Correcting the Record on the Transportation Funding Act

Ever since details of the Transportation Funding Act of 2015 became public late Wednesday afternoon, journalists, pundits, and others have tried to explain and interpret what the act does, and how Georgians will be affected by it. As someone who was briefed beforehand on what the bill might contain, attended the press conference where the bill was announced, read the talking points given to legislators about the bill, and actually have read the bill, I won’t claim to know everything about how it works. But, reading some of the press coverage and spin following the announcement, there is clearly some confusion over what the bill does or does not do.

Much of the incorrect information I’ve heard about the bill deals with converting the state and local sales taxes to a fixed excise tax of 29.2 cents per gallon. For example, an editorial in the Columbus Ledger Enquirer mentions the possibility that counties’ bond ratings could be hurt if they can’t pay off bonds issued against anticipated SPLOST revenue. However, because existing SPLOSTS will continue for the rest of their term, this shouldn’t be an issue.

Then, there’s this post in the RenewATL blog. Writing about how cities and counties can levy a three cent excise tax on gasoline, the author laments that proceeds couldn’t be used for transit. However, the bill specifically includes buses and public transit as permissible uses for a local excise tax.

That local excise tax is also causing confusion — it does not replace SPLOSTS, which could be renewed as they always have been, except that new SPLOSTS would not tax gas purposes. And the potential 6 cent excise tax (3 cents from counties and another 3 cents from cities) would not be subject to a public vote.

Then, there’s exaggeration, as seen in this tweet:

While it’s true that the estimated $7.5 million that would be raised from the larger tag fee charged to alternative fuel vehicles is going to the general fund, that amount, at least in my mind, is nowhere near a “great portion” of the estimated $1 billion funding plan. In any case, the AFV fee is supposed to go to transit, which is part of the transportation equation.

And then there is the misleading claim that a potential increase in the price of gas by 7.7 cents represents a tax increase. While it’s true that talking points distributed by House leadership say that current fuel prices would increase by that amount, the reason is an artifact of the switch between the current sales tax to the proposed excise tax. Because the amount collected with a sales tax varies based on the price of gas, lawmakers had to pick the gas price they would use to calculate the amount of excise tax to charge. They settled on $3.39, which is the average price of gas in Georgia over the last four years.

As a result, if the price of gas was $3.39 when the excise tax went into effect, the price would not be affected by the change. Because gas currently sells for around $2.00 per gallon, the sales tax paid is less than the excise tax, so the price increases when the excise tax is applied. If gas were selling above $4.00 per gallon, the conversion to the excise tax would mean a reduction in the pump price, because the sales tax would be more than the excise tax.

Trying to figure out the meaning and implications of the Transportation Funding Act is a challenge, especially early on, when one hasn’t seen the actual bill, which was finally released late Thursday afternoon. While some of the information put out about the bill is the result of misunderstanding what it does, there have also been attempts to muddy the waters by those who don’t like part or all of what’s being proposed. (For those supporting the bill, there’s a real need to be precise when talking about whether tax increases are involved.) And, I don’t want to sound like I know everything, because I’ve made mistakes too. But, as I tweeted this morning, “There’s a ton of misinformation out there about Georgia’s new transportation funding plan. Don’t believe all you hear.”

35 comments

  1. Al Gray says:

    If it doesn’t phase in as the SPLOSTS phase out, it is indeed a tax increase because motor fuels are then in one to three local tax bases, especially with respect to the LOST.

    At the current price, it is a huge tax increase by the numbers.

    For the 3 regions who passed TSPLOST it is a double tax increase.

    Forget the hand wringing over whether it is a tax increase or not and pass the tax increase straight up, but with credit to counties where TSPLOST is in effect. Doing it this way makes it worse because the method is disingenuous and sets up too much political opposition from the local governments and the TSPLOST regions.

  2. Thanks for linking to my post at RenewATL.com, Jon, and for bird-dogging the facts.

    But I actually wrote that it’s unclear whether the motor fuel sales tax money could go toward transit. And I think that’s still accurate: While the draft bill does contemplate giving local governments the freedom to use local motor fuel revenue on transit, the state Constitution limits “grants to counties” from gas tax revenue collected by the state to “road construction and maintenance, as provided by law authorizing such grants.” I don’t see an exception to that restriction in the Constitution, so wouldn’t we need an constitutional amendment to allow counties to spend gas taxes on counties? As said in the article, I’m not entirely sure but it does appear that way.

    I appreciate your caution that neither supporters nor critics understand everything about the bill yet. But it does seem to me that folks who want to see the Majority succeed are reflexively defending this particular proposal. The problem boils down to basic math: That billion dollars either comes from cuts or tax increases. One can label a tax increase something else, but ultimately the Majority is stuck between a rock (the business community and most commuters) and a hard place (anti-tax conservatives).

