I do not believe we can solve the deficit problem without raising taxes.  I also do not think that all tax increases on wealthier people are inherently bad.  I do not think the proposed tax rates are inherently bad relative to their effect on economic growth.  Furthermore, although I think we have a certain amount of “crony capitalism” in our country at all levels, money that gets redirected from the general public to a few favored corporate and union welfare systems, I think a certain amount of that will happen in any democract.

However, I have three fundamental issues with our tax system:

• Everyone should pay income taxes, except for the very poorest members of our society, and, for them, only for the period of time in which they remain below the federal poverty level.  Today, over 50% of Americans pay no income taxes.  That is wrong.  It disconnects over half of Americans from any economic stake in how income tax dollars are spent.  It has the psychological effect of deluding those not paying taxes that money will always be available from “the rich.”  Everyone should pay something.
• We need far tighter controls on how our tax dollars are spent.  I understand that, in a democracy, some uses of our tax dollars will go to causes that I would not personally support.  The majority of the voting public should help guide elected officials on the allocation of tax revenues.
• We need much more common sense in the way governments account for what they are spending, and what the long-term costs of that spending might be.  The whole issue of excessive retirement benefits has arisen because governments have hidden the long-term costs of these retirement obligations by using accounting rules that were prohibited for private businesses over two decades ago.  The Congressional Budget Office “scoring” of legislation is fundamentally flawed in two respects: first, it limits its evaluation to the ten-year period after the law is passed; and, second, it does not take into account the highly likely behavioral responses to a piece of legislation.  For example, any tax increase on businesses headquartered in the United States will cause some businesses to shut down U.S. operations and move investments and jobs abroad.  That kind of highly likely reaction to a tax increase is not factored into the CBO scoring model at all, even though any common sense evaluation of a tax law would take it into account.

However, at all levels of government, but particularly at the state and local level, taxes and bond proceeds are solicited for one purpose, and diverted from a completely different one, usually the enrichment of union leaders and other state employees.  When Connecticut created a fund for transportation improvements in 1984, most Connecticut residents would gladly support tax increases to upgrade our badly maintained transportation system.  However, year after year, the Special Transportation Fund has been raided for “general revenues,” which is a euphemism for paying rich retirement benefits to unionized and militant state employees.

Similarly, Connecticut established a fund for smoking cessation programs when it received a major settlement from the tobacco companies in 1998.  It has never used a penny from that fund for its intended purpose.  Every year, the fund has been raided for “general revenues.”

Connecticut is not alone in this regard. Diversion of funds from one budget line item to others is a regular practice of many states and localities, as noted in the Monday, November 14, 2011, issue of The Wall Street Journal, in an article entitled “Cities Hit as Funds From Bonds Pay Other Bills.” In that article, reports Ianthe Jeanne Dugan, Justin Scheck and Bobby White recount many examples of cities like Miami that routinely divert funds from their intended purposes.  The reporters stated:

“Cities and states across the country are using money designated for specific purposes—such as fixing roads or sewers—in order to fill financial holes elsewhere, according to public officials and records.”

We cannot allow governments at any level to use these “bait-and-switch” tactics, which, if used by large public companies, would subject them to SEC fines and penalties and investor lawsuits.

Governments need to clean up their acts before I feel comfortable with tax increases on anyone.  This is not about  dissatisfaction with uses of public money with which I disagree; it is about corrupt and dishonest uses of public money.

Finally, I believe all of us should know how our money will be spent and what the consequences of a particular government spending decision would be.  The projections and predictions about government spending are so flawed, as has been seen in the retirement benefits area, that I do not feel confident that we are getting the straight story.  This is not a result of dishonesty, unlike the fund diversion issue; it is just bad accounting.

For all these reasons, I would like to see some fundamental changes made in our taxing and spending policies before I would support any tax increases at any level.  At that point, I would be very comfortable paying my fair share of taxes.

Sometimes, the influence of bad human decision making on the scope of a disaster is obvious: Hurricane Katrina would not have been anything more than just another bad Gulf Coast hurricane, had the levees protecting big portions of New Orleans not failed to protect the city against water damage.  The levees were not built to protect against Category 4 or 5 hurricanes, so a disaster of the type that happened was inevitable and experts were not surprised when it happened.  Experts warned of this kind of problem, but were ignored year after year. Nevertheless, most of the time, we forget the degree to which we can anticipate disasters and minimize their impact.

In 1991, after Hurricane Bob, which hit Long Island, the Eastern Connecticut coast, and Cape Cod very hard, the homeowners association of which I was a board member could not initially secure a renewal of our property and casualty insurance policy from any carrier.  National media carried stories about horrific beach erosion in the 4-mile stretch of beach, beginning half a mile west of us.  The beach and the houses on it had been completely washed away by both the hurricane and a nor’easter that followed it a few weeks later.  The media story was that nature was getting more ferocious over time, and people had to stop building homes on the beach.

While it may be good public policy to provide better beach access for all residents of a beachfront community and for visitors, and to reduce the building of private homes on the beach, the story was wrong.  The beach erosion was not a result of nature’s fury, but of a misguided decision by the Suffolk County New York Supervisor some years before to refuse to pay the County’s share of a project to extend protective beach barriers for the last 4 miles of the barrier island.  The 4-mile stretch bore all the force of the ocean tides, instead of having it spread over the entire island.  Ferocious winds and tides destroyed the beach, but it was vulnerable to destruction, because of human error, a decision to leave the beach unprotected.

