Monthly Archives: March 2018

What is worse than your elected legislators voting for a tax increase?  Your elected legislators voting to allow an unelected bureaucrat to raise your taxes.

SB 1146 and HB 2166 would do just that.  Both bills would grant the Director of Arizona Department of Transportation (ADOT) the authority to charge any Highway Safety Fee rate they desire as well as set the initial percentage rate of the base retail value of a vehicle that will be used to assess the car owner’s VLT.

As it relates to the Highway Safety Fee, the only ostensible constraint in the proposed legislation is the requirement that the Highway Safety Fee funds 110 percent of the Department of Public Safety’s highway patrol’s fiscal budget, minus any monies left in the fund that exceed 10 percent of the prior year’s fees.   In other words, the fee must directly and fully fund DPS.  However, this is not how the government appropriation process works or should work.

There is a good reason we don’t let the head government bureaucrat decide how much money they need to operate and then tell the tax payers to fork over the money.  Instead, our system has representatives of the taxpayer determine priorities for funding and evaluate what the taxpayer base can ultimately afford and require the government to conform to the funds available.  This proposal is an inversion of this process and circumvents these safeguards to promote spending restraint and ensure the taxpayers’ representatives are active agents in determining spending priorities.

This means depending on who is in political power as Governor, they could use their administrative appointment authority to push their policy agenda, game the State’s VLT and unilaterally pick winners and losers.  They could choose to charge more VLT for “gas-guzzling” suburbans that would disproportionally harm large families.  Or they could charge more VLT for non-American made cars or charge no VLT for two-door convertibles.  There is no requirement in the legislation to ensure the registration fee is uniform among taxpayers.

The broad support for this type of legislative gimmickry is baffling.  For years lawmakers have complained of too much power vested in the executive branch, yet here is a bill that willingly surrenders their constitutional taxing authority to the Governor.Shockingly this bill has generated a good deal of support among legislative members.  SB 1146 received a unanimous vote from the members of the transportation committee and HB 2166 sailed through its committee with a vote of 6-1 and passed the House with a floor vote of 35 Ayes and 24 Nays.

Additionally, it is clear that both bills are designed to sidestep Prop 108, which requires a 2/3 vote in each legislative body to approve a tax increase.  If lawmakers believe that this new registration fee is a good idea, they should identify and debate what that amount should be and set that amount in statute.  But many lawmakers want to disguise the fact that they are supporting a tax increase, so bad public policy is what taxpayers get stuck with.

The only question now is how and when this tactic will be used next. Perhaps we should allow the director of Department of Revenue to set our income tax rates? An idea that would have been considered laughable a few year ago is now a real threat to Arizona taxpayers.

It would seem many of our elected leaders have accepted the premise that the ends justify the means.  They so desperately want to put more money into infrastructure and roads, they care little about how it is ultimately accomplished.  Because raising taxes is difficult both politically and process-wise, this tactic allows them to side step the process to raise taxes and avoid political accountability.

But lawmakers shouldn’t think they are fooling anyone.  They may think this is a clever way to not have to answer to taxpayers about a tax increase.  But they would be wrong.

For years advocates for light rail have been trying to convince the legislature to allow Maricopa County to extend the 1/2 cent transportation sales tax (currently set to expire in 2025) to include billions more for light rail. They know that they can’t pass light rail by itself, so they have been looking for ways to sneak it by lawmakers by tying it to other more popular transportation projects.

Their solution is SB 1147, a poorly crafted transportation omnibus bill that would eliminate the statutory spending caps on how much money can go toward light rail and other wasteful transit projects. The bill would also remove the requirements that funding go toward freeways and other regional roads, unnecessarily create duplicative and confusing new statutes for rural counties and allow new tax hikes to be considered on off-cycle election dates that are notorious for low voter turnout.

The evidence that light rail and similar fixed line transit is a bad deal for taxpayers is overwhelming. In 2017, the Free Enterprise Club published a study on the future of transportation policy in Maricopa County and the value of light rail in the Phoenix Metro Area. The conclusion was that light rail is a bad deal for taxpayers, commuters, non-politically connected landowners and anyone else that relies on the current bus transit system. Additionally, a cursory review of the wild-eyed economic development claims being made by proponents of rail are easily disproven as well.