    • Jon Richards says:

      Ken,

      I think you’re being too cautious. While I agree that the state’s motor fuel excise tax is restricted by the Constitution to roads and bridges, I’m not sure that applies to this new excise tax. This tax isn’t a “grant to counties,” from state government revenues. And, in Section 4.1 of the bill, ‘transportation purposes’ is defined to include the other transport options, and that definition is used in Section 4.2 to define how the excise tax can be spent.

      • TuckerDawg says:

        I agree with Jon’s reading. The 3 (up to 6) cent/gallon excise tax described in section 4-2 of the bill is a local tax directly assessed by the county, not a grant of state revenue.

      • As we all know, the Constitution trumps legislation. So, if that section of the Constitution is deemed to apply to that section of the bill, the bill definition of “transportation purposes” is immaterial. If it doesn’t, then you’re right, Jon: That money will be available for a more complete transportation system that actually helps to clear up congestion.

        But certainly, in general, caution — or more accurately scrutiny of each detail — is in order. It’s an odd argument that some people are making: That we shouldn’t critique this bill because it’s really just a draft. The whole point of the legislative process is to scrutinize such proposals very critically.

        • Jon Richards says:

          Well, here’s Article 3, Section 9 Paragraph 6 B, in part:

          An amount equal to all money derived from motor fuel taxes received by the state in each of the immediately preceding fiscal years, less the amount of refunds, rebates, and collection costs authorized by law, is hereby appropriated for the fiscal year beginning July 1, of each year following, for all activities incident to providing and maintaining an adequate system of public roads and bridges in this state, as authorized by laws enacted by the General Assembly of Georgia, and for grants to counties by law authorizing road construction and maintenance, as provided by law authorizing such grants. Said sum is hereby appropriated for, and shall be available for, the aforesaid purposes regardless of whether the General Assembly enacts a general appropriations Act; and said sum need not be specifically stated in any general appropriations Act passed by the General Assembly in order to be available for such purposes. However, this shall not preclude the General Assembly from appropriating for such purposes an amount greater than the sum specified above for such purposes. The expenditure of such funds shall be subject to all the rules, regulations, and restrictions imposed on the expenditure of appropriations by provisions of the Constitution and laws of this state, unless such provisions are in conflict with the provisions of this paragraph.

          Does it apply to local excise taxes? Keep in mind, the precedent is that this requirement doesn’t apply to sales taxes, and the constitution doesn’t specifically say excise taxes on fuel.

          • Yeah, I honestly don’t know. This one point is a parenthetical “maybe” in a longer article substantiating ways in which the bill really is, as Tea Party Patriots put it, a “shell game.” Certainly, replacing the state sales tax at the pump to an excise tax would eliminate a potential revenue source for transit.

            The larger point is claiming the House leaders’ plan isn’t a tax increase is disingenuous: Rather than making tough decisions at the state level, they’re proposing simply to take a revenue source from local governments. I don’t get how supposed fiscal conservatives are trying to brush that under the rug.

            Thanks, I should say, for the thoughtful conversation. If I have the time, I’ll try to find out more on this one point next week.

            • Bill Dawers says:

              Ken, the questions on this one point aside, I agree with the thrust of your piece, although, in addition to the five areas you discuss, the 29.2 cent excise tax could also be seen as a tax increase because we are currently paying substantially less in combined sales and excise taxes (at $2/gallon, I’m paying 21.5 cents per gallon in sales and excise taxes). Gas prices might climb again, but the time being used for the reference period to determine the amount of the excise tax was a period of unusually high gas prices, even adjusted for inflation.

  3. saltycracker says:

    Jon,

    Excellent reporting.

    In these times of tricky titles, obfuscation and morphing until the vote, your conclusion is right on to analyze it carefully once passed.

    We are too oft sold steak when the end result is scat.

    • Will Durant says:

      Instead of the obfuscation of RFRA and AP History curriculum bills, how about a meaningful one on adding some time to actually read legislation prior to voting like Nebraska where:

      “Bills may not be voted on for final passage until at least five legislative days after the bill is introduced, and one legislative day after it is placed on Final Reading.”

      It would also get rid of the cop out used by many legislators that they didn’t get to read the final version before the last minute votes on sine die.

    • Al Gray says:

      Burke County is bird dog capital of the world, so that could be dangerous. I thought they shot things that tweet.

      Hauling dogs in an off-road diesel vehicle is safe from fuel taxation for now, which should soothe their nerves. They best not discover that Georgia Fairtax will tax the dogs and the hunting lease, though.

      Burke County is in the TSPLOST CSRA region and one of the counties that fares best under TIA 2010, but that means they are sensitive about being double taxed for transportation.

