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 Sept. 23, 2005 | Vol 4 No 17 |
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In this issue of Spotlight on The Region: – The Implications of Higher Gas Prices – Calendar
How can this be? The difference derives from how each state collects the tax. In New Jersey, the state collects a static number of cents per gallon, known more technically as an excise tax. The state gains revenue only when more gallons are sold. Since higher prices usually lead to lower sales, they also lead to lower tax revenue for the state. New York, on the other hand, has a sales tax in addition to an excise tax. It also loses some revenue when fewer gallons are sold, but it gains revenue whenever the price of gas goes up. Gallon for gallon, New York’s 8.4% sales tax is collecting more now with the base price of gas near $3.00 than it was a year ago when it was applied to $1.50. (Connecticut has a sales tax at the wholesale level.) Even if prices drop, these trends will be exacerbated as cars become more fuel efficient. Which of these states has the better system of taxation, not only in terms of raising money in the short term, but in being fair to the public? Stepping back a bit, can their approaches point us to better long-term ways to fund transportation that are stable, fair and versatile? It’s clear that the higher revenue New York is receiving has raised some concern. Some Albany legislators have talked of tempering prices by capping the state sales tax so that it applies only to the first $2.00 of the base price of gas. Others in Albany have suggested spending the ‘extra’ tax revenue on relief for fixed-income and lower-income households. Meanwhile in Trenton, where lower-than-usual tax revenue can be expected if drivers use fewer gallons of gas, new revenue sources are desperately needed by next summer to keep both NJ DOT projects and NJ TRANSIT afloat. With the third lowest gas tax in the nation, New Jersey legislators might have considered a gas tax increase, or even better, adding a sales tax for gas. However, with prices at the pump as high as they are, many would consider it politically unfeasible to push for a gas tax hike. In examining such an option, it’s helpful to note that there is not a clear relationship between higher gas taxes and higher prices at the pump. First of all, gas and oil companies, in an open market, charge as much as they can to maximize profit, based not only on international and national factors, but more localized factors as well. This helps explain why New Jersey’s gas prices are still some of the highest in the nation, even though its gas taxes are some of the lowest. New Jersey drivers, overall, earn more than drivers in, say, Nebraska, where gas taxes are relatively high but gas prices are much lower. New Jersey also receives traffic from surrounding wealthy states that happen to have the highest gas taxes in the nation. Therefore, its prices stay high even as the state receives less and less tax revenue to fund highway and bridge improvements and transit expansion. All this explains why raising New Jersey’s gas taxes, perhaps by adding a sales tax, probably would not raise its gas prices by the same magnitude. It’s reasonable to be concerned about the chance of forcing gas prices even higher than they are now. At the consumer level, gas prices have a much greater impact on people who are dependent on their cars for transportation and those with lower incomes. According to the Bureau of Labor Statistics from 2003, those earning less than $20,000 per year spend $600 to $900 annually on gasoline, or at least 5% of their income. Those earning over $100,000 per year, on the other hand, spend about $2,000 on gas, or less than 2% of their income. When updated information is available, it will likely show that the greatest relative impact of the gas price surge has been on lower income household budgets. More equitable ways of funding transportation can and must be found in the long term. States already use a variety of taxation methods. New York, for example, uses part of a tax collected on real estate transfers to pay for public transportation. Many states, in our region and around the country, use the general sales tax, corporate business taxes, motor vehicle registration fees and a wide variety of other revenue raisers to pay for transportation. But none of these is perfect. Economists often favor replacing the gas tax with a more direct user fee: a cents-per-mile charge, preferably changing by time of day and route to control congestion. This would entail an onboard or odometer-fed device that measures how far you travel and charges you accordingly. The technology is being tested in Washington State. Some highways already effectively work this way. Overhead gantries make it possible to dynamically charge drivers with E-ZPass-like transponders according to how far they’ve driven; prices are adjusted according to the level of congestion as a means of easing traffic. Regardless of how we might pay to use our cars and the roads, chances are we will all be paying more in the future. Auto dependence is expensive, and it’s hard to find a way to pay for it that’s not regressive. That’s why it’s vital to choose the right investments. This region should focus on improving the accessibility and capacity of its transit-oriented places. There