Taxes

TCI policy design would punish Mainers with new gas tax

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The Transportation and Climate Initiative on Tuesday released a draft Memorandum of Understanding shedding light on how gas and diesel prices would increase under the plan.

A webinar held Tuesday afternoon to explain the plan outlined the potential for $0.17 per gallon increase to the cost of gasoline. A footnote on a slide of the presentation read, “If fuel companies decide to pass on allowance costs it could mean an incremental price increase in 2022 of $0.05, $0.09, or $0.17 / gallon in the 20%, 22%, and 25% Cap Reduction Scenarios, respectively.”

The TCI would set an artificial cap on transportation-related carbon emissions and force fuel suppliers to purchase allowances for the carbon emitted by their fuel products. The cost of the allowances would increase regularly, with the intent of discouraging and eventually eliminating the use of fossil fuels.

These costs would be passed onto consumers, in effect creating a new tax on gasoline and diesel fuel that consumers pay at the pump. In pricing emissions, the initiative attempts to push consumers to more quickly transition to electric vehicles and mass transit options.

Transitioning away from fossil fuels in Maine’s transportation sector means less revenue for road repairs and improvements, and electric vehicles are not affordable for the average Maine consumer. Public transportation simply cannot replace cars and trucks in most of Maine.

Only 1,300 electric vehicles were owned in Maine in 2018, less than one percent of all passenger vehicles registered in the state. In 2017, Maine’s transportation sector emitted 8.4 million metric tons of carbon, which accounted for approximately 0.44 percent of the 1,905.1 million metric tons of carbon produced by the United States as a whole.

“The TCI would hurt Maine’s infrastructure, economy and the most vulnerable among us, and our involvement would have no measurable impact on the climate. Maine’s participation simply is not worth the hardship it would create for families and businesses,” said Matthew Gagnon, chief executive officer of The Maine Heritage Policy Center.

The Maine Heritage Policy Center was one of 18 free-market organizations that sent the following letter to Governor Janet Mills on Tuesday expressing opposition to the Transportation and Climate Initiative:

“We, the undersigned, represent citizens and businesses in states currently considering participation in an interstate compact known as the Transportation and Climate Initiative (TCI), a carbon tax “cap and trade” proposal for reducing carbon dioxide (CO2) emissions from fossil motor fuel use.

While the specific details of the TCI are expected to be released on December, 17th, 2019, the framework was made public in October and the primary purpose behind the idea is not in dispute. The TCI is intended to make purchasing transportation fuels so painfully expensive that the astronomically high price discourages people from buying it. In short, consumers will have to pay more at the pump to fund increased government spending. Make no mistake, this is a tax. More precisely, it is a carbon dioxide tax being implemented through a gas tax.

But, unlike motor fuel taxes levied to pay for roads, bridges, and transportation infrastructure (a reasonable fee for use), the TCI would be the equivalent of a “sin tax” – a penalty for engaging in bad behavior. We do not believe that driving to and for work, transporting children to school, transporting goods, going to the grocery store, and all the other necessary activities that generally require a vehicle should be treated by governments as a sin. These are not activities people can, or should be forced to, avoid.

The TCI will also increase state and municipal spending, as public services such as snow plowing, collecting garbage, and transporting school children will be burdened with significantly higher fuel costs. Furthermore, fuel-reliant small businesses that transport goods or provide services will suffer higher operating costs. Those increased expenses ultimately will be passed along to consumers and taxpayers. Citizens in TCI states can expect to be hit with higher personal costs, higher costs for goods and services, and higher taxes.

Gas taxes are regressive in nature. The TCI will hurt lower-income and rural residents much more significantly than their higher-income, urban peers. Since motor fuels are economically “inelastic,” the higher costs imposed by the TCI’s fuel tax will have to come out of other areas of household budgets. People already struggling to make ends meet will be forced by their own governments to make painfully difficult choices. Economically speaking, this is bad policy. Morally speaking, it’s just cruel.

Among the 13 Northeastern and Mid-Atlantic states currently contemplating joining the TCI are some of the most heavily taxed in the nation. Adding another significant burden to the already over-taxed families of these states is neither desirable nor fair.

The first formal details of the TCI come out this month and will certainly raise more questions and concerns about the constitutionality of the program. State legislatures, legally required to or not, should vote on any proposal for their state to join the TCI. Legislators should not allow one citizen of a state — the governor — to impose such serious financial burdens on all other citizens. Such a decision rightfully belongs to the people’s representatives and should be reached through the legislative process, not by the decree of a single executive.

The TCI is a poorly conceived, fundamentally regressive, and economically damaging proposal. It would — on purpose — make the day-to-day transactions of life painfully expensive, especially for those of us who are going through bad times and are struggling every day to get by. Government should not do this to its citizens. Government exists to serve the people, not to bend them to the will of elite opinion. For these philosophical and financial reasons, states should reject the TCI at the first available opportunity. “

Mainers concerned about a gas tax increase can submit public comments on the TCI draft Memorandum of Understanding by clicking here. The public comment period is open until Friday, February 28, 2020.

About Jacob Posik

Jacob Posik, of Turner, is the director of communications at Maine Policy Institute and the editor of The Maine Wire. He formerly served as a policy analyst at Maine Policy. Posik can be reached at jposik@mainepolicy.org.

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