Guest Commentary: Demise of Car Tax Initiative Leaves Transportation Finance Unresolved

Guest Commentary by Loren Kaye  (California Foundation for Commerce and Education)

News last week that proponents have dropped their initiative to increase the car tax for transportation projects was unsurprising, but only leads to the larger question of how to meet legitimate new needs for roads, highways and other transportation works.

Recent private polling has found that voters are disinclined to approve new taxes for… almost anything. Even though most voters won’t pay the Proposition 30 income tax hikes, they believe these tax increases are enough to address the state’s problems, especially with their biggest concern: public education. Lingering uncertainty about California’s modest economic recovery also dampens voter interest in new taxes.

Incipient Financial Crisis

This is cold comfort for transportation and economic development advocates, who see an incipient financial crisis for Californians’ mobility.

The lion’s share of money for roads, highways and transit in California is thrown off by the gasoline excise tax, which totals 39.5 cents a gallon — the highest such rate in the country. But changes in Californians’ behavior — influenced by market forces and public policy — have disrupted this venerable source of transportation finance.

Higher mileage cars, including the penetration of hybrids and vehicles that don’t run at all on gasoline, are fundamentally altering the shape of the fuel tax revenue curve. Last fiscal year, Californians purchased the least amount of gasoline since 1998–99.

Downward Trend

While historic downturns in gasoline purchases have been temporary, the overall downward trend since the end of the last century seems apparent.

Add to this the inherent loss of purchasing power in an excise tax, and the result is a revenue source that is falling far behind the legitimate maintenance and growth needs of the system.

Governor Brown has dedicated some of next year’s budget surplus to transportation finance, repaying loans from special funds and dedicating some new money to deferred maintenance.

But this is small ball compared with the looming needs for California’s roads, highways and urban rail systems. Soon enough, California leaders—if not voters—will have to address this issue.

LorenGuest Commentary by Loren Kaye.   Loren is president of the California Foundation for Commerce and Education, a nonprofit think tank affiliated with the California Chamber of Commerce.

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