Toll-and-Borrow a Car-Toll Trap


Reading Steven Frias’s commentary in today’s Providence Journal points toward a possibility that should really be emphasized as the General Assembly embarks on a session during which some are saying truck tolls are a done deal.  Frias notes decades of resistance to tolls, in Rhode Island, and emphasizes that:

In the past, new taxes have been expanded after efforts to avoid the tax led to revenue shortfalls. For example, in 1969, Gov. Frank Licht’s investment tax was adopted. It was an income tax limited to only interest paid on savings accounts, dividends, and capital gains, which significantly impacted a small minority of taxpayers. But after millions were withdrawn from savings accounts in Rhode Island banks and reinvested into tax-exempt bonds to avoid the tax, the investment tax ended up generating far less in revenue than originally estimated. As a result, in 1971, a state income tax was imposed on all.

In particular Democrat Governor Gina Raimondo’s toll-and-borrow scheme is practically designed to ensure that tolls expand to cars if the actual collections fall short of the estimates (and they will).

Some have wondered why the governor is so insistent on rushing forward with a revenue bond when a general obligation bond would be sure to pass at the ballot box and would save the state tens or hundreds of millions of dollars in interest.  I’d argue that this financing mechanism would be contrary to the state constitution if we had a real judiciary, but even if that isn’t the case, why waste taxpayer dollars?  One obvious explanation is that unnecessarily high interest on the debt makes RhodeWorks a twofer for Raimondo’s friends and backers, funding work for the Laborer’s union and a windfall for Wall Street investment types.

Another explanation could be that people in state government have their eyes on much more revenue — revenue that’s relatively easy to ratchet up and that doesn’t count in some measurements of the state’s tax burden — by taxing cars.  From this cynical perspective, we can observe that placing a debt of the state on the rickety planks of such a narrow bridge makes it likely that the revenue source will prove inadequate, practically obligating the state to expand the base, specifically to catch the driving piggy banks that can’t simply route around the state: those of us who live here.

Such a cynic might also expect that the governor has the calendar worked out with the expectation that she’ll have moved up to bigger and better things by the time this becomes clear.  (She certainly has the investment experience to know how to structure the bonds to ensure the delay.)  But even without that level of cynicism, it’s reasonable to conclude that one truly “done deal” should be the end of the political career of any legislator or executive who brings any tolls to the state as part of this particular project.

  • Rhett Hardwick

    “the investment tax ended up generating far less in revenue than originally estimated. ”

    “That which you tax, you diminish” – Jefferson?
    And this comes as new knowledge to who?

    In the 70’s the British instituted a tax on unearned income which approached 110% . The Beatles left England.

    • Russ

      I searched for that one and couldn’t find any citation for the quote. Jefferson did say “A tax on whiskey is to discourage its consumption; a tax on foreign spirits encourages whiskey by removing its rival from competition…” (to Samuel Smith, 1823). He also wrote about taxing dogs so owners would kill more of them…

      So we can only conclude that Jefferson would have opposed tolls and advocated instead taxing dog owners to pay for bridge repair.

      • Rhett Hardwick

        I was uncertain about Jefferson, that is why I put the question mark after his name. The full quotation, as everyone knows, is “That which you tax, you diminish, that which you subsidize, you increase”. Your quotation is perhaps why the idea is associated with Jefferson.
        To extend your conclusion, if we tax dogs to finance bridges we may find the bridges littered with dog cadavers. Fortunately, they all go to heaven.

      • Max

        Russ, instead of your usual obfuscating by steering us into another Jefferson debate, tell us what you think of the Governor’s pronouncements that there will never be tolls on cars in this State. Not that it means much but at least the Speaker added a qualifier when he said it.

        • Russ

          Um, there already are tolls on cars in this state.

          My take, the right may well win a Pyrrhic victory on this one where Rhode Islanders instead win the right to pay for critically needed bridge repairs via a traditional infrastructure bond, allowing out of state truckers to roll through unmolested on your dime. Seems to me like a strange fight.

          fwiw, I wasn’t trying to debate about Jefferson. Rhett accurately qualified it, and in any case Jefferson probably did think that. You know, I just love reading Jefferson.

          • Max

            There’s nothing at all strange about this fight. I don’t think the majority of Rhode Islanders would mind if out of state truckers paid for our infrastructure but that’s not the reality. When the governor says cars will never be tolled, she can’t promise that. When she says that there is no other plan out there, that’s an outright lie. That’s not even touching how she plans to finance it. Unless I missed it, I find it interesting that even the usual left wing pundits including you haven’t jumped on her band wagon. It’s very telling and probably worrisome to many in the GA.

          • Russ

            So the right is worried that the state might actually charge citizens for the services they use vs. continuing to use taxpayer dollars to subsidize a special class of citizen at the expense of others? It’s like bizarro world over here and an interesting example of how framing can override the facts.

            In then end, this is likely a choice between “toll and borrow” and “no toll and borrow”. I have little doubt an infrastructure bond would pass if the money was dedicated to bridge repair.

          • OceanStateCurrent

            That comment is classic Russ… treating the single of tolling in the abstract as if it is the only factor to be considered in a complicated question of public policy.

          • Russ

            Notably you don’t deny that paying for this from general revenue is the likely outcome if the toll proposal fails. That’s not at all a comment in the abstract, nor was it intended as support for either payment model. I’m simply puzzled that the right seems to prefer that.

            (I can always tell I’m on to something when Justin opts to attack me instead of defending his own position)

          • OceanStateCurrent

            Good. Take it from general revenue without increasing general revenue. That’s the point. Alternately, cut general revenue and replace it with user fees. As usual, you’re just trolling.

          • Max

            LOL! Yea, because there are no other options right? Yes, lets suck what little life is left in Rhode Island’s dying economy and move on.

  • Tommy Cranston

    The lie to the “Never Toll Cars” bleating from our union whore politicians can be exposed by one simple question:
    “Will you support a CONSTITUTIONAL AMENDMENT unambiguously barring tolls on cars”

    Local media-are you listening?????