  4. xdog says:

    I’m not clear about the adjustments to the base excise tax of 29.2 cents per gallon.

    The first adjustment is based on the average mpg of “all new vehicles registered in the state”. Does that mean new as in current model or new as in registered for the first time or new as in re-registered?

    iow, are all these cases covered? 1)I buy a 2016 model in Georgia; 2)I buy a 2016 model in Florida and register it in Georgia; 3)I buy a used car in Georgia; 4)I buy a used car in Florida and register it here.

    If newly registered used cars are included, is there an adjustment for mpg figures which one presumes will have declined over the years?

    The second adjustment is based on “highway construction as measured by the Construction Price Index published by the United States Census Bureau”. The only such document I can find online relates to home construction costs. Do they mean to use home building cost increases as a proxy for inflation or do I lack sufficient google-fu?

    • Bill Dawers says:

      I don’t know what they “mean” but the wording should be “all vehicles newly registered” if it was intended to apply to all used cars bought and to all cars brought in from out of state and registered in Georgia for the first time. “New vehicles” means new, or at least it should.

  5. Mike Dudgeon says:

    I appreciate the general sentiment here Jon. One of my bigger frustrations being in politics is fighting through the misinformation. It is hard enough to decide on complex policy looking at the facts. But I spend untold amounts of time fighting misinformation either spread by a naive media or opponents of a measure who intentionally generate the false or wildly exaggerated claims.

  6. Will Durant says:

    This one is going to need a lot of splainin’ and where are all the king’s men? Are they waiting to see how the wind is blowing?

  7. Dave Bearse says:

    Jon, you’re undermine your integrity by calling the $200 to be charged alternative fuel vehicles a fee when it’s a tax. It’s not closely related to actual costs and is general revenue.

      • Dave Bearse says:

        And I’ll concede there is an element of a fee in it—$200 is the motor fuel excise tax on 684 gallons of gasoline, in the realm of that purchased by a typical Georgia motorist. The payment going to the general fund is what seals it as a tax.

  8. AlphaDog says:

    Yes, it is a tax increase. But the legislature is handing that hot potato to the cities and counties. It’s a shell game.
    The state can honestly say “we did not raise taxes” while the cities and counties must add a three cent per gallon excise tax at the pump just to maintain the status quo financially.
    Keep in mind that after this bill goes through committee and rules, the final bill will likely look much different than it does now.

  9. debbie0040 says:

    The same elected officials lying to Georgians about the plan not raising taxes are the same ones asking Georgians to trust them with a billion dollars of new revenue. Gov. Deal is backing this plan so he shares part of the blame.

    I reached out to activists in other states and it appears that South Carolina, Tennessee and New Jersey are looking at plans to raise the gas tax using creative accounting measures. Must be something in the RGA water.. And yea, they are planning on fighting the tax increase..

    There is a billion dollars surplus that is projected that is being spent on education and other items and not on transportation. I agree education is important and that is why I find it so ironic the House Republican Plan cuts needed funding from local school boards. House Republicans first impulse is to tax-not cut.

    The only reason transit is in the bill is to get votes from Democrats. The transit funding in the bill is miniscule and not dedicated. The funding is so little they are not even throwing Democrats a bone-they are throwing them a toothpick. Transit has to be part of any solution and it is laughable the money allocated in the bill.

    http://chronicle.augusta.com/news/government/2015-02-01/analysis-explaining-ga-road-revenue-plan

    • Will Durant says:

      You want to eliminate waste? How about eliminating future debt service for GDOT projects by paying for them as we go by raising sufficient revenue to build and maintain the roads. By not raising sufficient revenue and increasing the debt Sonny has left us with GDOT spending more than $400 Million per year in debt service. A true fiscal conservative should advocate pay-as-you-go policies and taxes that are sourced primarily from those who are actually using the roads. The most equitable way to do this at this time is through the motor fuel tax.

      • debbie0040 says:

        Will, you just illustrated our point. they aren’t fiscally responsible with they money they already have. They continue allowing existing big business to have tax credits, they are helping build a parking deck for the Falcons Stadium, etc.

        This is a plan we agreed to in 2012. they have not met the requirement of spending tax dollars wisely.
        The House Republican plan creates a giant transportation slush find in funding the central bank. CIDs, development authorities and other non-governmental entities will be allocating tax dollars.

        http://clatl.com/freshloaf/archives/2012/07/27/sierra-club-tea-party-agree-on-plan-b-if-t-splost-fails

    • Rambler14 says:

      Debbie,

      2 years ago you told us you’d work with the Sierra Club on a Plan B to TSPLOST if it weren’t passed.

      Where is it?

      Until we have a counter-proposal to compare against this, all I see is a decision between this and the status quo.

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