Deficit Commission Pushes For Anti-Sprawl Reforms

If political pandering and bad economic policies have encouraged sprawl and an autocentric transportation system, better incentives can start to correct past mistakes. Here’s one place to start: the National Commission on Fiscal Responsibility and Reform report, released this Wednesday.

Sorry, your vacation home may no longer be eligible for a mortgage interest deduction.
Sorry, but under the deficit commission's recommendations, your vacation home may no longer be eligible for a mortgage interest deduction.

The report has plenty to make anyone squirm. As co-chair Alan Simpson said when he and co-chair Erskine Bowles released their co-chairs’ report last month, “We have harpooned every whale in the ocean and some of the minnows.”

Once unthinkable, even defense spending is recommended for massive cuts. Meanwhile, the rich would be in line for even bigger tax cuts than they’ve been enjoying these last few years.

Smart-growth advocates are most interested in the report’s recommendations on transportation funding and mortgage deductions. We reported last month that the co-chairs’ initial report floated the idea of eliminating the mortgage-interest deduction entirely. That would promote more compact and sustainable development by discouraging people from buying “as much house as they can,” but it would also cause significant pain for a lot of middle-income homeowners who calculated their domestic budgets based on that tax credit.

The full commission’s report took the middle ground: lowering the deduction cap for expensive primary homes and eliminating it entirely for second homes. Action like that would be a positive way to dis-incentivize irresponsible growth, given the sprawling nature of so many people’s “country” homes, not to mention the disproportionate number of wealthy people affected by that provision.

The commission also tackled transportation reform, saying, “Before asking taxpayers to pay more for roads, rail, bridges, and infrastructure, we must ensure existing funds are not wasted. The Commission recommends significant reforms to control federal highway spending.”

It suggests whipping the Highway Trust Fund into shape and keeping it from hemorrhaging money. How? By imposing a 15-cent gas tax hike, for one thing. (Somehow, all these proposals for fiscal sanity just keep coming back to that inevitable conclusion.) And they want to inject more discipline and accountability into highway spending policy.

And finally, that greatest of political lightning rods: eliminating all Congressional earmarks. Though, as has been repeated over and over in the current debate, earmarks account for less than half of one percent of the federal budget, the commission clearly sees it as a symbol of the restoration of fiscal discipline.

The commission isn’t unanimous in its support for the recommendations in the report, which Congress may not take action on them. Meanwhile, Transportation for America has issued a call for the commission to stay strong in its support for a gas tax increase and to urge Congress to condition “any increase in revenue on a rewrite of a long term federal transportation bill.”

  • Jim T

    With regards to the Mortgage Credit, while I agree that the current tax break does encourage sprawl (as a disproportionate percentage of renters live in high density areas, and vice-versa for home owners), I do not agree that the proposed “fix” addresses this precisely. For instance, in the Bay Area, NYC, Chicago, DC, any dense metropolitan area, the most expensive housing stock is in the densest areas. So, if you still get a housing tax credit for “cheap” housing, won’t that just further incentivize moving to the extreme “ex-urbs”?

  • The commissioners are right that we need to inject “more discipline and accountability into highway spending policy,” but unfortunately the extra gas tax revenues they suggest will just produce more irresponsible spending of the kind we’re plagued with now – with politicians in control and pandering to special interests. We need to put the public in charge in place of politicians. Highway projects should all be required to pay their way with fees from users (tolls) or direct contributions by adjacent property owners. But the same needs to happen with bus and rail service. It needs to be fully financeable with fares, or it isn’t providing service commensurate in value with its cost. Only by ending tax-and-spend subsidies under political control can we provide a needed focus on customer value in transportation.

  • Bob Davis

    One of the problems in trying to replace private automobiles with public transit is that the “operators” of cars are what one writer called “unpaid chauffeurs”. No element of drivers’ wages or problem of transit operators going on strike involved. Not so much anymore, but in the days when public transit in general and streetcars in particular were in a major decline, automobiles were “user friendly” as far as repair by owners (also known as the “shade tree garage”) was concerned.

  • disqus_1pvtRUVrlr

    The claim about reducing sprawl is specious. In fact, I wonder if it would exacerbate it. Many leave the cities due to high real estate prices. With the elimination of the MID then it would further reduce home affordability, driving people to find even lower cost housing, which is often in the suburbs.