“Underwhelming” investment in Massachusetts transportation

This past Wednesday, the MA House leadership unveiled their plans for investing in transportation in our state. For months now, we’ve heard that the legislature was going to tackle our transportation infrastructure crisis in a big way, and legislators have talked to the press about how impressed with the process they have been (Leadership actually held meetings with them, instead of ignoring rank and file legislators! Imagine!)

When the bills were released, the legislature probably expected a huge groundswell of public praise. Instead, the plans were labelled “underwhelming” by former Secretary of Transportation Jim Aloisi.

The #mapoli House has issued its transportation funding proposal... And all I can say right now is this: it's underwhelming We can't settle for small steps. We can't accept the status quo. We can't provide #mapoli residents with the quality of life they deserve without meaningful change and meaningful new revenue to make the investments the system needs.

Our transportation system is falling apart

Like other public services such as education & healthcare, we’ve seen a lack of adequate funding for public transportation in Massachusetts: Trains and road infrastructure aren’t getting enough resources to handle the demands of our population.

recent report stated that Massachusetts needs to invest $50B in our transportation system over the next 20 years. That includes a $10 billion backlog of investment just needed to maintain the train & highway infrastructure we have today. But more people than ever are using our roads and trains, and whether it’s congested highways or gridlocked subway lines, we have urgent needs to make the system reliable for commuters.

I love when the MBTA sets on fire to keep me warm from the cold <3

https://twitter.com/tonyphamdesign/status/1228829365733142533

This isn’t just a “Boston” problem. $7 Billion dollars are needed to invest in repairing our roads and bridges all across the state. And half a billion dollars are needed to increase capacity for regional transit authorities from Cape Cod to the Pioneer Valley, from Fall River to Lowell. 

The House Proposal

So what has the legislature proposed? The House is offering two bills, one to raise new revenue, and another to spend it. 

The House proposes to raise between $522M - $612M in new revenue each year. If 100% of those funds were spent just on the $10B backlog of repairs, it would take 16 to 19 years to complete, to say nothing of the increased capacity needs of the system.

But many of the appropriations under the bill are less than is needed. For example, Gov. Baker requested $200M more in appropropiations each year for the MBTA system. The House proposal will only provide $187M. The Governor’s proposal was for a combined $18B in spending, but the House proposal comes in 20% lower, at only $14.5B. Why is our supermajority democratic House low balling our Republican Governor?

Don’t get us wrong, this bill represents a very real investment in our transportation system, but we already have evidence that this won’t be enough. Why aren’t we thinking bigger?

A question of fairness

And beyond the question of whether it’s enough money, it matters how that funding is raised. Are corporations who benefit from an excellent transportation network contributing a fair amount? Or are working people paying?

The bill has four main components: 

  • a 5-cent increase on gas (9 cents on diesel fuel), 
  • a $1 fee added to rideshares such as Lyft & Uber, 
  • sales tax on rental cars, and 
  • an increase in the corporate minimum tax.

An increase in the corporate minimum tax rate is a reform long overdue, and it’s great to see it in the bill. Massachusetts has an 8% corporate tax rate, but many large corporations hide their profits offshore or with complex legal tricks to avoid paying anything. Corporations such as Amazon are in the news for paying ZERO in federal taxes. Massachusetts doesn’t let these corporations get away with paying zero, but they might as well. Corporations that use tax avoidance schemes to hide their profits only pay $456 per year in Massachusetts (that’s not a typo. Many corporations pay just a few hundred dollars, which is about what the average American spends on gas each month.

This new corporate tax will require larger companies to pay more in taxes. If a company has revenues in excess of $1B, they would need to pay $150,000 a year (an effective rate of 0.015%).

This tax is expected to raise $100M to $150M per year, but that only amounts to about 19%, according to conservative estimates offered by House leadership.  (And the high-end estimate provided by House leadership only clocks in at around 25%).

