General Road and Highway Discussion

[p2ee]

Oh we're back to the silly argument where a lot of people pay a bunch of money for roads, but we don't count that money because that's in their role as "tax payer" and not as their role of "car driver".  Maybe that explains those times when I just can't get to sleep.  I bet "tax payer" me is just really angry at "road user" me because "tax payer" me is so heavily subsidizing "road user" me.

I wasn't aware this discussion had already happened. 

I just can't understand the logic behind not counting the HST on gas and on vehicle purchase.  What do people propose the HST currently generated by gas and vehicle purchase be replaced with?    That money isn't coming from nowhere, is it?  So government decides to spend it on other things besides roads.  If that HST revenue did not exist, what would be paying for those "other things"?

[tomh009]

p2ee, which U.S. highways do you have in mind? A lot of turnpikes in the U.S. do charge tolls, and you're right that they're low, but the tolls do not cover the entire cost of the highway. Some have tolls set to cover maintenance, but not the capital costs of the highway.

Thanks for the info on 407 ETR profit. Doesn't that suggest that, were the tolls 25% lower, they would cover the cost of the highway? That level would still be rather higher than tolls in the U.S.

I am thinking of the Illinois tollway, which is almost entirely self-funded, including their capital costs.   Here's an accounting of their 2017 year.  Page 44 has the high level accounting.  I just calculated a 90 km trip on that network would cost me about $3.75 USD.  I'd be looking at about 4 times as much cost on the 407.

A lot (possibly the majority) of the Illinois toll roads were constructed more than 50 years ago and will surely have been paid off by now so that will also skew the comparison.

[tomh009]

Mentioned above, I don't see how it's not relevant.  And yes it's only paid on the incremental value, so a $20k car would initially generate 2600 in taxes and then 1300 when it's sold at a market value of 10k.

If no one ever trades in an old car, then you are correct, yes.

[p2ee]

I am thinking of the Illinois tollway, which is almost entirely self-funded, including their capital costs.   Here's an accounting of their 2017 year.  Page 44 has the high level accounting.  I just calculated a 90 km trip on that network would cost me about $3.75 USD.  I'd be looking at about 4 times as much cost on the 407.

A lot (possibly the majority) of the Illinois toll roads were constructed more than 50 years ago and will surely have been paid off by now so that will also skew the comparison.

Given the revenue 407 ETR is making, they should be close to pay off their initial 3.1 billion investment, if they haven't already as well.  But the tolls keep going up instead, because once the investment is paid off its time to make the real profit.

Mentioned above, I don't see how it's not relevant.  And yes it's only paid on the incremental value, so a $20k car would initially generate 2600 in taxes and then 1300 when it's sold at a market value of 10k.

If no one ever trades in an old car, then you are correct, yes.

Sure, it'd be interesting to know how often cars are traded in and what is their value as the percent of the value of the new car that is being bought (trade-ins certainly don't apply to used car sales though), but regardless of that it doesn't really change the argument.  The fact that HST on the gas and on car sales is not being considered makes the conclusion of the article quite suspect.  The cost of road maintenance is being exaggerated (by comparing it to 407 toll costs) and the tax paid by drivers is being understated.  At the same time, I am not sure the subsidy to transit users considers capital costs of transit.

[tomh009]

GRT needs to pay its capital as well as operating costs so any shortfall must be covered by the subsidy. There are no other funding mechanisms other than subsidies and fares. (ION has additional subsidies but that's a whole different kettle of fish.)

In any case, the comparison is far too simplistic. Too many assumptions about costs, and it doesn't consider the fact that cars provide both local and distance transportation whereas GRT is local only. A serious comparison would take some significant work, though.

[danbrotherston]

Additionally, a number of toll roads have repeatedly gone bankrupt, or had the state bail them out rather than raise tolls to cover maintenance costs.

As for GST on cars, that is a sales tax, not a road use fee.  If I instead bought a bicycle and then also went to the movies, I'd still pay that same tax, so it in no way contributes to roads.  Same for the GST applied to gas.  Only the fuel excise tax is a fee in excess of the standard sales tax we already pay.

The opinion piece mentioned that vehicle drivers are subsidised heavily by taxes.  The sales tax on vehicle purchases is going to the government as tax, later to be used as subsidies, and that tax is no small amount.  The revenue generated from those taxes would not exist if the vehicles were not purchased.  So why should it be excluded?  I understand it is not 'road use tax' per say, but we're talking about drivers getting subsidised by the state.  And the fact that HST on the gas is not being included is even worse.  Why should that not be included?
...

