Problems With Pothole Repair Act

Sales tax falls heavier on low-income transit users, but bars any spending on transit.

By , Wisconsin Budget Project - Jan 20th, 2016 11:48 am
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Brick pavers are exposed as the asphalt has crumbled away. Photo by Jeramey Jannene.

Brick pavers are exposed as the asphalt has crumbled away. Photo by Jeramey Jannene.

Proposed legislation to fix local road repairs is a bad deal for poor Wisconsinites who don’t have cars. The proposal would authorize a sales tax increase that would fall more heavily on poorer Wisconsinites because the sales tax takes a higher percentage of their income. What makes that particularly inequitable is that the bill precludes using any of the new revenue for transit (e.g. bus and van service).

The bill in question, AB 210, would create a local option for a 0.5% increase in the sales tax – under the following conditions:

  • A county could institute the tax only if it is approved by a local referendum (in a regular spring election or fall general election).
  • The new revenue would be shared with all cities, towns and villages in the county, and it could only be used for maintaining, repairing and constructing roads, streets and highways.
  • The tax would be place for four years, at which point it would have to be extended by another referendum.

In a recent Urban Milwaukee column, Steven Walters discusses the bill and describes it as the “pothole repair act,” which I think is a pretty good description – although the allowable purposes were expanded in Assembly Substitute Amendment 2 to include road and highway construction, as well as repairs. Walters explains that the bill appears to have broad, bipartisan support. In fact, it was unanimously recommended by an Assembly committee.

Funding for local services, including road repairs has been squeezed from many directions, including cuts in Shared Revenue, state-imposed limits on property taxes, a long freeze on the gas tax, and increased spending for highway construction. With that in mind, it’s not hard to understand the support for a bill that would give voters the option of approving a new source of funding for local transportation spending.

On the other hand, there a couple of significant areas of concern about AB 210 that have been raised by advocates for disadvantaged Wisconsinites and the environment:

  • The sales tax falls disproportionately on low-income Wisconsinites.
  • The bill doesn’t allow any of the new revenue to be used for transit – which means that low-income transit users would get little or no benefit from the tax increase.
  • In contrast to an increase in the gas tax, the increased sales tax isn’t a user fee and will fail to discourage energy use.

Optimally, I think any increase in funding for road repairs (and especially for construction) should come from a user fee – preferably a small increase in the gas tax. At a time when we need to take steps to discourage energy consumption in order to reduce global warming, increasing the gas tax and boosting financial assistance for transit would be much more appropriate fiscal choices.  But if legislators are intent upon approving the sales tax option, at the very least they should amend the bill to give local governments the discretion to use the new revenue to make investments in transit services.

WISDOM, which is a faith-based group that works on social justice issues, made the following points in a recent action alert asking legislators to oppose AB 210 unless local governments are given the option to use some of the new funding for transit purposes:

Transit funding was cut by 10% in the 2012-14 state budget, which resulted in the end of some bus routes, shorter service hours and in some communities, a complete loss of transit service. The problem was made even greater when the state reduced shared revenue to local communities, leaving them with less capacity to support their local systems.

I suspect that some conservative legislators will vote against AB 210 because they won’t support a bill authorizing any sort of tax increase – even one that simply gives voters the authority to approve a local revenue source. If that assessment is correct, progressive legislators might have leverage to insist on modest changes that make AB 210 a better bill.

I hope legislators in both parties will agree with me and WISDOM that the bill should not be enacted unless it is amended to allow local governments to use the new revenue for transit.

8 thoughts on “Problems With Pothole Repair Act”

  1. Tim says:

    We know from commuting patterns that many well heeled people that live in some of the wealthiest counties in the state of WI (Waukesha/Ozaukee), work in Milwaukee county. I’m guessing many of those same people do much shopping in Milwaukee county as well; how much of this income will come from outside the county?

    WI doesn’t have high taxes. It has an over reliance on property taxes and road spending. We don’t need to increase road spending to reduce Milwaukee county’s reliance on the property tax while sticking the cost (rightfully) to visitors from other counties that shop here.

  2. Jeremy says:

    Although this new revenue can’t be used for transit, it would free up other funds for redirection back into the transit systems (if said counties already have one). Most transit systems are subsidized by the tax levy ($20 million in Milwaukee County) which is probably not being paid by those in the lowest income brackets now. The real question will be if the state incrementally reduces the local transit aids by the amount of money raised by the new sales tax.

  3. Tom D says:

    @Jeremy (post 2), according to Steven Walters’ piece, this new money could NOT free up other money for transit. Specifically:

    “Counties and local governments getting aid from the surtax could not use it to reduce what they now spend on those programs. A ‘maintenance of effort’ provision in the bill requires local governments to keep spending an amount equal to the average of what they have spent over the past five years.”

  4. Tim says:

    Tom D, if the property tax levy is currently X. Then the new sales tax adds more funding for roads, which replaces the existing property tax levy used for roads, the the levy is now X minus sales tax.

    Now, the county could raise additional funds while keeping the tax levy at or below X.

    The statement you quoted is to convince brain dead conservatives to allow a tax increase. As usual, simple math makes them look stupid.

  5. blurondo says:

    Previously posted on Steve Walters’ piece:
    This is the chicken shit way the state government can avoid the blame for raising the gas tax which is how money for roads should be raised. They’ll just lay the blame on local governments and have people who purchase goods and services pay for them instead of people who use the roads.

  6. AG says:

    I like so much about this bill.

    It’s locally collected and locally spent
    It’s limited
    It’s temporary
    It’s authorized by the voters
    It doesn’t tax necessary things like nutritious food, housing, utilities, or gasoline… things which many poor can not avoid paying for
    Suburbanites will directly pay for the roads they use in the city whenever they make purchases in the area

    Unfortunately, I think not allowing some portion of the funds to go towards mass transit is short sighted.

  7. Can this be used to build bike infrastructure? I mean bike lanes are part of the street, not a service like transit.

  8. Tom D says:

    Tim (post 4):

    Under “Assembly Substitute Amendment 2” (which passed 13-0 in committee and is now apparently part of the bill):

    “Each local government must expend for the purposes of maintaining, repairing, and constructing roads, streets, and highways no less than an amount equal to the average of the amount it spent for such purposes in the previous five years from revenue other than the new tax, plus the average of the amount of tax revenue received under the bill.”

    As I read this, the new sales tax money must be used IN ADDITION to what that government has spent on highways (over the last 5 years). This would mean that the new money CANNOT be used to free up tax levy funds for non-road purposes.

    source: http://docs.legis.wisconsin.gov/2015/related/lcamendmemo/ab210.pdf

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