Texas Sales and Use Tax Revenue for Transportation Amendment, Proposition 7

This is part of the series of posts where I struggle to understand and think through the 7 proposed amendments to the Texas Constitution that we can vote on 11/3.

Ballot Title

The constitutional amendment dedicating certain sales and use tax revenue and motor vehicle sales, use, and rental tax revenue to the state highway fund to provide funding for nontolled roads and the reduction of certain transportation-related debt.

Helpful Links

• Ballotpedia
• Page 39 of the "Analyses of Proposed Constitutional Amendments" by the Texas Legislative Council
• Page 17 of the 2015 ballot "focus report" by the Texas House of Representatives
• Page 4 of progresstexas.org's ballot guide (for a progressive perspective)
• Page 7 of the Texas Libertarian 2015 Voter Guide (for a libertarian perspective)
• This analysis by the "Center for Public Policy Priorities"
• This Texas Tribune article

What does this do?

Overly-simple summary: it requires a portion of general tax revenue to go toward roads for the next 10 years.

Currently, roads are primarily funded through gas taxes rather than other taxes. This has the benefit of, to some extent, targeting the tax toward people who use the roads more, as well as encouraging less traffic and gas consumption. But since fuel efficiency for many cars has gone way up, current levels of the gas tax are no longer sufficient to fund state highways. So if we were to keep using our gas taxes in this way, the rates would need to be raised, and most state politicians do not want to sign any kind of tax rate increase into law. To avoid that, Texas has been building up some debt for highway work. This amendment seeks to divert existing general tax revenue toward highways so that we can pay for what we need without having to raise the gas tax.

The first question that came to my mind was: why this strange constitutional amendment forcing them to dedicate a portion to highways in this way for a while, when they can just choose to divert those funds in this way year-by-year? But from what I can tell, there's actually a fairly good reason for that. Most highway work requires years of funding to be dedicated to a project, so it's good to have something that forces the revenue to be consistent.

Why would this be good or bad?

To know the practical effect of the law, we'd need to compare it to what would happen if this law did not get approved. Basically, there would be a portion of general tax revenue that would be free to do something else, which leads to a few different possibilities:

• They may simply fund highways in this way anyway in year-to-year budget. This would be less desirable due to the uncertainty of a steady revenue stream, as I explained a bit earlier. But it probably wouldn't be too bad, and I'm guessing this is the most likely alternative.
• They may have to raise gas taxes (and maybe raise other transportation fees) to pay instead. IMO this would be better. Because not only do we need more and better highways for our growing population, but paying for them with gas taxes gives extra incentive to drive less, which solves our problem at both ends: we'd need to pay for less road work if people drive less. Taxes on gas are also a classic example of Pigovian taxation, and I'd like to shift more of our tax burden onto pollutants for that reason.
• Or, they may simply not increase funding for highways. My basic understanding is that this would definitely be bad: we are building up debt in that area that needs to be paid off, and we really do have increasing needs here as our population rapidly grows without the gas tax paying for as much as it used to.
• For the last two possibilities, it would leave open the question of what is done with the general tax revenue that would otherwise go to highways? That also needs to be considered:
• They may cut general taxes. This seems likely given the ideology of our state, and especially if they are left having to raise gas taxes or fees in some way, a cut in other taxes would be the only way the politicians may be able to save face.
• They could fund something else. The two other major areas of state government spending are health care (medicaid) and education:
• Texas spends the absolute minimum on medicaid, and at the margin extra spending would receive additional federal funding, so arguably there's a lot of bang-for-buck here. But I think there's no chance our state government will increase medicaid funding.
• More likely (but I would guess less likely than tax cuts), the money could be used on education. But I would argue we shouldn't expect much benefit per extra dollar here, because despite conventional wisdom, once you adjust for demographics, Texas ranks very highly in education. And that should make us skeptical that we have a lot room for improvement.

Verdict

I am undecided-leaning-no.

Basically, I do think we need increase state road funding. I want to vote yes to the extent that it would make sure that happens. But I'd prefer to vote no to the extent that it encourages them to fund it differently (I very much think gas taxes should pay for it).

What would it take to change my mind?

It really comes down to how much likelihood we should assign to the alternatives, and honestly I don't have a good idea of how to do that accurately. So solid data toward that end could easily cause me to choose one way or the other.