That is clearly false. If you don't have to buy a car, what are you going to do with that 20,000 dollars (and 50 dollars a week on gas). Are you going to throw it in the garbage? Obviously not. That money will get spent, and given that you've already got your necessities covered, you aren't likely to buy more of those, you'll probably instead buy more taxable items. Even if you were to save that money, eventually you will spend it. It comes back to the same thing, car or no car, the government is getting 13% of that money, so to suggest that the tax dollars from that item should count towards roads is just false.

Also, for the tax argument, we almost always associate the tax paid on something as an economic consequence of that activity.  It's not perfect, but its generally the most reasonable thing to do.  So when people just discount tax revenue related to spending on transportation because its a general tax and not a transportation tax, its kind of silly imo.

I think you are confusing the "economic activity generated by" and the "economic activity of buying"...as I explain above, the buying activity will still take place, and will almost certainly result in the same economic activity and taxes as buying a car (with a possible small decrease if you instead buy on average more imported goods).

The economic activity generated by owning and driving a car is a different issue, if we look at the economic benefits of roads, i.e., the businesses enabled to exist because there are transportation connections, those are real. However, the real question is whether we could achieve those same economic gains with cheaper more efficient infrastructure, i.e., not building a 20 lane wide highway through suburban Toronto, and instead building rail. And the answer by all accounts is probably yes.

[tomh009]

Sure, it'd be interesting to know how often cars are traded in and what is their value as the percent of the value of the new car that is being bought (trade-ins certainly don't apply to used car sales though)

People certainly do trade-ins on used cars, too.

[p2ee]

GRT needs to pay its capital as well as operating costs so any shortfall must be covered by the subsidy.  There are no other funding mechanisms other than subsidies and fares.  (ION has additional subsidies but that's a whole different kettle of fish.)

In any case, the comparison is far too simplistic.  Too many assumptions about costs, and it doesn't consider the fact that cars provide both local and distance transportation whereas GRT is local only.  A serious comparison would take some significant work, though.

And the fact that with the climate we have, you can't expect that everyone to spend time waiting for a bus or LRT in -10 or -20.

Just a disclaimer: I'd actually prefer a properly implemented public transportation over cars.  Clearly 1 person per car with hundreds of thousands of car on a highway is environmentally bad, not to mention very expensive infrastructure. But we also have to be practical and realize that given where we are today with respect to our public transportation system and that we have climate that is not favourable to using public transportation, we have to accept that most people will continue to prefer cars except for places like Toronto and Montreal.  I am personally looking forward to electric cars maturing, getting cheaper, having higher range, charging faster, etc.  That'll be a big part of the future to get rid of fossil fuel.

[ijmorlan]

GRT needs to pay its capital as well as operating costs so any shortfall must be covered by the subsidy.  There are no other funding mechanisms other than subsidies and fares.  (ION has additional subsidies but that's a whole different kettle of fish.)

In any case, the comparison is far too simplistic.  Too many assumptions about costs, and it doesn't consider the fact that cars provide both local and distance transportation whereas GRT is local only.  A serious comparison would take some significant work, though.

And the fact that with the climate we have, you can't expect that everyone to spend time waiting for a bus or LRT in -10 or -20.

Just a disclaimer: I'd actually prefer a properly implemented public transportation over cars.  Clearly 1 person per car with hundreds of thousands of car on a highway is environmentally bad, not to mention very expensive infrastructure. But we also have to be practical and realize that given where we are today with respect to our public transportation system and that we have climate that is not favourable to using public transportation, we have to accept that most people will continue to prefer cars except for places like Toronto and Montreal.  I am personally looking forward to electric cars maturing, getting cheaper, having higher range, charging faster, etc.  That'll be a big part of the future to get rid of fossil fuel.

I’m going to try to avoid getting deep into this again, but let me just say that I would like to see an entirely self-funding superhighway network. That is, all superhighways in the province would be operated like the 407 (except without the Harris giveaway to private owners). I’d probably be OK with the system being operated on a non-profit basis, i.e., any profit in a given year would be banked and stay within the system to fund future expansion, repair, or lower tolls, rather than contributing to government revenues in general. We could have a robust debate on whether it’s OK for toll profits to fund transit construction.

The point, however, would be to make the choice of whether and when to use the highway a true economic decision based on the cost, rather than the way it works now, where using the highway is free to the user. Simple economics says that this would almost certainly lead to a significant change in the amount and timing of the use of the highways, and would allow people to choose for themselves whether to spend their money on highways or on other goods.

