The SCDOT Math Word Problem

Facts

The SCDOT is funded by a dedicated revenue stream that consists primarily of the gas tax. The gas tax has remained at the same rate for 25 years. The gas tax brings in 60% of the current projected annual needs of the agency. The current funding needs accumulated to date equal $6 billion. The state has over 1,200 deficient bridges.

Question

Which of the following choices would best allow SCDOT to meet their needs?

1. Do nothing.

2. Borrow money (issue bonds).

3. Divert revenue from the General Fund.

4. Index the Gas Tax.

Answer

Option 1 is the worst choice because delay will exponentially increase future repair costs.

Option 2 has limited appeal for new construction projects because the cost of money (i.e. – interest rates) is cheap. However, using debt to cover repair costs is irresponsible and all debt financing shifts the burden to future generations.

Option 3 has limited appeal to pay for current emergency maintenance needs. However, using General Fund revenue to subsidize SCDOT is bad tax policy. Shifting unrelated revenue streams from the General Fund, such as income tax revenue or sales tax revenue, to pay for roads confuses the revenue streams and prevents future simplification of the state tax code. Furthermore, excess revenue (over budgeted amounts) should result in lower tax rates especially in the personal income tax brackets. Remember, income taxes, being confiscatory and punitive in nature, represent the worst form of taxation next to real property taxes.

Option 4 has the broadest appeal. Though no one likes tax increases, the gas tax represents a pay as you go fee and is the fairest approach. Indexing to CPI with a cap allows sustainability and controlled growth.

 

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