On July 14th, the IRS held a public hearing for the debt-equity rule (section 385 of the IRS code) that the Treasury Department proposed last April. The hearing, which had as many as 16 speakers from various industries,...
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- Crunch Time for Virginia Transportation Funding Plan
Crunch Time for Virginia Transportation Funding Plan
It's getting down to crunch time for Virginia Gov. Bob McDonnell's (R) transportation funding plan to repeal the gas tax and raise the sales tax. Scheduled adjournment is two weeks away, and while the House passed most of McDonnell's plan (they stripped out the tax on hybrid cars but kept the $800 million raid on other funds and the $1.1 billion in online sales tax revenue that may or may not happen), the Senate declined to go along. So instead of hashing it out in conference committee, it's just stalled.
The problem here is a sticky one and not Virginia-specific: how to raise more money for transportation while not raising taxes. Gasoline tax increases are unpopular, and tolls only slightly less so. (Given that the status quo is lots of free roads at no tangible cost, it's hard to fault people for preferring the status quo.) So we get smoke-and-mirrors stuff like McDonnell's plan. He has nevertheless been clever at positioning his plan as the middle ground between opposition to any net revenue increase and efforts to raise all the taxes. (Regional divides are also behind the debate.)
The Thomas Jefferson Institute, a state-based think tank, offered its own "friendly amendment" today to get things moving. They propose indexing both the gas tax and income tax to inflation, in a way that ends up being revenue neutral. They note that the state would likely see higher economic growth under their proposal.
I hope such ideas get their hearing. McDonnell's plan to move away from user-related taxes and fees towards general revenues is going in the wrong direction. When road funding comes from a mix of tolls and gas taxes, the people that use the roads bear the cost of them. By contrast, funding transportation out of general revenue makes roads “free,” and consequently, overused. Theory and past experience suggest McDonnell’s plan will result in further congestion and continual underfunding of transportation in Virginia. The next governor and legislature might see the reintroduction of the gas tax while retaining the higher sales tax. Virginia’s transportation problems are serious and require a serious plan.
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