Similarly, power outages and flooding are usually a result of a number of human decisions.  In many communities, utilities are not permitted by homeowners to trim branches from trees on an appropriate schedule, with the result that those branches break off during storm, hit overhead power lines, and cut the lines.  Street flooding is usually a result of poor drainage from inadequately built or maintained roads.  Basement flooding is often the result of building codes that do not require adequate soil fill under the foundation of a house or other kind of building.  We discovered this when our basement flooded many times in the last decade, because our builder cut corners in having only four inches of soil fill, when best practice indicated that 12 inches of fill was the minimum desirable.  Trees are often uprooted and destroy or damage whatever they fall on because poor soil drainage erodes the soil that holds roots in place.

In the storm’s aftermath, we are seeing the consequences of decades of underinvestment in our commuter rail systems.  The commuter railroads were not  able to resume service as rapidly as the New York subways because they have suffered far more preventable damage.

Wind damage results from structures that are not built to withstand winds above a certain level of intensity, and items inadequately secured to the ground or not stored properly in anticipation of a storm become projectiles that destroy everything in their path. In the spring of 1979, Chicago experienced a freak 70-mile per hour windstorm one afternoon, with the result that a thick wooden restaurant sign hanging by two chains to the restaurant’s patio came loose and killed a pedestrian.

The 1906 San Francisco earthquake caused most of its fatalities because the fire department had not properly secured its water lines, so it was unable to get water out to extinguish some of the fires.  Similarly, communities often fail to think through how they will get rescue vehicles to stranded residents, which created many issues in the Gulf Coast areas after Hurricane Katrina.

We are better at responding to disasters today because of the intense focus on what went wrong with Hurricane Katrina, but the problems with our infrastructure and the underinvestment in rebuilding, maintaining, and renovating roads, bridges, tunnels, and buildings will continue to make the impact of natural disasters far worse than they need to be.

We need better ways to hold elected officials accountable for decisions they make that put us at risk, not immediately, but over time.  Since we do not know when “natural disasters” will hit, it is tempting to defer maintenance, repair, and renovation that will secure our facilities from damage, but insurance companies, bond rating agencies, and watchdogs acting on behalf of voters should do a better job warning us.  As citizens, we need to send strong messages to elected officials that using their office to redistribute wealth and income from taxpaying citizens to favored constituents, instead of using taxes to maintain and strengthen the assets for which they are responsible is wrong.

To her credit, Governor Rell has supported the Board’s recommendation that the State study the reinstitution of tolls, using modern cashless collection technology, and the State will also study the concept of congestion pricing, that is, varying tolls based on traffic congestion levels.

The transportation finance bonds Connecticut has issued routinely require that the revenues collected in the Special Transportation Fund be at least two times the required interest and principal payments on the bonds.  The primary sources of revenue for this Fund are gasoline and other taxes heavily based on fuel consumption and automobile usage.  If fuel and automobile consumption decline, the State’s ability to cover the existing bond carrying charges or to issue new bonds will be compromised.  That is why new and more diversified sources of revenue will be needed, particularly revenue sources not dependent on fuel consumption.

But even the imposition of tolls on Connecticut interstate highways will not address the broad range of transportation financing issues.  All states will see a reduction of federal funds because of the problems with the Federal Highway Trust Fund.  So new and creative techniques will be needed to finance and expand transportation capability.

There is no single “silver bullet” solution, but there are multiple solutions with significant cumulative impact.  The least expensive way to reduce the gap between the demand for transportation and existing capacity is to invest in demand reduction strategies. Virginia uses a web-based program to match commuters with space in their motor vehicles with individuals looking for rides.  This is a very inexpensive way to take motor vehicles off the roads.  Building bicycle paths and providing secure access to trains and workplaces are great solutions for parts of the country that have transportation corridors which can have a part of the corridor dedicated to non-motorized transport.  San Francisco is piloting a program which uses inexpensive and readily-available GPS technology to help people cruising for a parking space in a congested area know where parking is available.

I also like the idea of having delivery vans serve multiple retailers who would otherwise have individuals coming into the store to pick up a single item.

Finally, there are private sector companies like Cisco, Verizon, ATT, Research in Motion and T-Mobile that would welcome the opportunity to work with communities to devise effective telecommuting strategies which use state-of-the-art wireless technology.  I know this works because about 8% of Pitney Bowes call center workers reporting to our Wisconsin, Washington, and Connecticut facilities now work at home.

We also need to recognize that accidents cause congestion, and cost a great deal in terms of public safety and transportation resources.  They also increase motor vehicle insurance costs as well.  Camera-based technologies that detect moving violations, which are deployed in many places, including Southern California, Arizona, and the City of Chicago, significantly reduce accidents in the areas in which they are used.

There are many other small steps we could take to reduce this capacity-demand gap, most of which would cost far less than the major highway construction projects we cannot readily afford with our current financing methodologies.  We need to think differently about the problem of transportation financing.