Virginia Holds Legislative Special Session on Transportation Taxes

June 23, 2008

Back in February, the Virginia Supreme Court invalidated seven regional taxes levied by the unelected Northern Virginia Transportation Authority (NVTA). Government officials reacted predictably-they proposed re-imposing the taxes statewide, and threatened to cancel most transportation projects unless it happens. It’s not quite as bad as when Michigan threatened to stop burying people unless voters hiked taxes, but still a more palpable threat than the famous warning that the Washington Monument would have to be shut down if the Park Service budget was cut.

Virginia Governor Tim Kaine (D) has a list of ideas for $1.1 billion in new taxes, which will be debated beginning today at a week-long legislative special session. Kaine’s plan includes a 1 percent increase in the state sales tax in Northern Virginia and Hampton Roads (to 6 percent), a new 1 percent tax on the sale of automobiles, a $10 increase in annual vehicle registration fees, as well as a 25 cent increase in grantor’s tax (to 35 cents per $100 in assessed value). Temporary taxes have a way of becoming permanent, of course.

An alternative proposal was offered by Senate Majority Leader Richard Saslaw, which includes a quarter-cent sales tax increase, a half-percent hike in the state car titling tax, and a 5 to 6 cent per gallon increase in the state gasoline tax (up from the 17.5 cents currently collected).

Expectations are low that the special session will achieve anything. It must be noted, though, that Virginia state spending on primary roads has more than doubled in the last ten years, but somehow is still insufficient to cover maintenance and construction. Virginia should also consider whether sales taxes and taxes on home sales are the most efficient and justified way to finance transportation projects.

We discussed whether gasoline taxes are an appropriate source of revenue for road construction here. We also discussed transportation financing and gasoline taxes more generally here.

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