Sunday, August 17, 2008

High Speed Rail Will Save You Money and Create Jobs

NOTE: We've moved! Visit us at the California High Speed Rail Blog.

But the Howard Jarvis Taxpayers Association would prefer you not know that.

In what is becoming an unfortunate trend, California journalists are turning their articles over to the right-wing anti-tax brigade, allowing them to spout nonsense but rarely providing important alternative information. In today's LA Daily News is an article titled California tax bites get hard to digest (get it? hard to digest? you slay me, Daily News) that makes the following flawed claims:

Stung by one of the highest state tax rates in the nation, Californians soon could be paying even more if officials and voters approve an array of new bond measures and taxes now under consideration.

Already on the November ballot are nearly $17 billion in statewide bonds, ranging from $9.95 billion for a high-speed passenger train system linking Southern California to the Bay Area, to $5 billion that would give motorists cash rebates for buying fuel-efficient vehicles.


Two problems here: first, Californians do NOT pay one of the highest state tax rates in the nation. According to the California Budget Project we rank 13th in state taxes and 18th in state plus local taxes. That hardly qualifies as "one of the highest state tax rates in the nation" but the claim goes uncorrected.

The second problem is the implicit equation of a bond measure with a tax increase. Rod Diridon is famous for saying "this project won't raise your taxes" and while it's not what I would say, neither is he technically wrong - there is no tax increase written into Prop 1(A). Depending on how the state resolves the current budget crisis it is possible that there will be extra money to pay the annual debt service - and the state Legislative Analyst has said we can afford that debt. It's possible that Prop 1(A) might lead to higher taxes, but it's not certain, and depends on a whole host of factors. Those who claim it WILL raise taxes are assuming certainty where none exists.

The Howard Jarvis Association, which alongside the Peninsula NIMBYs are likely to be the main source of opposition to Prop 1(A) this fall, goes on to argue these tax and bond measures will be the death of us all:

"What's happening is the taxpayers are under assault like we've never seen before," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "We have not seen an assault on taxpayers of this magnitude since the tax revolt leading up to Proposition 13 three decades ago.

"Our elected leadership, at both the state and local levels, is pushing California into the 'coveted' position of the highest-tax state in America. If that happens, it will be economic suicide for the Golden State."


Seeing as we're currently at 18th in state and local taxes, it would require one hell of a tax increase to put us up to #1. But what's more important is their delusional argument that taxes will cripple California.

That's only true if you assume that the taxes vanish into a black hole, never to emerge in any form again. But with the HSR bonds, as with other mass transit proposals like SMART or the LA Metro sales tax, that's just not so. High speed rail will produce immediate and long-term economic benefits while saving Californians money.

The California High Speed Rail Authority has estimated that the cost of expanding freeways and airports to meet the demand HSR would serve is between $80 and $150 billion - from twice to four times the cost of HSR. HSR is therefore a savings over those alternatives.

Of course, California taxpayers will save money once the system is open through cheaper fares than what airlines and gas stations can offer. As we've pointed out before, the long-term gas price trend remains upward, and by 2018 it's likely that oil prices will be substantially higher than they are now. Even if Prop 1(A) were to be paid for by new taxes, it'd be around $525 per person *total* ($19 billion in bond principal plus interest, divided by 36 million Californians). If the bond life is 40 years, as AB 3034 directs, that comes out to $13 per year per Californian.

If a Californian travels between the northern and southern halves of their state at least once a year using HSR they're likely to save more than $13 a year, and likely to save much more than $525 over the life of the bonds.

Finally, HSR will create jobs. The current estimate is 160,000 construction jobs and 450,000 permanent new jobs will be created by the project. As Atrios, a longtime fan of our project that he calls "SUPERTRAIN", noted today that's a badly needed economic stimulus in a country that has lost 800,000 construction jobs. California now has the fourth highest unemployment rate in the nation at 7.3%, behind Michigan, Rhode Island, and Mississippi. 160,000 new construction jobs would be an ENORMOUS boost to this state at a time when we desperately need new employment.

What prosperity California still has today is the product of past public spending - the bay bridges, the freeways, the aqueducts, the universities. All of those were paid for by taxes, and Californians reaped the rewards. But those investments need to be renewed, in a way that suits the new conditions of the 21st century, specifically energy, environment, and climate. High speed rail accomplishes all those wonderful things.

The Howard Jarvis Association would prefer California voters know none of this. In their mind all taxes are bad, as is the government spending the taxes support. In a state with a decaying infrastructure and a sky-high unemployment rate, partly due to the Association's successful 30-year war on government, you wonder why anybody would listen to them.

17 comments:

Tony D. said...

Robert,
Excellent info again! This is the kind of information that needs to get out to voters this campaign season; to build and strengthen the 62%! Any reason why Howard Jarvis or the critics ignore the facts you presented? Even without HSR or new taxes/bonds, how would they propose paying for nearly $80 billion in new freeways, airport terminals and runways?

