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Funding our Roads: The Income Tax Subsidy

As we approach our income tax filing deadline, we should understand the reality of subsidizing the SCDOT using General Fund revenues.

According to the SC Board of Economic Advisors, 46% of individuals who will file a state income tax return this year will not actually owe any taxes. That represents slightly more than one million filers.

Income tax revenues flow into the General Fund. These funds are used to pay for a variety of state agencies, not including SCDOT. They receive their funding primarily through the gas tax.

If we subsidize SCDOT with income tax revenues, we force working-class citizens to subsidize everyone who benefits from our roads. This approach violates basic principles of a fair and simple revenue policy. If excess income tax revenues exist to subsidize SCDOT, fairness demands that we adjust income tax rates downward

Fairness also demands that a connection exist between the tax and the service obtained. Most state taxes fail to meet this requirement, with the exception of the gas tax. This tax directly links road usage with road funding. If you operate a vehicle, then you pay for road use. Since vehicle weight contributes to fuel consumption and road wear, the gas tax captures revenue in proportion to the actual wear-and-tear wrought by individual vehicles.

Beyond being a necessary evil, few taxes remain conceptually intact. Though specific taxes are initially passed to fund a specific need, such as sales tax revenue for schools, politicians end up combining revenue streams instead of lowering or raising specific taxes as needed. Exemptions are then adopted for various reasons – some worse than others – which further dilutes the original tax concept. This political expediency leads to the complex and inefficient tax code that we have today.

No one wants to pay higher gas taxes, but at least it remains conceptually intact. If we refuse to raise it then we need to be satisfied with allowing politicians to further shift the tax burden on a dwindling group of taxpayers.