Marin Voice: Liberal voters should reconsider support of sales taxes for public transit

Three years after the COVID-19 pandemic began, public transit ridership has not returned to pre-pandemic levels. Because of the evolving hybrid work schedules constraining transit use, ridership may never return to those levels.

Low ridership comes with unavoidable financial challenges. With significantly lower fare revenues to fund transit services, alternative funding sources need to be found. Otherwise, the transit systems face the dreaded “death spiral” of service cuts and further declines in patronage.

Taxpayers beware. The plan emerging from the Bay Area Rapid Transit District and other regional planners to address the funding shortfall is to place a regionwide sales tax on the ballot in 2024 or 2026. Such a tax will pose significant conflicts among the social goals shared by liberal San Francisco Bay Area voters.

Proponents of the tax measure will claim that individuals who depend on transit need further support. I have concerns about the truth of that statement.

Most riders on local buses are transit-dependent. Not so for “choice riders.” They take public transit to jobs in downtown San Francisco and Silicon Valley. Naturally, the transit agencies facing “fiscal cliffs” and most in need of financial aid are those serving downtown San Francisco and Silicon Valley.

Claims that passing a sales tax will address inequities in our society are also specious. Sales taxes are incredibly regressive, burdening the least affluent among us far more than the affluent.  Sales taxes already being collected for transit are not minor. Last year, Marin households paid an average of $971 for just the Sonoma-Marin Area Rail Transit District commuter rail and the Marin Transit bus service.

What most voters don’t understand is that the majority of the sales tax we pay is hidden and incorporated in the pretax price of all goods and services.

For local businesses, the sales taxes they pay are a cost of doing business in the county and that cost is included in the pretax prices they charge. Even tax-exempt items like food and “tax exempt” services contain some cost for the sales taxes the business pays.

Liberal voters need to face up to the fact that the sales tax is the most regressive tax in wide use. When supporting such funding for a desired public service, they ignore the reality that the more affluent save a higher proportion of their income than less affluent households do. The result is a higher tax burden on the least affluent among us.

All transit agencies will receive some bailout funds even though some don’t need additional funding.

For instance, SMART recently reported $100 million dollars sitting in two bank accounts. More funding would only increase its cash position and have little impact on rail services since service frequency is constrained by SMART’s single-track system.

But, in order to obtain “buy in” from local politicians, revenues raised from a regionwide tax will be allocated based on geographic “fairness.” Every agency that exists will get a bite of the tax revenue apple – whether they need it, deserve it, or not.

The cost of providing transit services varies significantly by agency and so does the amount taxpayers pay to subsidize ridership.

In 2019, the taxpayer subsidy for Marin Transit was $6.46 per rider. By contrast, the taxpayer subsidy for SMART, which appears to service more affluent “choice riders,” was $32.64 per rider. In the middle of the pandemic, the subsidy for Marin’s bus passengers rose to over $15.  SMART’s rose to $196.

There is no doubt that without additional funding the big operators serving downtown San Francisco will need funding forever to maintain services at current fares.

Therein lies the conflict: Subsidizing the transit-dependent population is consistent with liberal social goals. Increasing taxes on the less affluent to further subsidize the more affluent to take public transit is not.

Mike Arnold is an economist living in Novato.