Anonymous said...

According to the report, Robert cited


" Last week, the Washington, D.C.-based Tax Foundation released a report that found California's state-local tax burden currently is the sixth-highest in the nation at 10.5 percent of per-capita incomes - costing Golden State taxpayers an average of $4,752 a year."

Furthermore Wikipedia, says our state income tax rate, is the highest in the nation.

How much do you expect taxpayers to have to pay to live here.

GO bonds get repaid from the State's general fund, which get it funds from taxes. I don't know how much clearer it can be, that when you issue GO bonds, the net effect is raising your taxes.

AS stated here many times, HSR is not going to appreciably diminish the need for new freeways. By CHSRA's own numbers, they are looking even at their highly exaggerated ridership predictions at taking only 6% of inter city auto traffic.

Since the Jarvis group is the largest taxpayer organiztion in the state, and Robert is carrying on a single person campaign, they probably don't even know this blog exists.

cal said...

The Jarvis group never backs anything..that mindset is fading
people know you have to vote for bonds to improve infastructure and other projects.There mindset is so frozen that they will never ok anything like this..They have lost several times on issues they oppose
One this issue there wayoff and sound much as what they are..Old whiners that are well take care of.

Tony D. said...

Well said Cal, well said. Anon states "how much do you expect taxpayers to have to pay to live here?" Anon, we don't have to pay anything if we want our current infrastructure TODAY to look the same 20-30 years from now. I, like many others, choose to approve new taxes and bonds to keep our state abreast of a rising population and crumbing infrastructure. You choose not to want any more taxes; that's your prerogative. So anon, answer the question (if you can): absent bonds or taxes, how do we pay for new, expanded infrastructure?

Rafael said...

@ anon @Aug 17 -

" [...] when you issue GO bonds, the net effect is raising your taxes."

You're jumping to conclusions. General obligation funds are serviced by revenue from state taxes that are already being levied. New taxes are only required if one of the following scenarios applies:

a) prior legislation explicitly prohibits adjusting tax rates for general inflation, yet politicians are unwilling to cut public services or,

b) decades of neglect are forcing the state to implement more infrastrucuture projects at the same time than the regular budget can support.

At first glance, both of these appear to apply to California. However, the Legislative Analyst's Office has concluded (see figure 6) that the total combined volume of the 2006 and 2008 bonds will not lead to a DSR in excess of 6% during the next decade.

That's because old long-term bonds are being retired every year and, the very expensive short-term "deficit financing bonds" used to clean up after the Davis administration are also finally being paid off. In other words, legacy debt will be replaced by fresh debt (and then some).

Granted, 6% is a pretty high figure and, the DSR is expected to remain above 5% through 2020 - well above historical trends. Consequently, if voters approve all of the the big-ticket measures in 2008, state politicians will have to accept that there will not be much room for additional projects over the next decade - unless taxes really are raised or services cut back.

Conclusion: none of the bond measures proposed in 2008 - including especially, HSR - will directly trigger a tax hike or cut in public services. That claim is simply false.

However, if voters decide that major additional bond measures are required between 2010 and 2020, those may well have fiscal consequences.

If you want to minimize that risk, look for a gubernatorial candidate in 2010 who is prepared to take a hard-nosed look at the cost-effectiveness of existing programs, e.g. the very expensive
automatic three strikes law.

Juan Pardell said...

Juan P.

Actually, I consider myself a fiscal conservatice , and I believe the Jarvis Group is dead wrong on this issue. Over the next twenty years, our state will undertake many new infrastructure projects. In my opinion, none is more important than adding high speed rail. As Ron Diridon stated, California, and the United States, are so far behind the rest of the world when it comes to innovative transportation methods. I'm sure the project will be opposed by many. I suspect the oil/gas industry will be vigorous in their opposition. Obviously, HSR will affect their bottom line. Then again, the oil companies are our friends (sic).
HSR, will connect our state in a manner that no other method of transportation can provide. Our state should be the first in the country with this technology.

Anonymous said...

GO funds are supplied by taxes.

If you float a GO bond, it is serviced from GO funds. This almost 10 billion dollar bond measure over the course of 30 years is going to take 30 billion out of the general fund.

The bean counters are so obsessed with how much is being taken out each year, they now propose in AB-3034 to make it a 40 year bond, adding considerably more to the overall cost of the bond, but taking a little less each year.

Now you can say, this bond won't directly raise your taxes, but presumably your taxes are tied to how much money in needed in the GO fund. OK, take money out for this project you do one of two things, cut other programs that are taking funds from the GO pool, or raise your taxes.

The 6% from the legislative analyst as pointed out is only with bonds currently outstanding or presently proposed.

However, our dear Governor talks about needing $500 billion worth of new infra-structure over the next 30 years.

