I am the Rhode Island State Coordinator for the Progressive Democrats of America. My primary interest is Rhode Island's economy and what we can do to fix it.

9 responses to “Yes, the car tax is very regressive”

  1. transportprovidence

    I would argue just that the car tax does not exist as a transfer-of-wealth tax, so to judge it by those criteria is wrong. But I stand by my point that the reverse of the car tax– getting rid of it– ends up being regressive in comparison to better options (If folks check out my article, you’ll see that the tax refund I propose tips things much more towards the poor, does not ignore non-drivers, and still leaves money to improve transit). The car tax refund gives way more money to the rich and upper middle class when no such return to those groups is necessary, and ends up hurting poor people by cutting services.

    I also forgot to mention in my article that RIPTA costs are higher than car taxes, so in the sense that this proposal ignores RIPTA costs, it skews the overall charges so that the poorest quintile is going to pay the most. $840 (conservatively, as monthly pass costs are $840/year) is more than the amount a Providence car owner pays if their car is $16,000, but that’s what a RIPTA rider has to pay. More realistically, a RIPTA rider pays more like $2,190 a year (that’s a two-way trip, everyday, with one transfer each way) because getting monthly passes is hard work since they’re not available everywhere. So that’s more like the tax on a $38,000 car in Providence (or a $45,000 car in Cranston, and a $292,000 car on Block Island). That’s a big part of why this proposal is regressive– we have to look at RIPTA costs and car costs together.

    The car tax *is* progressive economically compared to other ways to pay for car impacts: transit expert Ben Ross confirmed that online for me about a month ago (you’ll have to comb through Twitter for it). For instance, a gas tax just flatly charges people for car use. A car tax based on percent of value charges somewhat for use, but also scales that up by income (or at least a proxy of income, car value) so that the richer folks pay more. So the question isn’t “Does the car tax redistribute income perfectly in some kind of socialist way” but “Is is more progressive than other options?” and “What are the other tools we can use to cancel out the effect of the car tax, while keeping its good effects?”

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    1. Tom Sgouros

      The other progressivity issue worth addressing with the car tax is the phase-in. This is what happened with the last attempt to eliminate it, starting in 1997. First they exempted the first $1000 of car value from the tax, and the second year, exempted $1000 more, and so on. So far, so good, but what this meant was that the delta in year five was astonishingly regressive because the only benefit was to people whose cars were worth more than $5000, and that’s where the phase-in of the tax cut stalled. The exemption level saw no further progress until the cut was repealed during the fiscal crisis of 2009-2010.

      This wasn’t even very long ago, so I’m not sure why we have to revisit this issue without changing any of the issues that made that previous attempt fail. But that’s just me.

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      1. transportprovidence

        Two things:

        1. I get the appeal some people make to raising the exemption rather than cutting the total tax, and I agree that as an equity measure it would be better than eliminating the whole tax. But remember: this still leaves out people with cars (who pay the sane as a $16k PVD car tax for monthly passes, or $38k in PVD car tax if they use cash for RIPTA). So in practice, taken together, that still looks too regressive to me.

        2. If we were focused on the exemption, then our values are clearly for targeting to poorer people (which I agree is good). So in that case, I have to ask why we should frame this through the car tax lens at all. Even in PVD, at 6% tax, a $5,000 exemption is $300. We could give $300 to people (or more) through the EITC. And people forget that raising the exemption has a linear payout up the chain of car cost– in other words, if the exemption is raised $1,000, *every* car in PVD gets $60 back. As the Sweden article I linked to shows, all that added money given to upper income people supposedly making the tax “less regressive” comes out as lost services, so the balance of the two ends up hurting the poor (even poor drivers).

        Let’s use the right tools for the right jobs: car taxes pay for car use, the EITC redistributes income. Use the EITC.

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        1. transportprovidence

          People *without* cars who pay the *same*. Sorry, cell phone typing.

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    2. m. bessette

      This may cross the realpolitik line, but isn’t there a divergence here between normative agreement and policy objectives – one of those unbridgeable gaps that good intentions supposedly fill? Why’s it not apparent that improving the lot of the working poor by making concessions to the BAU way ensures that truly equitable arrangements will never materialize? And why pretend that there’re no substantive differences between mollifying the ills of capitalist society and taking strides toward a democratic, low-carbon/postcapitalist society?

      The former gets it backwards. Alternative transit, affordable housing, and reformed land-use arrangements have to be the ABCs of daily life hic et nunc, not hopeful contingencies, if the latter’s going to be anything more than wishful thinking.

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  2. Peter Nightingale

    I cannot improve on how Albert Camus put it: “It is no more immoral to directly rob citizens than to slip indirect taxes into the price of goods that they cannot do without.” In other words, in a country without a decent public transportation system a car tax without a cutfoff at the low-income side is immoral.

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    1. transportprovidence

      For the record, I would totally agree with that assessment. There is no way to simply push people out of their cars. You need to have a strong transit system, strong biking, walking, and strong land-use/affordable-housing policy. But like I point out in my piece on Transport Providence, it’s not a matter of making people pay for car use or not making them pay; we can choose to make them pay, and then also have strong policies of income redistribution and public transit as part of that cocktail.

      I think this article, sent to me by Dan in the Democratic Socialists of America, sums up what I was saying more articulately than I was able to put it: http://www.demos.org/blog/10/10/14/sweden-does-soak-its-rich

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  3. Barry Schiller

    I suggest the car “tax” is in a way a user fee – motorists want cities and towns to improve or maintain local roads, light them, patrol them, sign them, remove snow, provide parking, none of that paid for by gas taxes (which don’t even pay for all the capital improvements on major highways) so this is a way to have users pay for that, indeed a progressive way to pay for it since its not based on use but on value of the car.
    However one looks at what is “regressive,” it does not seem social justice that the 5.3% of RI households that have 4 or more cars (data I once got from Statewide Planning) may get enormous tax relief while a good friend who cannot afford a car at all, so adds negligibly to congestion or pollution, gets nothing, indeed has to be concerned that the diversion of $215 million of the state budget to car owners can threaten state programs she needs.
    On the other hand, like most, I dislike paying taxes so even though we only have 1 car, it being a fairly new Honda Civic, I could enjoy a big personal tax break!

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  4. No, lowering the car tax is what’s regressive.

    […] Sam Bell and I have been debating the role of the car tax in producing economic equality. I wrote a bit about this on my own blog, which Sam generously linked to, but I also wanted to post to RI Future with some new information not in the original post. Getting a political message across is about repetition, and those who oppose the car tax have had years to slam their points home (despite being wrong). […]

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