Five takeaways on transportation bill
House proposal sure to unleash fierce jockeying by interest groups
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LEADERS IN THE Massachusetts House on Wednesday unveiled an approximately $600 million transportation revenue bill.
The bill will raise the gas tax, increase the minimum corporate tax paid by large corporations, increase fees on ride-hailing services, and force rental car companies to pay sales tax on the cars they buy.
Lawmakers say new money is necessary to address the state’s traffic and transit woes. “Our residents, our communities and our economy are dependent upon an immediate source of revenue,” said House Speaker Robert DeLeo.
The bill will be the subject of intense lobbying from business and transportation interests over the coming months. Here are a few flash points in the debate.
The bill would create a new nine-tiered system to increase the minimum tax corporations must pay, based on company size – from $456 today to as high as $150,000 for businesses with more than $1 billion in annual sales.
Businesses were among the top cheerleaders urging lawmakers to raise transportation revenue, saying their employees were having trouble commuting to work. But they are less enamored with paying for it.
Rick Dimino, president of the business group A Better City, a strong advocate for transportation funding, urged lawmakers to reconsider the corporate tax increase and focus on revenue sources directly tied to transportation. Dimino said transportation taxes and corporate taxes are “apples and oranges.” He said focusing on transportation-related revenue – like tolls or congestion pricing – is necessary to ensure reliable funding and change behavior.
The Greater Boston Chamber of Commerce similarly called the corporate minimum tax increase “problematic.” “This is a troubling signal to business in a time when cities and states around the country are competing for jobs and economic growth,” chamber officials said in a statement.
Chris Geehern, a spokesman for Associated Industries of Massachusetts, said his organization is still gathering feedback from members, but AIM believes any taxes raised to fund transportation should be linked directly to transportation.
On the other side, Raise Up Massachusetts, a labor-backed coalition, argues that companies should pay more. “Large corporations make massive profits by using our transportation infrastructure to move their goods and customers, and they must pay their share to help fund transportation improvements,” Raise Up said in a statement.
Who will pay the new ride-hailing fees?
House Ways and Means chair Aaron Michlewitz called this a “progressive, balanced” fee increase that ensures those who need the services most are not disproportionately affected “while making sure those who can afford it are paying more to support our transit needs.”
However, a provision in the bill also requires ride-hailing companies to “hold consumers harmless” from fee increases – in other words, to not pass the fee onto riders.
Company lobbyists note that the main way to incentivize shared rides would be to pass on the fees.
“The House is proposing a significant tax increase that will disproportionately harm working families — and even worse, they want to do it secretly because they know their constituents rely on the affordability of ridesharing,” said Uber spokesperson Alix Anfang.
Asked how a fee that cannot be passed on would incentivize consumer behavior, Michlewitz explained that companies will not be allowed to directly pass the fee onto consumers, but companies will be encouraged to develop new ways to incentivize customers to take shared rides, including through pricing mechanisms. “We’re talking about an innovation company that created dynamic price structures no one’s ever seen before. They can figure out new ways to incentivize those types of rides,” Michlewitz said.
According to Uber, 20 percent of riders live in households earning under $25,000 a year. Lyft says nearly half its rides start or end in low-income communities.
Lyft spokeswoman Campbell Matthews said, “Raising rideshare taxes by over 500 percent could hurt low-income riders and reduce the transportation options available, especially for those outside Boston.”
The car rental war
Traditional car rental company Enterprise and peer-to-peer car sharing service Turo have engaged in a nationwide battle over what regulations and fees should apply to online platforms that let private individuals rent out cars.
In Massachusetts, Enterprise was pushing for legislation to regulate Turo like a car rental company and require its customers to pay various fees. In response, Turo lobbied for a bill to eliminate car rental companies’ exemption from the state sales tax.
In a move likely to infuriate car rental companies, the House bill would raise $110 million by eliminating the sales tax exemption they enjoy when buying their auto fleets. House Majority Leader Ron Mariano called the existing exemption a “glaring kiss to the industry.”
Car rental companies say they are like any business that buys goods wholesale without paying sales tax. Although rental companies buy cars without paying sales tax, they collect on rental transactions, and eventually sell the cars to consumers who pay the sales tax.
The bill also regulates peer-to-peer car sharing. It would impose safety and insurance requirements, require cars to have a decal and require transparency in pricing, similar to rules governing the ride-hailing industry. It would also require car-sharing platforms to collect a new fee of $1 per day per rental.
Michelle Peacock, head of government relations for Turo, praised the bill for eliminating traditional car rental companies’ sales tax exemption and said it “not only levels the playing field but will help fund Massachusetts’s transportation shortfalls and provide more economic opportunity to the state.”
What Transportation and Climate Initiative?
Lawmakers are growing increasingly uncertain about the future of the Transportation and Climate Initiative, a regional cap-and-trade system that would put a price on gasoline emissions.
Gov. Charlie Baker is a strong supporter of TCI. The House bill does not count on any TCI money.
DeLeo called the future of TCI “very iffy,” noting that no other state has committed to it. “It does not appear the TCI concept is catching on as we’d hoped it would,” DeLeo said. “That could change. If it does change, we’d adjust this accordingly.”
House Transportation chair William Straus said lawmakers are uninterested in “double taxation,” and the bill recommends an offset, so if TCI goes into effect, the first five cents of its cost would be covered by the gas tax increase.
That decision may please drivers at the pump, but it upsets Chris Dempsey, director of the advocacy group Transportation for Massachusetts. Dempsey would prefer two separate tax increases, arguing that Massachusetts currently has a lower gas tax rate than most states in the region. “We think TCI has the potential to be a transformational policy, and the House language seems to diminish the potential importance and value of TCI both for transportation and climate moving forward,” Dempsey said.
Is it enough?
Several pro-transportation advocates described the bill as a start and said they wished it went further.
Former transportation secretary James Aloisi, a regular CommonWealth contributor, said he is “underwhelmed.” “We need a transportation or revenue bill that produces much more revenue than this bill,” Aloisi said. “We’re talking about a need that’s in the billions of dollars. This doesn’t get you to three-quarters of a billion.”
On the other hand, Paul Craney of the conservative Massachusetts Fiscal Alliance said the additional taxes go too far. “These measures make it harder for people to make their home here and do business in the state and will only hurt the middle class—especially workers who have to drive,” Craney said.
A Baker spokeswoman said the governor, who has generally opposed gas tax increases, is still reviewing the bill.