By Noël Perry
If you are like us at FTR you watched the debate on the repeal of ‘ObamaCare’ with great interest. The debate is of critical interest to all of us because it is the first in a long line of debates that explicitly addresses the ‘entitlements’ we have voted ourselves. In this case the debate is over extending the existing entitlement of Americans to free emergency health to the much larger realm of everyday, comprehensive healthcare. That care is already an entitlement to all retirees and public sector workers but does not fully cover many lower level workers.
The Democrat’s Affordable Care Act (ACA, ‘ObamaCare’) was their first cut attempt to make the entitlement universal, as it is in almost all the rest of the developed world. Whatever the jargon about ‘affordable’ and ‘low cost’ in the current debate, the reality of the controversy is a fear of the hideous expense of a universal healthcare entitlement pitted against the wide-spread belief that good health care is another of those inalienable American rights. That the Republican majority has not yet been able to come close to its number one campaign pledge of ‘Repeal ObamaCare!’ is testimony to the growing inalienability of this right. Like it or not, it is seen by most Americans as an entitlement.
This is important to trucking for two reasons
- In the short term the stalemate means that the current mix of coverages will continue and that carriers will be forced to balance the employment benefits of providing company coverage against the high cost. Had Ms. Clinton won the election with a Democratic majority, as did Mr. Obama in 2008, we would be moving ever closer to the full entitlement recognized by most other countries and you would be forgiven that hard cost management choice. In the long-term, that seems the most likely case.
- It comes with a big cost, however. Taxes will rise to pay for it. That’s where this week’s additional data comes in. The 3 left hand set of bars quantify the tax implications of the ‘infrastructure’ investment that the Congress and the President are eagerly looking forward to. It, of course, will come with a cost, quantified here for your convenience on a per mile tax basis. The ‘constant share’ gray columns tells us the cost if policy maintains the current truck share of highway taxes. Because it is likely that cash-strapped governments will increase trucking’s share we also show you the results of doubling the trucking share of highway taxes.
The good news is that even the unlikely policy of building a bunch of new highways and lanes of highways would, in the worst case, cost only $0.20/mile. Yes, that is noticeable, but it does not change industry economics in a fundamental way.
The catch to the chart is the right-hand set of columns which address paying for health care and the deficits resulting from our other expensive entitlements. It simply applies the European experience to the U.S. problem. In Europe, they tax fuel heavily as a source of general revenue – to pay for their entitlements. In the U.S., highway taxes are applied mainly to the entitlement of public transit, with the majority of money going toward fixing the roads. If we simply adopt the current European standards, taxes per mile on either fuel or through a ‘value added’ tax would get well above a dollar a mile. Sadly, the European standards still include unsustainable borrowing, so the end game of full payment for entitlements is probably over two dollars per mile.
Yes, this is, at yet, a long-run exposure. But it is a reality in Europe now. In the meantime, you would be wise to watch the debate on infrastructure investment. Those roads will most likely be paid through user taxes or tolls. Let’s see how Congress determines the trucking industry’s share.
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