The most critical facts when considering light rail include:

  • Light rail will NOT reduce traffic congestion–it will INCREASE traffic congestion

A common myth pushed by proponents of light rail is that it will help in getting people off the roads and into public transit. The fact is that light rail will increase traffic congestion, and there are a couple of reasons for this. First, the only way to accommodate the new rail line will be to remove street lanes currently used by automobiles. And since street lanes can move more traffic per hour than light rail, congestion will be greater along the line. Secondly, since the rail line is moving at street grade, it will have to receive priority at every traffic light. This will disrupt signal coordination systems, spreading the disruption well beyond the light rail intersections. That is why every independent traffic analysis that has been done concludes that light rail increases traffic congestion.

  • Light rail will NOT increase transit ridership and will HURT bus ridership

Another argument made by the light rail lobby is that building light rail will increase transit ridership. The fact is most light rail passengers are either individuals who already use transit or passengers who were forced onto light rail when existing bus service along the rail line was eliminated. Additionally, since rail costs substantially more to operate than buses, over time light rail will crowd out bus service and will result in a reduction of bus lines in the Phoenix metro area.

This is not speculation—this exact scenario has played out in every city that has built light rail. For proof, here is a chart showing transit ridership in the Phoenix metro area since 2000, courtesy of Valley Metro:

As can be seen by the chart, transit ridership was increasing steadily from 2000 to 2008, prior to light rail opening. After light rail opened, bus ridership began to plummet and is now at levels not seen since 2003. Even more troubling, after a decade of growth annual transit ridership has been in decline.  The 2017 figures were just released and annual transit ridership is now LOWER than when light rail opened in 2009.

  • The Economic Development Claims are False

Knowing that light rail cannot be defended for reducing congestion or increasing transit ridership, advocates usually pivot to the claim that rail should be built since it promotes economic development.  This claim is easily disproven as well. After a careful analysis of the figures provided by Valley Metro, the Club proved that most of the economic development credited to light rail was either “planned or committed” development, projects that had nothing to do with rail (like the Phoenix Convention Center) or were projects that never occurred.

After discrediting their figures in 2015, Valley Metro released a new analysis, now claiming that billions in constructed projects have occurred because of light rail. How did they reach this conclusion? Valley Metro is now assuming that light rail is responsible for ALL economic development that occurs within 1/2 mile of the rail line. Since the rail line is 26 miles long, that means they are including 26 SQUARE MILES within their analysis. The idea that light rail is responsible for all economic development in an area the size of Queen Creek is laughable.

  • SB 1147 Ignores the Blossoming Self-Driving Transportation Revolution in our own Backyard

The final nail in the coffin for light rail is that it is more likely than not that drastic advancements in autonomous vehicles will render the service useless and unused. Thanks to Governor Ducey, Arizona has become a leader in promoting and developing self-driving technology, and it is anticipated that such cars will be available to the public in the next five years. The idea that we are going to commit billions to human-operated, fixed line rail through 2045 when the technology will be beyond obsolete would be a huge mistake.

If lawmakers believe there is a need to update our existing transportation statutes or even consider extending the Maricopa County transportation tax, policy makers should make sure that the money is used on productive transportation projects that include plenty of transparency and oversight. Without drastic changes to SB 1147, the bill will remain a train wreck for taxpayers.

If you enjoy using the internet, prepare to hide your wallet. A coalition of cities throughout Arizona have announced their intention to impose massive new tax increases on a wide array of currently untaxed digital products, targeting popular streaming services and applications such as Apple iCloud, LegalZoom and Pandora.

This outrageous plan to tax everything on the internet manifested itself from good faith legislation introduced at the Capitol earlier this year to clarify what digital products should (and should not) be taxed. Arizona law has been silent on the issue, and the Department of Revenue has struggled to develop rules to differentiate digital goods from digital services, which is an important distinction since Arizona has historically not taxed services.

HB 2479 and SB 1392 were introduced after lengthy bipartisan discussions that included input from the private sector and taxing entities, including the cities. The conclusion from those meetings was that taxing online digital services was a terrible idea that was contrary to legal precedent and would put Arizona at a competitive disadvantage, since most other states do not tax similar internet products.

Yet the allure of new revenue from internet taxation has led the League of Cities and Towns to oppose both bills. They have made it clear that no restrictions should be placed on their internet taxing powers, a radical position that could lead to digital goods and services becoming one of the MOST taxed items in Arizona. Even more stunning is that their plan is likely illegal and would violate federal law.

This is not an issue that lawmakers can remain on the sidelines. If local governments get their way, internet users will be hammered with a slew of new taxes, while digital startups and capital investment will be driven to other states much friendlier to the tech industry.

Action must be taken soon to protect taxpayers and slam the door shut on the digital internet tax. We urge everyone to contact your lawmakers to vote YES on HB 2479 and SB 1392.

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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.