A Stitch in Haste

To review: Mass transit is not a pure public good, since it is perfectly excludable. It may be a natural monopoly, and it may be a club good, but that would only suggest rate regulation or at most public provision — not taxpayer subsidization. Those who use a subway line or commuter train — and only those who use it — should pay for it. If “the poor” are a concern, then they can be issued means-tested vouchers.

New York State’s perpetually mismanaged Metropolitan Transportation Authority, along with its bought-and-paid-for lackeys in Albany, are unfortunately now leapfrogging even further away from this rudimentary principle of fiscal propriety:

The regional mobility tax — 33 cents on every $100 of payroll — would provide $1.5 billion a year, and the tolls would produce $600 million in net revenue a year ($1 billion a year in gross revenue minus expenses)[.] The new revenue streams would help finance borrowing for a $30 billion-to-$35 billion M.T.A. capital plan for 2010 to 2014 that would help stimulate the economy while maintaining vital infrastructure.

Read that again: A bureaucrat is actually brazen enough to suggest that imposing a new tax “would help stimulate the economy.” The Great Liberal Delusion™: that an economy can ever tax its way into prosperity.

And not just any tax — a payroll tax. A tax that specifically targets the working poor that New York’s off-the-scale liberals pretend to care about (in much the same way that Washington’s off-the-scale liberals pretend to care about the working poor when they cheer on Social Security).

Be sure to reject outright of course any flunk-the-final insistence that “businesses will pay the tax and not workers.” Businesses never pay taxes; they only remit them. Only individuals pay taxes — either through higher prices, lower wages or reduced profits. With a payroll tax, that burden of course falls on the workers. To help “stimulate” them. Somehow.

The other fraud that apologists are foisting upon the economically illiterate is that this disconnected payroll tax is justified by the future growth that expanding and improving mass transit will generate. Consider the ever-reliable defenders of ever more and ever bigger tax-and-spend governance — the New York Times editorial board:

The cost of a vibrant city, fed by its daily influx of commuters, should be shared by others who benefit. That means drivers, who face less traffic because so many other people leave their cars at home. And businesses that can draw employees from across the metropolitan area should also contribute.

Again, a city cannot tax itself into “vibrancy” and businesses will not “contribute” the new payroll tax — employees will.

But there is another aspect to this con, a sort of intertemporal bait-and-switch. If expanding or improving mass transit makes a city more “vibrant” tomorrow, or allows a business to attract more customers tomorrow, then government revenues should increase — tomorrow. More people riding subways and buses means more fares paid, more business means more sales taxes and business taxes, more employment means more income taxes. Tomorrow. So overlaying an entirely new tax today, based on (purported) benefits tomorrow, is simply illegitimate — because those (purported) benefits will now be taxed twice: today via the new payroll tax and tomorrow via the boring old taxes that we already know and hate.

In conclusion, let’s go back to the Times and first principles:

Almost every commuter recognizes that a fare increase is inevitable, but [a 23% increase] is unnecessarily onerous.

Why is it “especially onerous” to expect those who use infrastructure to be the ones who pay for it? Raising the subway and bus fare from the current $2 to $3 would be a 50% increase — and yet still far from “onerous.” (Again, if the concern is the poor, then the answer is means-tested vouchers, not new taxes that transfer wealth from all non-users, including the poor, to all users, including the non-poor. It’s absurd.)

Previously:
–Who Should Pay for Mass Transit? (Part One)
–Who Should Pay for Mass Transit? (Part Two)
–If You Don’t Live in NYC…
–Why Should There Be Municipal Golf Courses?
–Are Public Libraries Really Public Goods?

Filed under: Economics & Finance, New York City & State, Public Goods v. Private Goods