A Half-Cent for Your Thoughts
In November, St. Louis County voters likely will decide whether to enact a half-cent sales tax increase for the expansion and upkeep of Metro. Passage of this increase will also result in a one-fourth-cent tax hike in St. Louis city, which was approved several years ago, but never actually implemented in the city because county voters rejected the same proposal. Now, with Metro wanting to expand and increase
its budget, it’s again under consideration.
Those who support the increase cite its relatively low cost, while those who oppose it label it as unfair. Other revenue-generating possibilities are also being discussed, such as a transit ticket price increase and a crackdown on free riders — both of which may be viable options. For the purpose of this post, I will only focus on the proposed tax increase and its expected revenue.
As a disclaimer, I am not a frequent MetroLink rider, only using it when attending various events downtown. I grew up in a rural area where there was no public transportation, so I am not accustomed to using MetroLink as a primary mode of transportation. With that said, my own experience has no bearing on my conclusions about the tax increase.
The proposed increase, assuming that the demand for goods is completely inelastic, would generate around $87 million annually in additional funding for the expansion and operation of Metro. The majority of this funding, around $78 million, will come from St. Louis County because of its larger half-cent increase, and because of its much larger tax base. St. Louis city would generate around $9 million from its one-fourth-cent increase. While it is true that demand is most likely not completely inelastic, these numbers give us a general idea of how much revenue could be generated.
As I said earlier, I’m not a frequent MetroLink rider and I don’t know whether a tax increase is the best way to fund an expansion. Some people are advocating a use tax (taking the form of increased ticket prices), while some of my coworkers have suggested a sales tax specifically for business areas that benefit from mass transit. One point of contention about increasing ticket prices is that those who use mass transit the most have no other means of transportation. They depend on transit for their everyday travel and have no other alternatives. Also, higher ticket prices may decrease the number of riders, negating the need for an expansion in the first place. However, a sales tax increase has its own faults — not everyone who shops in targeted areas uses mass transit, so why should they have to pay for something they don’t use? This is a valid point, worthy of consideration.
Mass transit is a useful tool that can further enhance a city’s development. There is little doubt that public transportation is a key component to boosting growth, but the best means of funding that transportation is open to debate.
When you say, “Not everyone who shops at targeted areas uses mass transit,” you are correct. The converse is of course, “Not everyone who shops in a targeted area arrives by automobile.” Nonetheless, the parking lots in most newer shopping areas have been constructed using bonds paid for by sales taxes from special transportation development districts. In addition, 50% of St. Louis County’s current 1/2 cent sales tax pays for roads on which Metrolink users never drive. Based on your logic; Why should Metrolink users pay the 1/8 cent sales tax when shopping at Dierberg’s on Eager Road when they don’t arrive by car and don’t use the parking lot?
Comment by Hugh Scott — July 25, 2008 @ 4:14 p.m.
Mr. Scott,
Thank you for your comments. I appreciate you taking the time to read the Show Me Institute blog.
To address the question in your post, I don’t think that the situations are comparable. The percentage of people that ride the Metrolink regularly is around 5%. That means that roughly 95% of people predominantly use a car when they travel. It is obvious that these numbers are not even close. In the case of shopping at Dierberg’s on Eager Road the overwhelming majority of people arrive by car rather than Metrolink, so the sales tax to construct the parking lots makes much more sense.
In the instance of a sales tax for Metrolink, it would be a large majority of people subsidizing the actions of the very small minority. This is a completely different situation than having something that is used by 95% of people being paid for by everyone.
Comment by Pat Eckelkamp — July 28, 2008 @ 4:28 p.m.