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Crunch Time for Virginia Transportation Funding Plan

2 min readBy: Joseph Bishop-Henchman

It's getting down to crunch time for Virginia Gov. Bob McDonnell's (R) transportation funding plan to repeal the gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. and raise the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. . Scheduled adjournment is two weeks away, and while the House passed most of McDonnell's plan (they stripped out the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. 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 inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. , 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.