The bloom is off the rose in California. We have over developed and used up a considerable amount or our natural resources. From the best school system in the nation, we are now at the bottom or next to the bottom on academics. Most of this down trend, in my estimation because of Prop 13. Having lost our lead in education, we are losing it rapidly everywhere. The public service unions, especially the prison guards, have gotten such rich pension and salary deals, all the money being siphoned to them is killing most other areas in the state.

The project, will do little to solve existing problems with transit in the state. It is being promoted under false pretenses (10 billion as a down payment, when 25-30 billion is what is needed).

Hopefully the voters will see through all of the deceptions and just vote NO.

Spokker said...

"From the best school system in the nation, we are now at the bottom or next to the bottom on academics."

K-12 is a wash, but we have a great public college system.

Cal said...

funny how the Jarvis prop 13 people
always paint every issue as wasting
taxpayers money...GEE most of these
Prop 13 Luckys pay about 1/3 of everyone else pays in taxes!! NOW that is a waste of MY TAX DOLLARS!
Our "friends in Menlo Park" must enjoy this..must be nice!!YES on Prop 1!! for JOBS and Freedom!

nikko pigman said...

Anon said

taking only 6% of inter city auto traffic.

That figure doesn't refer to intercity auto traffic. I've read the report. That 6% figure accounts for ALL auto traffic, including intracity traffic and a short drive to the grovery store. Obviously these take up a huger percentage of auto traffic than intercity traffic to Central Valley or to the Bay Area.

And I think we've said this about a 1000 times: the only argument is "well, they made up their numbers". These "made up numbers" were concluded by reliable sources, not Howard Jarvis or Paris Hilton. Yeah, show me proof.

Tony D. said...

I knew anon anti-tax couldn't answer my question. He, or she, is probably in their 80's, sit's on a fat fortune, and could care less about the state around them! When it comes to the anti-tax, far right, they would rather take food out of a kids mouth then tax the wealthy...such a shame! Go Prop. 1!!

Anonymous said...

@ nikko pigman

You don't know what you are talking about. If you possibly belive that 117,000,000 trips is 6% of all yearly car trips of all California. Just think about what you have said here.

Mike said...

Anon,
116 m trips * 200 miles/trip = 23.2 b miles
23.2 b miles / .06 = 387 b VMT
387 b VMT / 50 m = 7,700 VMT per person
Current US VMT is around 9,000-10,000 per person

So maybe it's 5% instead of 6%. Or maybe avg trip is longer than 200 miles. But clearly the figure is in the right ballpark if you, you know, stop to think about it.

Anonymous said...

@mike

I suggest you read again what nikko pigman said.

"That 6% figure accounts for ALL auto traffic, including intracity traffic and a short drive to the grovery store."

That's what I was saying was nuts. Your talking about 200 mile trips -- that's to the point.

If you read Cambridge's projections, you find they don't know how many inter city trips are make. The did a survey of a relatively few drivers and extrapolated those results.

Their whole study just smells of "garbage in garbage out" results.

In any case, CHSRA got the numbers they wanted.

Matt said...

I live on the east coast, have never been to California, and yet, I've been following the HSR proposal in California with great interest. The US is far behind the rest of the world in devising and implementing efficient transportation solutions. I believe that once a HSR system is implemented within the US, other systems will follow, hopefully within the eastern corridor.

The only real opponents to such a system seem to be those who fight government spending in any form. Yet, they don't seem to oppose more spending to expand the highway system. It could help many problems: reliance on oil, air pollution, climate change, and it would cost less than expanding the highways! It, of course, could solve any of these problems on its own, but it is part of the solution.

This would be a huge boon to the state economy. Furthermore, the nation as a whole could benefit if California could get the ball rolling on HSR.

mike said...

@Anon -

I read both what you said and what Nikko said. I showed that under the 117 m trip figure that you cite, HSR could plausibly account for 6% of all auto traffic in California. It would account for a much higher share of 200+ mile trips, of course, as you would expect. For example, the airlines currently account for roughly half the trips between SF and LA, and they offer a much inferior service to HSR.

In fact, it turns out that Californians only average 5,938 VMT/person. So if each HSR trip averages 200 miles, then ridership would have to hit 89 million in 2030 to account for 6% of all auto traffic. At 2008 population, that's equivalent to ~65 million trips/year if the full system were already in operation, which doesn't seem unreasonable. For example, Taiwan's new 210 route-mile HSR already carries 30 million trips/year serving a population of 13.3 million, and it's still in the growth phase. The 700 route-mile CA HSR system would serve 30.1 million at 2008 populations - 65 million trips/year at current pops would not be unreasonable.

mike said...

Incidentally, 6% of all California auto traffic is more than the entire Bay Area sections of 101, 880, 580, 680, 80, 280, 24, and 85 currently carry. Anyone who implies that carrying "only" 6% of California auto traffic is no big deal is saying that they don't think it would be a big deal for the state if every limited-access freeway, bridge, and tunnel in the Bay Area suddenly disappeared tomorrow.