“How should we pay for our roads and bridges?” Eulala Effersen asked as we waited for our coffee to cool.
“Are you asking a theoretical or a practical question?” I said.
“Is your emphasis the best way to balance who pays with who benefits? Or is your concern how do we get the Indiana General Assembly to come up with more money for roads and bridges?”
“Both,” she said.
“As far as practical politics goes,” I replied, “Rep. Ed Soliday of Valparaiso has an interesting proposal. He says raise the existing per gallon gas tax, shift existing fuel sales tax revenues from the general fund to roads and bridges, and offset the loss to the general fund by raising the tax on cigarettes.”
Eulala was making little steam engine sounds at her coffee. She gazed at me and asked, “Will it be enough?”
“Oh, Rep. Soliday wants local governments to help close the gap by passing or increasing their vehicular taxes often called wheel taxes,” I said.
“Then it’s going to cost Hoosiers more to operate cars and trucks,” she declared. “That’s makes workers less willing to travel long distances to work. Won’t that force some employers to pay more to get the workers they want?”
That causes prices to rise, she continued. “Higher taxes make store deliveries more expensive and then retailers will have to raise prices.
“All of this brings about inflation, drives jobs overseas, causes unemployment, and the evisceration of American society.”
I laughed heartily.
“I’m sorry to laugh at you, but you sound like those folks who never understood economics and pontificate about what politicians should do.
“All that linear inevitability in your rant means you neglect the more complex economic reality. If taxes go up, or if the minimum wage rises, it doesn’t mean that prices have to rise. Profits may decrease and the owners of companies may take less for themselves.”
“You’re a fool, if you believe that would happen,” Eulala laughed back at me. “Stock prices would fall and resources would be shifted to other investments.”
“Exactly,” I asserted. “And that reduces the wealth of the owners and the income of executives.”
“Next,” she said, “you’ll have companies trying to wring lower prices out of their suppliers, shifting the higher taxes, or the minimum wage, backwards through the supply chain. Fat chance of that.”
Undaunted, I said, “Most of all, you’re neglecting the benefits to those who use the roads and bridges. Trucks and cars will be safer, less damaged, move faster. Everyone can benefit from lower transportation costs. All this knee-jerk talk about higher prices, inflation and general economic calamity ignores the benefits of the increased infrastructure spending and a more equitable distribution of income.”
Surprisingly, Eulala gulped her coffee and left without another word. Some people don’t want to hear another side of the story.
Morton Marcus is an economist, writer, and speaker who may be reached at mortonj email@example.com.