Temperature Check: Massachusetts, Still Crazy Liberal

Deval Patrick - crazy bad idea.

Scott Brown, semi-Republican Senator from Massachusetts created a glimmer of hope for conservatives that even in a very liberal state, common fiscal sense might be starting to take hold.  But after a recent temperature check, Massachusetts is still crazy liberal, or at least Governor Patrick is. You may have already suspected that but as confirmation, there's a news story about a new Massachusetts mileage tax.

This story came to my attention via a new Facebook contact whose name I won't mention because I haven't gotten permission to do so.

Ignoring the slippery slope argument for now, and ignoring the invasion of privacy issue for now, and ignoring the taxation versus reducing spending issue for now, and forgetting the fact that this is just another insidious way to attempt to control people's behavior by pushing them away from automobile travel and towards public or mass transit of some sort, there's still economic reason NOT to pursue this idea.

Firstly, it's claimed to be a fairer tax.  The more you drive in distance the higher the mileage tax you would pay.  Sounds fair right?  Wrong.  What this amounts to is yet another redistribution of wealth from certain groups to other groups, even outside the realm of the taxation.  The fact that taxation moves from consumption to miles means that those who are required to drive further for their commute to work, will of course be taxed at a higher rate than those who live closer to their work*.  In effect, it is a transfer of wealth from suburban and rural areas to cities.  In other words, a 'progressive' wealth transfer from higher median income suburban areas to lower income city inhabitants, as well as those who can pay exorbitant condo prices and fees in high end urban areas.  Liberals love to give them tax breaks...

It also penalizes rural citizens of the state for whom everything tends to be further away - from stores to hospitals to schools to gas stations - and require more travel to reach.  It is not coincidental that rural and suburban voters tend to be more conservative than their urban counterparts, so in a sense it is also a wealth transfer from conservatives to liberals*.  Perhaps an unintended consequence would be that this helps drive rural, suburban and ex-urban people to find more local employment, thereby shifting the workforce dynamic and also the face of the business community in the state.  That sort of effect wouldn't happen overnight, but it is quite possible there would be long term deleterious effects on the make-up of everything from cities to small communities.

Of course a mileage tax in that sense would be no different from a gas price tax as more distance naturally will require more gas and therefore generate more tax*.  The taxation is already re-distributive, but it would become more visible and more likely to have those unintended consequences.

Another way to think about it is in terms of fuel efficiency.  As the story mentions cars are becoming more fuel efficient which is reducing gasoline usage and therefore reducing taxes collected from that source. But this program would work to negate the fuel efficiency efforts of environmentalists (which is a discussion for another time).  Having pushed people to get more fuel efficient cars (through efforts like the federal cash for clunkers program) the government of Massachusetts is now penalizing those who have tried to get more fuel efficient vehicles by replacing the gas tax with a mileage tax.  Some of the benefit for having made that efficiency shift, and likely taking on new debt in the process, would be negated by this program. It's bait and switch governance.

Lastly, what about special consideration for taxi drivers, pizza delivery guys, florists, FedEx, car rental places and the like?  Do they get special exemptions because their business is dependent on mileage?  Will Governor Patrick create a tax that imposes on consumers and not business? Or do certain businesses get an exemption thereby furthering the wealth transfer and creating a multi-tier system much like Obamacare and all its exemptions? Or do those (or all) businesses absorb the tax and then absorb the resulting decrease in business as their costs rise and they are forced to pass on the cost to consumers.

When it is cheaper to do business out of state, what do you expect the effect will be?  And it will be cheaper to do business out of state because this IS going to be a tax increase.  Why?  Because faced with declining revenues caused by fuel efficiency the governor is looking to replace that lost tax revenue.  Meaning they will collect more tax.  That is by definition a tax increase.  

For that matter what happens with travel out-of-state?  Is that subject to the mileage taxation as well as gas taxes imposed by other states?  That hardly seems fair. And if not, how will it be tracked?  The  news story indicated that where travel occurs would not be done, only total mileage. 

There are so many objectionable issues with this idea that getting to the slippery slope issue, or invasion of privacy, or any of the gut-level reaction to government over-reach arguments.  There is NO WAY this idea should see the light of day, but this is still Massachusetts and I'm not holding my breath that sanity will prevail.

*Because it amounts to a tax increase (see above), it means that it has a bigger transfer effect than an existing gas tax.