New Sales Tax Hike for Transit Doesn’t Add Up for Taxpayers

http://www.dreamstime.com/-image18514272Math is a funny thing.

Take averaging, for example. Mark Twain observed that if you have one foot in a bucket of ice and one foot in a bucket of boiling water, on average you’re pretty comfortable.

Similarly, consider subtraction. Somehow, government officials have calculated that subtracting money from your wallet for taxes actually puts more money in your pocket.

That’s the conclusion of a recent study of the economic effects of Measure R, the 2008 increase in the L.A. County sales tax of one-half of one percent to fund transportation projects.

The Los Angeles County Economic Development Corporation determined that over its 30-year lifespan, the Measure R sales tax will create $80.7 billion in economic output while costing each resident just $25 a year in higher taxes.

The Society of American Magicians prohibits them from revealing how this trick is done, but they can’t stop me from exposing the secret.

It’s done with mirrors. A typical dollar spent by the Los Angeles County Metropolitan Transportation Authority (Metro) is counted three times: once when Metro hands it to a contractor, once when the contractor hands it to a union construction worker, and once when the worker spends it on rent, food, car payments or entertainment. They call these reflections the “direct,” “indirect” and “induced” effects of spending.

This “multiplier effect” would work if the money spent by Metro was earned by Metro. But it’s not. It’s earned by you, and then taken from you with a higher sales tax.

The study uses another trick, division, to determine that this higher tax costs each resident only $25 per year. Using multiplication instead, the 30-year cost of Measure R comes out to $3,000 for a family of four.

Figured another way, if the 10 million residents of L.A. County didn’t have to pay that $25 per year in extra taxes, they would have an extra $250 million annually, $7.5 billion over 30 years, to spend on whatever they personally find useful. Add the multiplier effect to those numbers, without government middlemen, for a true picture of what’s lost to higher taxes.

Now Metro wants taxpayers to cough up another $120 billion for more transit projects. The money would come from adding more years to the 30-year Measure R tax and hiking the sales tax by another half-cent per dollar, raising L.A. County’s sales tax rate to 9.5 percent for 40 years.

The transit agency would then borrow against the future sales tax revenues to start spending the $120 billion immediately.

Just how much is $120 billion?

It’s enough to pay for the repairs and deferred maintenance of every freeway in California for the next 10 years, twice.

It’s enough to build 120 desalinization plants like the one in Carlsbad that’s supplying 7 percent of San Diego’s water.

It’s enough to pay off the student debt of everyone who was enrolled in a four-year college or university in California in 2014. Seven times.

But Metro wants to spend $120 billion on a long list of public transit projects, even though ridership on public transit is declining. Metro boardings are down 10 percent since 2006 despite $9 billion of spending on rail.

Metro CEO Philip Washington says ridership will increase when the system is fully built out. “We’re not building for today,” he said recently, “We’re building for 100 years down the road.”

A hundred years ago, a telephone looked like a black candlestick. It didn’t have GPS or a camera. It didn’t have a keypad, or a dial, or Angry Birds. It didn’t even have a ringtone unless you count the bell in the box on the wall.

If the people of 1916 had designed a communications system for “100 years down the road” and racked up $120 billion in debt to pay for it, we’d still be paying taxes for something that was long gone; and we’d be wondering why our taxes are so high, and why there’s never enough money for road repair or water projects or education.

That’s what happens when governments run up too much debt, as ours already have—local, state and federal alike.

Multiply that by your children’s future, and then by your grandchildren’s future.

And when you see Metro’s sales tax increase for transit projects on your November ballot, don’t get taken for a ride.

Comments

  1. It is really simple. If you see a bond measure, any bond measure on any ballot vote NO. It is a rip off.

  2. askeptic says

    Did they ever repeal that telephone tax that was supposed to pay off the debt from the Spanish-American War?

  3. John Wirts says

    I say anyone who wants to raise a tax, should have to show a definitive plan to include the environmental impact study, time and cost for the study. It should pin down the exact cost of, and time to complete the project, the author(s) of the tax proposal should have to purchase a surety bond to cover any cost or time over runs, and assure that the taxpayer will not have to bail out this “self sustaining project! If the author is a bought and paid for shill, any attempt to postpone the agreed upon completion date or raise the agreed upon cost of the project, should result in immediate dismissal and charges of embezzlement, and conflict of interest should be pursued.

  4. Steve Ly says

    The same nonsense is going on in Santa Clara County, where the corrupt crony capitalists are joining up with the politicians to put another sales tax increase on the ballot, despite the fact that voters have already approved three transportation sales tax measures.

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