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from NewsLink, Vol. 4, No. 4, Summer 2000
The MBTA has finally decided upon a modest fare increase. Its critics – notably the Conservation Law Foundation, a public interest group, along with various special pleaders – raise a host of objections. Essentially, critics argue that the T shouldn't raise fares because it is not doing enough now to serve its passengers. Buses are late and crowded. Facilities are poor. And transfers are expensive. Moreover, they say, the T's method of raising fares is unfair, putting too high a burden on commuter rail users, on the one hand, and low-income users, on the other.
What the critics are really saying amounts to the following: “We are entitled to inexpensive and high quality public transportation, and we expect state taxpayers to provide it for us.”
State taxpayers are already doing their share, to say the least. Taxpayers are footing 80% of the bill for the MBTA. Riders pay for only 17% of the cost of their ride. It is absolutely reasonable to shift more of the burden from taxpayers to users.
The Beacon Hill Institute has long supported a fare increase. The current increase won't solve the MBTA's financial problems, but it's a reasonable start and long overdue.
Baby UI: The benefit that rocks the cradle
The great economist Adam Smith once wrote, “There is no art which one government sooner learns of another than that of draining money from the pockets of the people.” We've long maintained that government surpluses, whether at the federal or state level, are not a sign of fiscal strength. They are the result of forecasting errors that government turns to its advantage by drumming up new ways to spend. Wherever the money goes – into the rainy day fund, the unemployment trust fund or the welfare reserve fund – elected officials always seem to come up with a plan to spend the money rather than return it to the taxpayers.
Over the years, we've heard the argument that we can't cut the unemployment tax levied upon employers because it would drain reserves needed for an economic downturn. Last June, with unemployment funds brimming with surplus money, President Clinton revised regulations that permit states to use their UI funds for parental leave. Oddly, no one thought to call the baby UI a risky scheme.
But most states, including Massachusetts, are rejecting the idea. Recently, Governor Cellucci vetoed a plan that would have tapped the state's unemployment fund to create new baby unemployment benefits for parents. To blunt criticism, he offered a tax credit to companies that offer baby UI plans.
The only sure way to fend off schemes like baby UI is to cut tax rates, in this instance, the unemployment insurance tax rate, to a level that prevents surpluses from accumulating in the first place. Only then will government go on to learn arts more becoming of statesmen than draining the pockets of other people.
NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-2003. All rights reserved.
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