay that 5 percent, which still would be $300. But someone who buys a $10,000 car also would pay 5 percent, or $500. And instead of paying a tax of just 0.54 percent, the person who bought the $56,000 car would pay a tax of 0.89 percent. (Buy a $20,000 car, and you’d pay 2.5 percent, up from the current 1.5 percent tax.)
There are two better ways to raise the extra $60 million a year that this change would generate: Eliminate the cap entirely and lower the tax rate on automobiles, so that everyone pays a sales tax of about 3 percent of the total purchase value; that is, make it an actual sales tax rather than a fee for purchasing a vehicle. Alternatively, exempt the sales tax on the first $1,000 of the purchase price, and tax the rest of it at the normal 5 percent — that is, create a tax floor instead of a tax cap.
The plan also could be improved by giving local governments the authority to raise the money themselves to maintain local roads, rather than giving them state money that they legitimately fear the Legislature would take back at the next economic burp.
This point needs elaboration. One of our big problems is that the Legislature has never gotten past its 19th century notion that it should control everything that happens in our state. It orders local governments to do things the state ought to be doing, while at the same time doing things that local governments ought to be doing, and it severely limits how and by how much the city and county councils can raise revenue, even though those council members are in some cases elected by more people than are legislators.
It’s true that having the option to raise the money locally would be of little use to rural counties that have practically no tax base. But it’s also true that people in Richland County shouldn’t have to pay to pave half-mile roads with two houses on them in Allendale County — or in Lexington County. Or vice versa. Those ought to be local responsibilities.
A better way to spend
The plan could be improved by closing the loophole that allows the Transportation Commission to ignore the ranking of road projects that is based on objective criteria and instead undertake projects that haven’t even been evaluated.
It could be improved by eliminating the Infrastructure Bank board rather than simply expanding its membership to dilute the outsized authority the House speaker and Senate president pro tempore have over it.
Finally, the House roads plan could be improved by adding a fix-it-first requirement, to make sure that we get our current roads and bridges up to safe-driving standards and add extra lanes before building whole new roads — such as the $105 million interchange for the unfunded and quite possibly unbuildable leg of Interstate 73 that the Transportation Commission tried to authorize a few years back.
One of the reasons we’re in this mess is that the Transportation Department has focused its limited resources on building new roads rather than taking care of the ones we have. Changing that focus won’t bring our road system up to safe-driving standard, but it will free up some money to start addressing the problem.
And it will reduce the rate at which we are digging our ever-deepening hole.
Ms. Scoppe can be reached at email@example.com or at (803) 771-8571. Follow her on Twitter @CindiScoppe.