It was a speeding ticket received while on vacation in Pennsylvania that set economist Thomas Garrett’s mind churning.
He wondered about devising a study to prove the theory that local governments issue more traffic tickets during rocky economic times to make up for their budget shortfalls.
This is a subject long-haul truckers are all too familiar with across the country.
Garrett, an assistant vice president at the St. Louis Federal Reserve, and co-author Gary A. Wagner, an economist at the University of Arkansas at Little Rock, set out to conduct an empirical study based on financial statistics they found online for local governments in North Carolina over a 14-year period. The economists also had online access to local governments’ traffic ticket statistics during this period.
What their study, titled “Red Ink in the Rearview Mirror,” found was that there was a direct correlation between “hidden taxes” through the use of traffic tickets and times when local budgets are bleeding red ink. Garrett said what’s also interesting to note is that the number of traffic tickets doesn’t go back down during good economic times.
“We had heard all this anecdotal evidence – ‘Look out, it’s the end of the month so that means more tickets,’ or ‘Times are tough, so watch out for more tickets’ – but we wanted to prove this statistically,” Garrett told Land Line Magazine on Monday, Jan. 12.
Garrett and Wagner’s study will be published in the Journal of Law and Economics in February.
“What we found is that there is an incentive there for local officials to obtain hidden taxes from folks who aren’t local and who are nonvoters,” he said. “It doesn’t mean they are bad people. It’s just that there is definitely an incentive when times are tough and local governments get cash-strapped.”
He said that over the past decade state and local governments have increased their tax rates and have expanded their tax bases, but they can only do so much during harsh economic times because voters are also financially struggling and “sick of tax increases.”
Instead, Garrett said local governments turn to the use of traffic tickets, lotteries, hotel taxes and casino taxes as revenue sources.
“So it’s a great way to export the tax burden to nonvoters, and the financial burden is passed on to people outside the jurisdiction,” he said.
OOIDA Executive Vice President Todd Spencer told Land Line recently that he agrees with the study’s findings that there is a direct correlation between the “level of enforcement you see and economic activity.”
“When revenues fall off, these municipalities scramble. And writing tickets is one way they can offset those costs,” he said. “Unfortunately, this is just another hidden tax drivers incur.”
– By Clarissa Kell-Holland, staff writer