CA Must Align Tax and Climate Change Policies, Says UC Professor

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California cities are not developing very much high-density housing, according to research by Professor Karen Chapple of the University of California

California’s tax policies are at odds with its climate change policies, said UC Berkeley Professor Karen Chapple in a talk yesterday at the University of California Center in Sacramento. The current tax structure encourages big-box development and sprawl, she said, while making it difficult to build infill and high-density developments that could reduce auto dependence and greenhouse gas emissions from transportation.

Local jurisdictions rely on a variety of taxes for revenue, including property, sales, and income taxes. Property taxes are used for school districts and other expenses that are outside of local control. In contrast, sales taxes are kept locally, which has led to many cities finding it lucrative to encourage retail development that produces sales tax revenue.

This has led to some perverse outcomes, like cities offering large retailers tax breaks to encourage them to locate within their borders, thus reducing the amount of sales tax revenue gained. It also leads to situations where people drive across city borders to shop at retail stores where the taxes they pay won’t benefit the city they live in.

While stopping short of suggesting specific tax reform measures, Chapple offered several principles to guide future tax reform from a perspective of making the tax system more consistent with climate change policies.

For example, she suggested sharing sales and property taxes regionally. For one thing, this would remove the incentive for cities to encourage large retail developments and discourage housing. And, she said, if sales taxes were allocated on a per-capita basis, jurisdictions would be encouraged to build more housing and to meet their Regional Housing Needs Assessment targets—targets set out in regional planning documents but resisted by many municipalities.

She also suggested the state find a way to return more property taxes to municipalities, to give them an incentive to build more housing, which might then lead to more balanced development. She acknowledged that this would be complicated, however, and that past attempts to do so have not been successful.

More directly, the whole tax system should be linked to environmental and sustainability goals, said Chapple. That would mean the gas tax, for starters, which theoretically could be a way to link behavior with outcome: if you drive more, and pollute more, you pay more (but which currently does not work quite so simply). A VMT or a carbon tax would be even more direct, and an oil extraction tax (“California is one of very few states that does not have one,” she said) could have similar effects on consumption.

Professor Chapple also suggested finding a way to better use cap-and-trade revenues to subsidize new housing development. Cap-and-trade does currently fund the Affordable Housing and Sustainable Communities program, but on a painstaking, project-by-project basis. Chapple suggested considering allocating money to municipalities that agree to help finance local infill.

And, she said, the state should put some funding behind S.B. 375, which requires regions to create a Sustainable Communities Strategy (SCS) tying together land use and transportation planning. Although every region now has an SCS that includes infill targets and discussions of jobs/housing balance, without funding, S.B. 375 can offer little in the way of incentives or enforcement to make sure the strategies are fulfilled.

In her talk, and in the research conducted for the lecture she delivered yesterday, Chapple touched on what she called “the elephant in the room,” Prop 13, but noted that it’s a whole separate topic. This ’70s tax reform law has made California property tax unique among the states. One of its many effects is on household mobility, as it tends to keep homeowners in existing housing to avoid new, and higher, taxes. This contributes to a jobs-housing mismatch as people are reluctant to move closer to jobs or may find they cannot afford to move.

A panel discussion after Chapple’s talk included comments from Mac Taylor of the Legislative Analyst’s Office, who pointed out that changing the tax code can have many unintended consequences. The net effect of a VMT tax, he said, is unclear. People could find that, if everyone pays a tax based on how many miles they drive, they are less inclined to choose zero emission vehicles.

Chapple agreed that any tax policy would have to be carefully thought out. “We don’t want tax policies to get in the way of climate change policies,” she said, “or we’d be shooting ourselves in the foot.”

Katie Kolitsos of the Assembly Speaker’s Office pointed out that there are a other factors, outside of tax policy, that contribute to reluctance to build housing and infill, including the fact that it is easier and cheaper to build in new areas than in older, built-up areas. Also, she said, there is a huge need to fund planning. Many local governments don’t update their General Plans because they don’t have the money or the capacity to do so. That means that the Sustainable Communities Strategies don’t get incorporated into General Plans, and many municipalities approve plans that are based on outdated standards—like parking minimums, for example—that don’t further climate change goals.

Chapple’s talk was part of a series at the University of California Center in Sacramento that aims to bring UC researchers and legislators together to discuss data-based solutions to problems in California. It remains to be seen whether any legislators will pick up on any of Chapple’s suggestions.

“California has shown that its legislators are not shy about passing bold climate change legislation,” said Chapple. “We should not hesitate to experiment with sensible tax code reforms that support our climate goals as well.”

More information about Chapple’s research can be found at the University of California Center Sacramento website, where a policy brief and the white paper can be downloaded, and in this op-ed in the Sacramento Bee.

  • ZA_SF

    FYI – these issues are being worked on, or have already been answered to Oregon’s satisfaction.

    http://www.oregon.gov/ODOT/HWY/RUFPP/Pages/index.aspx
    http://www.californiaroadchargepilot.com/

    As of May 2015, the average age of cars on US roads was 11.4 years, which means all things being equal, by the time these kinds of programs are tested, legislated, and rolled-out, a lot of the fleet will turn over. The typical new car now has an incredible amount of data integration, so many of your technical concerns about smartphone integration (which should also be cheaper/more accessible) will probably be moot.

    http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_26.html_mfd

  • LarryTRN

    If you are in favor of a VMT tax system, I urge you to carefully consider the following…

    The primary justification cited by advocates of a VMT tax is that hybrid and electric vehicle owners aren’t paying their fair share for road improvements. Easy, easy fix: Impose a surcharge on these vehicles when the owners renew their plates each year; have one surcharge level for hybrid vehicles, and a higher surcharge for fully electric vehicles. If you like, throw in another surcharge for vehicles over a certain weight, as they cause more wear to the pavement. Problem solved.

    Yes, we do need more money going toward highway and infrastructure funding. I like having decent roads and bridges to drive on and I don’t mind paying more to do so. But all we need to do is raise the existing gas tax; it’s already in place, and you can start collecting that extra revenue right from day one. No one has offered a sound reason why a VMT system is superior to raising the existing gas tax. And if we were to switch to a VMT system, understand that that would involve creating a government bureaucracy from scratch. Take a moment to consider the millions of dollars that will be diverted away from highway funding just to create and sustain this new bureaucracy.

    In the VMT pilot programs across the country, there are multiple schemes floating around for collecting our mileage data, and none them are particularly appealing…

    Smartphone apps: This is completely unworkable, and by far the worst idea of the lot. How will this app know which vehicle I’m in? How will it know if I’m the driver or a passenger? How will it know if I’m in a rental car, or an Uber car, or a train, or a taxi, or a bus, or on a bike, or walking? Just because my phone is in motion doesn’t mean I should be charged for mileage. If you successfully address that issue, consider that I don’t use my phone’s location services. Some people leave them on all the time (personally, I think that’s silly), but I’m quite capable of getting around without the help of GPS, and I don’t need everyone on social media knowing my every move. Mainly, I keep the location services off because they are a colossal drain on the phone’s battery. Also, consider how easy it would be to cheat this system. I could leave my phone at home or put it on airplane mode while I run errands around town. Boom…tax-free mileage. Finally, consider the number of drivers who don’t own smartphones. There are plenty of them out there. How will you collect their mileage data?

    In-vehicle GPS device: Better idea than a smartphone app, but still has plenty of drawbacks. I travel thousands of miles annually in very rural areas where there is no cell signal. What happens when there are reception gaps in the tracking history of a vehicle? If you think satellite tracking is the answer, it’s not. Satellite GPS signals are far weaker than cell signals and are easily blocked by trees and buildings. Also, consider classic car owners. There are thousands of vintage machines on the road. How will you track them? My car, made before 1980, has no computer, no electronics, no data port. And I’m not about to let anyone hardwire a GPS unit to this classic vehicle that I’ve worked so hard to restore. As for those vehicles that will have VMT tracking devices installed, who pays for those devices? Who pays for their installation? Who pays for maintenance or replacement when they malfunction?

    Preset annual distance fees, odometer readings: These are the least objectionable methods being considered, but what I’ve yet to hear from anyone is how VMT will be handled across jurisdictions. Will we have one national VMT system or a patchwork of state systems that will surely have trouble communicating with one another? I drive all over North America…will I have to separate my mileage totals for each state that I pass through? Will I have to send an annual check to every state I’ve visited? What about all of the miles I log in Canada each year? Income tax preparation is already complicated enough…do we really need more record keeping added to mix?

    All of these issues will need to be addressed before you can roll out VMT to the masses. And, for the record, any of the above methods for collecting mileage data are open to fraud and abuse, some more so than others. Thousands of people will find ways to under-report their mileage. But you can’t cheat the existing gas tax; it’s already built in to the cost of the fuel. You pump the gas, you’ve paid the tax.

    Let’s assume for a minute that all of the issues I raised above can be successfully addressed. Fine. Now, answer the big question: Why? Why should we, as a nation, undertake the tremendous effort and expense of creating a VMT tax bureaucracy when we can quickly and simply achieve the same end result by raising the existing gas tax and placing a registration surcharge on hybrid and electric vehicles?

    When you encounter anyone who advocates the VMT tax, be they ordinary citizen or state legislator, ask them if they’ve actually considered all of the costs and logistics of creating a workable VMT tax system.

  • Having a carbon tax would be the most direct way to link tax policy to reducing global warming, but cap and trade functions in a similar way. Non-tax policies, like the renewable portfolio standard for electricity generation, standards for energy-efficient buildings, etc. are also important.

    Land use authority is still local though. Cities still have a lot of latitude to promote car-oriented development patterns if they so choose. The state is chipping away at that authority and trying to incourage infill but the freedom to sprawl is still mostly intact.

  • mememine

    CO2=Y2K²

    Climate blame “believers” look like the last fella to ever wear disco pants to the party. Move on.
    Even Occupy no longer mentions CO2 in it’s demands because 35 more years of climate action delay and global disbelief is certain and unstoppable.

    “Grampa, were your climate gods also only 99% sure the planet wasn’t flat?”

    Do you really want the billions of kids being goose stepped to exaggerated greenhouse gas ovens remembering you as a climate blame drama queen?
    Climate Blame will always be to liberalism what pro life is to neocons.
    Can we evolve?

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