Revenue by source pie chart

The largest component of the package is a 5-cent tax on gasoline that everyone will pay at the pump, a regressive tax. Now, Massachusetts gas taxes are actually lower than 29 other states, and even with this increase we’ll still be paying about half the tax of states such as California. Gas taxes have other benefits such as encouraging the use of public transportation, and they ensure that those who use roads the most contribute to their upkeep.

However, we ought to question if it’s fair for the corporate component to only make up about a fifth of the total.

A tax that favors big business

Even more strangely, the shape of the corporate minimum tax is oddly favorable to the most successful businesses.

A corporation that earns $1M a year will pay $1500 per year, or an effective tax rate of 0.15%. However, a corporation earning more than a $1 billion will only pay $150,000, an effective tax rate of 0.015%.  That means the small business is paying 10 times as much as the large business based on their revenue!

The Massachusetts Department of Revenue stated that there were 403 billion-dollar corporations in the state in 2016.  If we tweaked the top corporate tier up just to $250,000 per corporation, that would be an additional $40M in revenue per year.

Minimum corporate tax tiers

What’s Next

These transportation bills were released to the public on Wednesday, and they’re expected to be voted on next Wednesday, March 4.

However, legislators only had 2 days to file amendments to the bills. House Republicans tried to extend that deadline until Monday, but the motion was defeated.

That’s a very real way in which debate and discussion are squelched in the House. You try reading 70+ pages of dense legalese and understanding the implications of the language in order to identify important improvements to the bill.

Update March 4th*

Call your State Rep to support amendments that improve the bill to make sure more of the taxes hit the wealthiest corporations in our state - not just residents at the gas pump.

Ask your State Rep to support these amendments and stand for a recorded roll call vote:

Amendments #17, #68, and #70 - More progressive revenue

  • ✅SUPPORT #17 - Increases the corporate tax rate on the largest 403 corporations in MA - This would only affect the richest 403 corporations that earn over $1 Billion per year in annual sales.  It would increase the corporate minimum tax from $150,000 to $250,000.  This is only an increase of 0.01% in the effective tax rate for these corporations, and would raise approximately $40M / year to fund transportation projects.
  • ✅SUPPORT #68 - Creates a transportation excise fee on the largest corporations- This tax would raise $150M / year by assessing an excise tax on corporations of over 100 employees.  It’s a progressive tax, so smaller companies would pay less than larger companies, and estimates based on 2017 employee data show that it would be about $50 per employee for the smallest companies.  This is a very modest tax on employers who depend on our transportation system to get their employees to work.
  • ✅SUPPORT #70 - Maintains a tax that currently exists on rolling stock - The current draft of H.4508 includes a tax break worth $9-11M per year for the transportation industry.  This amendment removes that tax break.

Amendments #72 and #60 - Free & reduced fares for residents

  • ✅SUPPORT #72 - Free & Reduced fairs - Dedicates the $9M-11M in revenue saved through amendment #70 to be used to give residents reduced or free fairs on MBTA, commuter rail, and regional transportation systems. The amendment prioritizes Environmental Justice & low income communities.
  • ✅SUPPORT #60 - Free bus fares (Boston & Regional Bus Networks) - This amendment dedicates a fifth of the gas tax revenue to providing free bus service to people using the MBTA, and another fifth of the gas tax revenue to providing free bus service to riders of RTAs in different regions of the state outside Boston.  This helps low income people & the environment.  It’s win win!

You can look up your State Rep here: https://malegislature.gov/Search/FindMyLegislator

Sample Script:

“Hi, my name is ___ and I live at __(address). I’m a constituent of Rep. _______ and I’m calling about the transportation revenue bill H.4508 to ask that s/he SUPPORT amendments to make the taxes more progressive, and fund reduce/free transportation prices.  I support amendments #17, 68, and 72 to raise more progressive revenue from corporations. Only about a quarter of revenue in the bill currently proposed come from corporations, and that’s not ok.  I also support amendments #60 & #72 to dedicate some of this revenue to providing reduce or free transit fares for low income people.  It’s not fair that bus fares continue to increase, when we need to be incenting people to ride clean public transit!  Thank you.”