Transportation Report Change Shows Dems Have Leverage on Revenues (And They Should Use It)

The Georgia Transportation Joint Study Committee recently offered two major new revenue options to make up Georgia’s transportation funding shortfall: an additional 1% sales tax and a state gas tax hike. In order to sell the new sales tax, estimated to raise $1.4 billion annually, the committee originally designated that half of that revenue would be put towards cutting the state income tax. In a last-minute change, however, the recommendation was modified to let the General Assembly decide how to properly split any new sales tax.

This change makes the option much more palatable to Georgia Democrats, who on principle push against movement to more regressive sales taxes from income taxes. The fact that this change was necessary despite massive Republican majorities in the General Assembly confirms that Democrats will have a seat at the transportation table.

Committee Chair Jay Roberts says the General Assembly may decide to “take the other half [of a sales tax hike] and put it to something else.” If one funding source does end up being a sales tax increase, Democrats should insist that this is the case. Georgia could institute a state-level version of the Earned Income Tax Credit (EITC) to boost the after-tax income of working- and middle-class Georgians and counteract the regressive impact of a sales tax hike. Expanding the federal EITC is supported by both Rep. Paul Ryan and President Barack Obama, so a Republican-Democrat compromise on a Georgia EITC is not out of the question. The Georgia Budget and Policy Institute estimates that a state EITC at 10% of the federal level would cost $274 million a year, leaving over $1 billion for transportation and other priority investments such as education and health care.

Some committee options – eliminating the $180 million a year to the general fund from the 4th penny on gas sales taxes and beginning to pay off $3.6 billion in Department of Transportation debt from the general fund – would strain Georgia’s non-transportation budget. Democrats should be cautious. Any compromise should keep in mind that Georgia’s education system is still being underfunded by over $700 million annually, Georgia’s rural hospitals are struggling to remain open, and over half a million Georgians who would be eligible for expanded Medicaid remain uninsured. Options to relieve any new pressure on the general fund should be discussed. For example, eliminating a single loophole that allows itemizing taxpayers to double-count one of their deductions would bring in an estimated $460 million a year.

Transportation investment is incredibly important, and the report makes clear that our state is falling behind our peers. When our legislators are deciding how to raise the $1-1.5 billion annually to maintain our current system or the $2.1-2.9 billion required to actually improve it, Democrats should make sure that other state priorities aren’t crowded out and that tax increases don’t fall primarily on those who can least afford it.

13 comments

  1. Dave Bearse says:

    A general sales tax for highway transportation that nominally decreases relative taxes on the rich and nominally increases relative taxes on the middle class for transportation doesn’t work for me.

  2. hewhoone says:

    Anyone who believes the people of Georgia will support a tax increase without even knowing where the money will go is seriously mistaken.

  3. Daniel N. Adams says:

    Thank gawd a few years back the Republicans took over control of the government in Georgia, otherwise we would have had to fight against some tax increase EVERY DAMN YEAR!

  4. benevolus says:

    So when the economy goes bad, there is less revenue so budgets get cut. As the economy gets better, isn’t there increasing revenue? Why do we have increasing taxes in an expanding economy?

    edit: Never mind, I guess this is allegedly revenue neutral?

  5. androidguybill says:

    “Any compromise should keep in mind that Georgia’s education system is still being underfunded by over $700 million annually”

    Ah, that claim again. The $700 million shortfall is according to QBE figures that the state has never met EVER. It would be preferable to look at the state education funding levels under Zell Miller and Roy Barnes, index them for inflation and the increase in population and then use that to discuss any “shortfall” that took place under Sonny Perdue and Nathan Deal. My guess is that it would come nowhere near $700 million.

  6. Will Durant says:

    I’m still a strong advocate of “user fees” for the transportation infrastructure and the best way to accomplish this currently and for the near future is still the motor fuel excise tax. It is important to those paying the higher taxes on motor fuel that will necessarily be increased to know that every penny paid for that tax goes to transportation. This means that current county sales taxes that apply to motor fuel should be grandfathered in but only allowed in the future if they are dedicated 100% to transportation. Conversely a sales tax on everything doesn’t count as a user fee and I cannot support an increase in the state sales tax for transportation.

    • Dave Bearse says:

      I’d support a fraction of a cent general sales tax for other than highway transportation—the motor fuel excise tax cannot be used for other than highways, e.g. no ports, rail, air, etc.

  7. Al Gray says:

    A statewide sales tax of 1% to fund transportation? A statewide fuel tax increase to fund transportation? What about the 3 regions who passed TSPLOST? A statewide “anything” to fund transportation will tax us yet again for costs we supposedly had taken care of.

    I cannot find words to describe how damnable state politicians would be to do that.

    • notsplost says:

      I agree that those three regions that passed the 2012 TSPLOST create a wee bit of a problem here. Double taxation is your reward for being a nice compliant region and supporting the Chamber of Commerce?

    • Will Durant says:

      How does this substantially differ from the county TSPLOSTs that have been passed subsequent to the failure in most of the regions making up the state’s regional TSPLOST initiative? I’m fine with some legislation allowing counties to make their own deals among themselves in the future if a project crosses multiple jurisdictions. I just don’t want to see anymore shotgun weddings taking the marriage out of local control.

      Keep in mind that those who didn’t pass the statewide one still have to pay more matching funds in perpetuity as well.

      • Dave Bearse says:

        Many TIA projects, including state route projects, are proceeding with zero matching state of federal funds. It’s why in part the approving regions will say “take a hike” concerning new transportation taxes.

        • Rambler14 says:

          Yes.

          Many people outside the transportation world don’t realize that state/federal funding means costs double and schedules triple, due to the bureaucracy at FHWA and GDOT.

          • Dave Bearse says:

            Federal and state strings do significantly increase costs and lengthen schedules, but not at those magnitudes.

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