Interesting Day for Government Economics

So the state of California is apparently close to resolving our budget crisis, thanks to a bunch of spending cuts (a compromise for Democrats) and tax increases (a compromise for Republicans). This includes major cutbacks to education funding, for all public schools in CA including the university systems, and we're all gonna have to pony up more money in the form of state income tax surcharges and increased sales tax.

But one tax increase I think might actually have a positive impact on society is the increased gas tax (an additional 12 cents per gallon), and increased vehicle licensing fees:

"Vehicle license fees would nearly double, going from the current rate of 0.65% to 1.15% of the value of a car or truck. The sales tax would increase by 1 cent, raising the rate in Los Angeles County to 9.75%. Gasoline taxes would increase by 12 cents a gallon. And residents would pay a new surcharge on personal income taxes, amounting to 2.5% to 5% of their total tax bills, depending on how much federal money California gets." (From the L.A. Times article)

All these extra costs are going to be hard to swallow, but perhaps the increased vehicle-related costs will encourage people to use their cars less and use public transit, car-pools, and bicycles more often. In a city like L.A., where so many people drive alone in their cars to work, contributing to pollution, dependence on foreign oil, and traffic congestion, a significant change leading less people to drive could have a major impact. We already saw that ridership on L.A. public transit went up by a whopping 10% in a year (hey, it's a big increase by public transit standards) from September 2007 to September 2008 due to the gas price increases through the summer, and then remained high despite gas price reductions, probably at least partially because people who changed their habits didn't trust that the gas prices would stay low for very long.

On the Federal side, it sounds like the Stimulus package has been put into its final form, with a big surprise for transit advocates: $8 Billion for the construction of new High Speed Rail lines. Wha?!? That's great, but it's a big surprise because the Senate Bill only allocated $2 Billion for HSR, and the House Bill didn't allocate any special funding for it. So, after each of those bills being crafted over weeks, to compromise between $2B and nothing, the Conference Committee bumped it up to $8 billion in one day?!

Well, whatever. I won't look a gift horse in the mouth. With this news and hopes that the Kerry HSR bill will eventually make it through congress, it's getting more and more plausible that the CA HSR system (which needs $10B from state bonds, $10B from the federal government, and $10B from private/commercial sponsors) will actually happen.