are three large scale projects that would go a long way toward accomplishing that goal: the Second Avenue Subway, a Long Island Railroad connection to Grand Central Terminal, and a new passenger rail tunnel under the Hudson. At the same time, more mixed-use development should be focused on transit villages in towns along train lines in Long Island, Connecticut, the Hudson Valley and New Jersey. We should also be investing in bus rapid transit, shared car programs and other ways to use the existing roads more efficiently. To do all these, states can consider funding mechanisms that generate a pool of transportation dollars that can be used for either roads or transit, wherever the priorities are. Clearly people would like to live in a place where they don’t have to pay so much for gas. But the answer is not to lower gas taxes. As we can see in the table above, lower taxes don’t necessarily mean much lower prices, and prices will go up eventually. The answer is to build places and transportation systems where people can live without having to use as much gas. – Alexis Perrotta, Senior Policy Analyst But can America routinely build light, airy bridges that cross streams or gorges beautifully and sturdily, like Germany? Build high speed train lines like France, or giant gates that shut out the sea, like Holland? Set up a universal tolling system that allows trucks to travel without using toll gates, like Switzerland? So far, the answer is “No,” or at least, “Not yet.” It’s clear that this country now routinely lags behind Europe and Asia in the construction of advanced infrastructure systems. Americans like to think of their country as excelling in everything, but many of the nation’s roads, bridges and general infrastructure have a kind of crudity that is shocking for such an advanced and rich country. In recent decades, examples have proliferated. It’s no longer a question as to whether we lag behind, but how far. China, still a developing nation, is building a high-speed, high altitude train with a pressurized cabin, like a jet. The Malmo-Copenhagen bridge that arcs from Denmark to Sweden, the Chunnel between England and France, and simply the average automobile tunnel or pedestrian escalator in Western Europe are routinely more refined than in this country. Although we are a wealthy nation, our relatively poor infrastructure systems make the quality of life poorer in many respects for the average citizen. This is particularly true when disaster strikes. A front page New York Times story on Wednesday by Christopher Drew and Andrew Revkin suggests that the levees failed around New Orleans principally because they were poorly installed and designed, not because of unexpected wind and water. Hurricane Katrina, although a category four to five storm overall, did not directly hit New Orleans and its winds near the levees did not exceed 100 mph, the authors said. Such winds were substantially below the Category 3 specifications of the levees. Although the story was a great example of hard-hitting journalism, the photograph that accompanied it said a lot in even fewer words. A broken concrete flood wall shown next to a canal looked more like sections of the infamous Jersey barriers had been plopped down next to a river bank than an advanced infrastructure system. If the United States lags in its infrastructure – and to me there is no question that it does – than the natural question is, Why? One reason is that we as a nation resist higher levels of taxation. The percentage of our economy dedicated to government expenditures is among the lowest of any industrialized country. So things are often done on the cheap, if at all, even though this ultimately costs us money. In Louisiana, the failure to spend around $10 billion to strengthen levees and control the Mississippi River means that the federal government is now contemplating spending up to $200 billion to rebuild New Orleans and other affected areas. And this doesn’t include the huge costs that insurance companies and private businesses and residents will incur. But less taxation isn’t the only reason. A full investigation would delve into things like our procurement systems, which favor the lowest bidder rather than the most skilled. Fitting in with this is a general lack of respect for skilled, blue-collar labor. This shows in our education and training systems. Although this country has probably the best higher education system in the world at the top levels, it’s not as good at churning out highly trained and highly-paid mid level engineers, technicians and skilled laborers that would erect a bridge or build a road or levee. The workers who construct the light airy bridges common around Europe are highly skilled, and highly paid. In the United States the more brutish concrete slab and heavy steel bridges are the default option in part because we lack the workers with enough training to do something more subtle. It appears we are paying a price for our education system and an economy that is tilted toward winner-take-all outcomes. If true, this is sobering because such problems are not changed easily. They take decades to fix. Such questions are of particular concern to the Tri-State Region. We have the most infrastructure intensive region in the country, and our prosperity depends in the long run on upgrading that infrastructure. Our cities