Friday, January 18, 2013

On Raising Massachusetts Revenues.

We check the forecast before traveling - Will we need an umbrella? When one makes plans, it's good to have an idea of the situation that plan will probably deal with. Mass. Governor Patrick's 2013 budget and transportation plans are built on some assumptions of how the future will be. There are projections of how much we will drive our cars, how much we will work, earn and spend, etc. To plan, we make assumptions about fuel prices and use, about employment, wages and interest rates, and about weather. If these are stated, we can discuss how these projections were created, how they match what we know of today's world and how it's changing. A ten year transportation plan expecting yesteryear's fuel prices would be like sunglasses for a rainstorm. "The Way Forward:" must have an expectation in mind of what the future will be like, but it's unstated in these plans. What's the forecast?
Usually we assume things will continue as they have been. But our future will not be like our past, because of what's going on in the rest of the world, where increasing numbers of people are earning and spending increasing amounts of money, and using increasing amounts of resources, emitting increasing amounts of carbon into air, increasingly altering the climate we rely on for our agriculture and food supply.
Our future in Massachusetts, the one we'll be traveling in, will either have rapidly weirding weather or rapidly rising fossil fuel prices, and probably both.
How would we respond to European-level transport fuel prices? Would we drive as much, or would we move closer to work, or work from home?
How will higher fuel prices affect the transport choices we make? Will we choose public transport instead of our cars, and to what extent?
These are difficult questions, but ignoring them won't help us plan well. It would be tragic if we fixed roads with borrowed money, only to find that we can not afford to use them as planned, because we can not afford to drive private cars as much as we do now. What we spend on new roads could be spent on new buses, or on new business's equipment.

Together, we, the people of Massachusetts, have made our home state a nice place. Hence most people moving or living here really want to buy land here. 'Location, location, location' they say, controls real estate value. That location is in relation to the rest of us, and in relation to the communities we've built together. It is that location that gives most market value to land, and it is that location which our communities made valuable in the first place. Returning a portion of the market value we have created through our communities to maintain our communities makes sense. A state tax on land purchases would return a portion of the value we created when we built these fine communities.
We tax retail sales at the state level, yet we haven't taxed real estate sales statewide. It's only fair that we tax purchases of the rich as well as purchases of the poor, if we are to tax purchases at all. The proposed 4.5 percent sales tax, applied to real estate sales, would generate about $1.5 billion, so state revenues would increase about 1/30th.

Outer space, where we can not breath, is closer to us on earth than Dorchester is to Medford. With only about 7.5 miles of air above us, and about 400 ppm of CO2 now in our air, there is no longer airspace above earth for all the carbon in the fuels we could burn. We need to encourage each other to burn less, so as to maintain the climate, the agricultural systems and thus the food we all rely on. Those before us, to eliminate labor, substituted energy resources, which was brilliant in a world empty of people and full of resources, but now we're running out of resources and have plenty of labor. It now makes more sense to use more plentiful labor and less rare resources, which will yield less pollution and more jobs.
Nothing says 'Slow down' like taxes. A carbon tax will encourage all of us to develop the methods and the equipment all the world will need tomorrow, for our food system to continue to yield our meals. So a state carbon tax can prepare our state to supply the world tomorrow with exports of goods and services. Carbon taxes inspire this needed change in technology to proceed faster, preserving resources, jobs and the environment. In Massachusetts, we each release about 14 tons of carbon dioxide per person per year. If taxed at $30/ton, as in British Colombia now, state carbon tax revenues would be raised by about $2.6 billion/year, or about a twentieth of existing state revenues.

These two new taxes would add about $4.1 billion to state revenues, about as much as higher ed. state revenues. These revenues would be relatively easy to collect. There are but a few sources of carbon entering Massachusetts; coal, natural gas, motor fuel etc. And real estate transfers are clear through county deed records.

As Massachusetts transitions to a more carbon-efficient future, access to public transit will be increasingly valued. One of the leading ways public transit is valued is through increases in real estate value due to nearby public transit access. This value increase is not due to the actions of the individual owner, but to the community's actions, is fair to tax, and taxing this neighborhood increase in value can pay for all or some of the cost of extending public transit into new neighborhoods.
To do this, laws forming special tax districts surrounding newly transit-served neighborhoods would pass, so land value increases occurring as new public transit arrives would be taxed.

 Brian Cady

No comments: