By Eric Fruits, Ph.D.
While much of the region is stuck at home under the governor’s “stay home, stay safe” order, the Metro regional government is charging ahead with a $7 billion “T2020” transportation package focused on an expensive and unneeded light rail line. Unlike Metro’s recently passed taxes for housing services, T2020 will impose hundreds of dollars in new taxes on just about every working person in the region.
To fund its massive spending plan, Metro has settled on a new poll-driven tax: a payroll tax anticipated to cost about $250 million a year. Approximately 925,000 people work in Metro’s jurisdiction, so the payroll tax will be about $270 a year per employee. Where will that payroll tax money come from?
In most cases, the payroll tax will fall on the workers. A review of the research on payroll taxes concludes that workers tend to bear nearly all of the burden of payroll tax, even if the tax is levied on their employer: “virtually all applied incidence studies assume that both the employee share and the employer share are borne by the employee (through a fall in the net wage by the full amount of payroll tax).”
Research published earlier this year concludes “the employment effects of payroll taxes are concentrated among low-skilled workers and workers performing routine tasks.” In other words, payroll taxes are regressive and disproportionately burden low-wage workers. There are several ways workers would bear the full burden of the payroll tax.
Employers will reduce wages. They may not directly cut workers’ wages; instead, workers may find that they don’t get the annual pay raise they expected. Employers may cut workers’ hours. Wage reductions can come in the form of making workers pay more for employer provided benefits such as health insurance. Wage reductions can also come in the form of reduced benefits like less vacation pay. There are many ways to push the costs onto employees.
Employers will reduce the number of workers. Hiring plans can be put on hold, and retiring workers may not be replaced. Evidence indicates some firms replace low-skilled workers with higher-skilled workers. Other firms replace low-skilled workers with technology, as seen with restaurants replacing employees with computer ordering kiosks. With the pandemic, some firms have learned there’s no special benefit to doing business in the metro region. Why not move to Bend, Vancouver, or Boise?
Proponents of the payroll tax argue the money will come out of company profits. This is simply not true. Currently, Metro’s payroll tax would be assessed on all employers, including nonprofits and government agencies which have no profits to tax. Portland-area businesses have already had their profits extracted with Oregon’s Corporate Activities Tax, Portland and Multnomah County’s business income taxes, Portland’s Clean Energy Fund tax, and Metro’s new business income tax that goes into effect next year. There are no more profits to tax.
Unlike Social Security, Medicare, and unemployment payroll taxes, workers paying Metro’s payroll tax receive no direct benefit. Most of the tax will be used to build a light rail line from Portland to Bridgeport Village—a light rail line that will worsen road congestion. The project anticipates tearing up Barbur Boulevard and adding congestion to dozens of intersections and highway ramps. Workers will be handing over a chunk of their paycheck for projects that will make their lives worse, not better.
For years, TriMet has been violating its contractual obligations with the Federal Transit Administration regarding operations of the Yellow, Green, and Orange light rail lines. For example, TriMet promised both the Yellow Line and the Green Line would run 8 trains during peak hours in 2020. In contrast, before the pandemic TriMet was running only 4 trains an hour on these lines. TriMet promised the Orange Line would run 6 trains during peak hours in 2020; instead, before COVID-19 it had been running 23% below the promised levels.
Metro’s transportation package is a monument to misplaced priorities, and its reliance on regressive payroll taxes makes it an abomination. It’s time to tell Metro enough is enough.
Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.
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By Rachel Dawson
Is it possible to spend billions of dollars on transportation to make congestion worse? According to Metro, the answer is “yes.”
More than 75% of residents in the Portland tri-county region commute to work by car. Therefore, it should come as no surprise that a similar percentage of voters surveyed by Metro consider traffic congestion a serious problem (73%) and say that improving roads, bridges, and highways to ease traffic should be a regional goal (78%).
Share of respondents who answered each issue is an “extremely” or “very serious” problem.
Next year, Metro wants to raise at least $3 billion in taxes for its transportation package (informally known as “T2020”). That $3 billion is just for what Metro calls its “Tier 1” projects; it still has a long list of “Tier 2” projects that could significantly increase the price. To pay for all that, Metro is considering bonds that would increase property taxes, an additional vehicle registration fee of up to $59, an income tax, or possibly a sales tax. Conservatively, Metro’s transportation package would cost the average household an additional $530 a year in taxes and fees and would be the largest proposed tax increase in Metro’s history.
But, Metro’s T2020 tax package is not the proposal residents in the region want. Close to $2 billion from the plan have been earmarked for transit. Of that amount, nearly $1 billion would go toward a light rail line to Bridgeport Village. Another $50 million would be spent on planning for a MAX light rail tunnel under the Willamette River—planning that most survey respondents did not support. Millions more will be spent devising potential MAX light rail expansions along Powell Blvd to I-205 and 99E from the Orange line’s last stop in Milwaukie to Oregon City.
In contrast, when voters were surveyed regarding the goals for additional transportation funding, more than twice as many people indicated that widening roads and highways to address bottlenecks (31%) was their first choice, compared with only 13% of respondents who preferred providing more frequent and faster bus and MAX service. Widening roads was by far the most popular choice, beating out retrofitting bridges to be earthquake resilient and improving pedestrian safety on streets.
Finally, when asked about specific types of projects that could be funded by a transportation ballot measure, repairing potholes had the highest percentage of support (86%), while upgrading MAX to run underground at a cost of $5 billion dollars was the only potential project mentioned to have support from less than half of respondents (only 44%).
Portland residents were clear about what they want: better roads and less congestion on roadways. They were equally clear about not supporting MAX upgrades.
Instead of crafting a measure that reflects what people want, Metro has chosen to allocate the majority of funds in their 2020 transportation measure to areas that received the lowest amount of support, such as public transportation and biking/walking infrastructure improvements. It is clear these are projects that Metro staff, not voters, want for the region.
Based on respondents’ answers, officials should consider adding auxiliary lanes on freeways and major arterials to address congestion in bottlenecks. For example, a new auxiliary lane on I-5 southbound from OR 217 to I-205 brought congestion levels down from five hours a day to only one; and an auxiliary lane added to 217 between 99W and I-5 S improved congestion from four hours to zero. Adding auxiliary lanes decreases the number of merges that occur at a given section. This in turn would lead to fewer vehicle emissions, as cars idling in congestion produce more emissions than driving in free-flowing traffic. Also, merging onto a freeway is a major cause of accidents, so decreasing the number of merges also improves safety.
Metro staff seem to forget their job is to serve the public. They are attempting to force their own transportation agenda on the region instead of providing the improvements residents say are most important. Portland metro residents should stand up to this bullying by voting “no” on Metro’s transportation bond measure next year. We need improved transportation, not more low-use government pet projects.
Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was published by Pamplin Media Group on November 27, 2019.
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