The Political Notebook 1.31.2024
MAGA legislative hits and misses: per-mile taxes, DEI training, ESG investing, banking and politics.
Premature to ban per-mile taxes
MAGA Republicans in the Legislature are trying to prohibit any tax based upon vehicle miles traveled. They are moving both a bill (SB 1010) and a referral to the ballot (SCR 1002), the latter of which would evade a gubernatorial veto.
This is another example of how the right-wing populism of the MAGA movement differs and departs from economic conservatism.
Economic conservatives tend to favor user fees more than liberals, charging people based upon relative benefits received. This has been particularly true for road construction and maintenance.
Much of Arizona’s transportation finance is based upon this concept. Our state gas taxes and car registration fees are deposited in what is called the Highway User Revenue Fund and earmarked for road construction and repair.
The idea of replacing the gas tax with a tax based upon miles driven mostly gained currency in libertarian and conservative think tanks. Robert Poole, director of transportation policy at the Reason Foundation, is the leading intellectual on the right pondering these things. In 2019, he published a policy paper, “How a state could transition from per-gallon taxes to per-mile charging”, fleshing out the idea.
The argument is that a per-mile charge would be a more reliable revenue source and a superior user fee, given the variation in fuel efficiencies among vehicles and the general direction of vehicles becoming more fuel efficient.
The idea hasn’t gotten much out of the think-tank lab because of the issue of how to collect the per-mile charge. The least intrusive way would be self-reporting odometer readings at the time car registrations are renewed. The opportunities for cheating are self-evident. The most intrusive way would be some sort of device in the vehicle that uploads mileage numbers to the government or a third-party contractor, which does have a whiff of Big-Brotherism – although Big Brother already knows all about your house, for purposes of levying the property tax, and how you make a buck, for purposes of the income tax.
The collection of the gas tax is simple and unintrusive, folded into the price at the pump. The superiority of the per-mile charge as a user fee hasn’t been enough to overcome the greater collection issues. The gas tax has been a reasonable enough proxy for miles driven. However, the growing market share of electric vehicles, which don’t pay the gas tax but use the roads, changes things, and improves the case for substituting a per-mileage tax.
How to pay for roads in the context of improving fuel efficiencies and electric vehicles is an important challenge without clear-cut answers. At best, it is premature to take per-mileage charges entirely off the table.
I would be remiss without acknowledging that I am as responsible as anyone in breaking the user fee connection in building roads in Arizona. In the 1980s, I served a stint as vice president of public affairs for the Phoenix Chamber of Commerce. In that capacity, I was a chief architect of the half-cent sales tax to build a freeway system that Maricopa County voters approved in 1985.
It was the only funding source that would raise the money necessary to do the job in a reasonable period of time. The increase in the gas tax that would be needed was not only politically infeasible, it was a political belly laugh.
I intended this to be a one-off, a temporary use of a general tax source to catch up with a couple of decades of neglect in creating a freeway system that had been sketched out back in the 1960s. After the construction catch-up, my intention was for the sales tax to disappear and to return to user fees for maintenance and further improvements. Needless to say, things didn’t work out that way.
DEI training and ESG investing bans warranted
MAGA GOP legislators are also trying to ban mandatory diversity, equity, and inclusion training in state and local government (SB 1005) and the use of environmental, social, and governance factors in public investments, including pension funds (SB 1013). They are on firmer ground in these endeavors.
DEI training is a euphemism for indoctrination in identity and grievance politics, as anyone who has endured one can testify. Identity and grievance politics rejects the concept of an aspiring American meritocracy as a snare and a delusion. Instead, groups are stratified based upon what the DEI gurus regard as unearned privileges. Those with high privilege owe those with low privilege compensatory deference, irrespective of individual circumstances or merit.
It is a pernicious ideology that has infected way too many of our institutions. And mandatory training that features it can be banned without the large risk of unintended consequences that, for example, was inherent in the effort to ban critical race theory in school curricula.
The bill generally does a good job of describing the training that is to be proscribed. But it does reach somewhat beyond that and gets into unintended consequences territory. For example, the bill prohibits “any policy or procedure designed to influence the composition of (the governmental entity’s) workforce on the basis of race, sex or color.” This could be interpreted to forbid benign affirmative action outreach efforts to expand diversity in the applicant pool, such as advertising in outlets serving minority populations. The Arizona Constitution already forbids racial preferences in public hiring. The bill should be stripped down to only address mandatory DEI training.
ESG investing is losing favor in the marketplace. Prohibiting it for public investment funds is still a useful step.
Those managing these funds do already have a fiduciary responsibility to maximize returns for beneficiaries. But fiduciary responsibility can be an elastic term. There have been, and continue to be, rationales offered as how taking into consideration things other than pecuniary returns is part of a fuller concept of fiduciary responsibility. And from time to time there are proposals to use investment funds managed by the government to achieve other political objectives.
Nailing down in statute a narrow view of fiduciary responsibility is warranted.
Economic liberty for bakeries but not banks
These two measures – banning mandatory DEI training and forbidding ESG investing – are legislators putting restrictions on what governmental entities can do.
An argument can be made that extending the proscriptions beyond state government to local governments is an overreach, that local governments should be free to make these determinations on their own. I’m generally sympathetic to that argument. But, in these two cases, I think the principles involved are of sufficient statewide importance and impact to warrant the preemption.
The situation is different when legislators seek to similarly direct private sector activity. Another bill by the MAGA legislators would prohibit private sector financial institutions and insurance companies from refusing to do business based upon the politics of the client or potential client (SB 1014).
The support by the MAGA movement for private property rights is, at best, spotty. There is no individual or collective right to get a loan, or banking services, or insurance coverage from any particular company. The First Amendment right of association includes the right not to associate. A financial or insurance company that refuses to serve particular groups or industries for other than sound underwriting reasons puts themselves at a competitive disadvantage. But they should answer for that to their shareholders, not the government.
According to MAGA politicians, government shouldn’t compel a bakery to provide services to a gay wedding. But government should compel a bank to provide services to a gun manufacturer.
Sort of ironic for a group that fashions itself a Freedom Caucus.
Reach Robb at robtrobb@gmail.com.