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Christopher MacKechnie

Progressive Tax Rates for Transit?

By February 2, 2011

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From the Seattle Transit Blog we see that a Washington state representative is bringing forward a bill to allow counties to levy an additional car registration charge in order to fund transit. This transit funding is temporary - the bill allowing this charge would expire in 2014 - and presumably is meant to buy Seattle-area transit systems time until the economy recovers. As one of the premier transit cities in the country with over 400,000 daily riders it would be terrible if agencies such as Seattle Metro are forced by the economy to dismantle their network.

Of course many will no doubt argue that such an increase in the car registration tax is regressive: it will, like increases in the gas tax or sales tax, hit poorer people proportionally harder than the better off. Of course this argument is very debatable, but such a debate is not the point of this entry. The point is: what if there were a different way to levy this tax and other taxes that are often used to support transit?

Our income tax system is progressive; i.e., the tax rates increase as you make more money. But to my knowledge I have never heard of anyone arguing to make other tax systems progressive. What if everything under $1,000 was taxes at the current state sales tax rate but objects over $1,000 had a higher tax rate? Better, what if your first car had a reasonable registration fee - say $100 - but this fee increased as you registered more vehicles. Perhaps the second car you register would cost $300 and the third car would cost $500. The more cars you have the more you will drive and the less you will take public transit and other transportation mode options. Such a regime would allow everyone to have one car - and face it, automobiles will continue to be very useful no matter how much we spend on public transit - but discourage the accumulation of excessive number of cars by one person. At the very least parking may become easier to find.

Transit agencies throughout the United States are in financial distress and looking for new sources of income. Instead of relying on the usual measures, i.e. increase the sales tax, why not consider alternatives that in addition to increasing transit system revenue could provide some environmental benefits as well?

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