don’t have levees like New Orleans’, although we may need some additional storm protection, but our train system, bridges and water pipes keep our region humming and prosperous and need to be continually maintained and upgraded. As Hurricane Rita prepares to strike the Gulf Coast, our capacity to construct top quality infrastructure of all types is something to consider. – Alex Marshall, Editor, Spotlight on The Region. With the plans for the World Trade Center site embroiled in controversy and delay yet again, this time over plans for the International Freedom Center, it’s perhaps a good time to step back and see how we arrived at this place. Fortunately, Paul Goldberger’s book, Up From Zero: Politics, Architecture and The Rebuilding of New York, was released in paperback this month. Adapted from Goldberger’s articles in The New Yorker that first appeared during the passionate and chaotic times following the attacks of Sept. 11, 2001, the narrative about the efforts to come up with a plan for this contested ground holds up surprisingly well. Goldberger’s dry, dispassionate style, which during the heat of the moment sometimes comes off as overly removed, is well suited to assuredly guiding a reader through the events now that some time has passed and some perspective has been achieved. It prompts the reader to review his own thoughts and positions on the plan. To briefly review: after the attacks, the entire city and region, and at times the entire world, was committed that the World Trade Center site should be rebuilt, that it should be better than before, that it should memorialize the thousands who died there, and that it should be a physical symbol of the city’s and nation’s resilience against the attacks by Islamic fundamentalists. But what exactly does that mean? Opinions varied, to say the least. Goldberger leads a reader through the initial urban design plans presented by the architecture firm of Beyer, Blinder, Belle; the immense Listening to The City event that sparked an overhaul of the process; and the State’s subsequent decision to call in a Dream Team of star architects, ranging from Richard Meier to Norman Foster, to essentially compete to create the best design (all the while essentially ignoring demands to re-examine the program). This culminated with the presentation of designs at the Winter Garden in December 2002, when architect Daniel Libeskind pulled away from the pack and set on a course to being selected as master planner for the site. I was at the Winter Garden that day, and I can testify to the rush of emotion and applause that greeted Libeskind’s presentation and his physical model. He clearly was “the winner” that day, if one had to be selected. Libeskind’s form and plan seemed the most audacious and stirring. But after reading Up From Zero, and knowing the difficulties Libeskind’s design has encountered, I found myself regretting that the design of Rafael Viñoly and Frederic Schwartz was not chosen, which vied with Libeskind’s plan for selection until Gov. Pataki made a choice. The centerpiece of the Viñoly-Schwartz plan, at least initially, was two tall, lattice-work towers that would rise from the site and be essentially ornamental and symbolic, and completely public. The private office buildings with their 10 million square feet would be left to another portion the site, and perhaps for another time, when the office sector rebounded. Such a plan would have avoided the controversies that have plagued Libeskind’s and David Childs’ Freedom Tower, which must double as a symbol and a giant office tower. Although meant to symbolize freedom and openness, the base of the tower was recently redesigned to resemble a windowless battle-hardened bunker to withstand a terrorist blast. The Viñoly plan also did not include the International Freedom Center, although perhaps some other element just as controversial would have materialized. All this is hindsight. But whatever happens with the plans at Ground Zero, it’s clear it will be very different than what the original cover of Up From Zero shows, which is the Freedom Tower slicing into the air, surrounded by flanking towers with sloping roofs, and the Statue of Liberty off to one side of the skyline. It seems significant that the cover design of the paperback edition of Up From Zero, just released in September, no longer shows the Freedom Tower but instead has opted to show the current skyline of Lower Manhattan with the addition of two beams of light representing the twin towers and their absence. “It is clear that whatever is built on the sixteen acres of Ground Zero was to carry a symbolic weight far greater than that of any other building project of our time,” Goldberger says in the Preface of Up From Zero. Carrying such weight successfully is proving to be quite a challenge indeed. – Alex Marshall is editor of Spotlight on The Region. Questions Or Comments On What’s In This Issue? Send Them To The Editor Of Spotlight On The Region, Alex Marshall At alex@rpa.org
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October 19 October 19th, 20th and November 7th
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Spotlight on The Region A publication of Regional Plan Association, Robert Yaro, President, Alex Marshall, Senior Editor 212-253-2727, x360 alex@rpa.org www.rpa.org |
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