[SammyOES2]

GRT needs to pay its capital as well as operating costs so any shortfall must be covered by the subsidy.  There are no other funding mechanisms other than subsidies and fares.  (ION has additional subsidies but that's a whole different kettle of fish.)

In any case, the comparison is far too simplistic.  Too many assumptions about costs, and it doesn't consider the fact that cars provide both local and distance transportation whereas GRT is local only.  A serious comparison would take some significant work, though.

It's not just work, there are fundamental disagreements that prevent this analysis from even being possible in a real sense. We've shown that in past iterations of this argument here. I feel like if I get $5000 of benefit from the public road system and I pay $5000 of my money to the Government that is used to provide that benefit - that its silly to say I'm being massively subsidized just because the money is coming from me as a 'tax payer' and the benefit is coming to me as a 'road user'. (Note: This works for other things too, I pay more than 'my share' of health care costs so its silly to say I get subsidized health care just because I don't pay any direct costs when I go to the hospital). Other people disagree (and with some reasonable arguments).

But these sorts of articles don't help at all. They're so biased and simplistic that they're never going to convince anyone that doesn't already drink their kool aid. It's the same as people railing against the subsidies of public transportation claiming they get no benefit from it.

[SammyOES2]

the buying activity will still take place, and will almost certainly result in the same economic activity and taxes as buying a car (with a possible small decrease if you instead buy on average more imported goods).

This is an overly simplistic assumption. Money can be used in a lot of ways that don't result in sales tax revenue. Savings. Non-taxable goods. Foreign goods and Travel. Etc. There's some overlap, but you can't just ignore it and pretend like it would be spent anyway.

[SammyOES2]

ijmorlan, I don't have a fundamental disagreement with your proposal.  But I think the big gaps are:

1. Ensuring the Government doesn't double dip.  Tax revenue should go down commensurate with the service level they're offering going down.

2. There should be some accounting for the general economic and social benefit that highways provide.  It's not just the drivers of the highway that benefit.  The Government should pony up some money for that benefit that comes out of general tax revenue (which is our 'best' way of charging society as a whole in a fair manner).

3. There should be some accounting for the nature/purpose of the highway and its relative importance.  In your proposal it seems like we should provide some basic level of transportation 'for free'.  Between some high density areas, that basic service level may require highways.  In other cases it might not.  But I think its too simplistic to say that non-highways are ok to be funded directly by the Government but highways aren't.  It's very situational dependent.

[jamincan]

the buying activity will still take place, and will almost certainly result in the same economic activity and taxes as buying a car (with a possible small decrease if you instead buy on average more imported goods).

This is an overly simplistic assumption.  Money can be used in a lot of ways that don't result in sales tax revenue.  Savings.  Non-taxable goods.  Foreign goods and Travel.  Etc.  There's some overlap, but you can't just ignore it and pretend like it would be spent anyway.

I think it's a fair argument. Money doesn't have any inherent value until it's exchanged for some sort of goods or services. The government taxes that. The exceptions are a small fraction of what is taxed with HST.

[SammyOES2]

It's not about the 'inherent value' of the money. The issue at hand is money that arrives (or doesn't) in the Governments hands to be spent. If I pay HST on gas they get to spend that money now. If instead I invest that money for retirement, they don't get to spend the money for awhile (if ever).

[MidTowner]

It doesn't make a lot of sense to me to view sales tax on gasoline as some kind of a user fee to pay for roads. The gas tax is intended to be something like that, but HST applies on everything- I can't think why, in the specific case of gasoline used for driving, it would go to anywhere besides general revenue.

As for the question of whether money not spent on gas or cars would instead be spent on something else, some of it would indeed be saved or invested- but, in Ontario lately, not much. Households' savings rates are not particularly high right now. The majority of it would be used for consumption.

I can understand that, for someone who drives, it's not very important whether the costs of that come from charges to him as a motorist, or taxes paid by him as a taxpayer. And, given that most Ontarians drive, that may well be good enough. If you're not a driver, though, or you're a light user of the roads, you're probably subsidizing drivers or more-frequent drivers.

That probably isn't a big problem (how much are the subsidies likely to be, really? is anyone living in poverty because of all the taxes he pays to support other people's driving habits?). But it isn't efficient, and if we ever wanted to curb driving in any real way, the way the costs are paid would need to change. We don't, though: most people are happy with the current system, there's no political will to make driving more expensive for drivers.