The Virginia transportation funding dilemma continued yesterday when the House of Representatives passed a slightly modified version of Governor Robert McDonnell’s original transportation funding plan. The majority of the Governor’s plan is still intact; the House voted to eliminate the state’s 17.5 cent 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 increase the state 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. to 5.8 percent. They also removed the provision that would allow Virginia to use tolls on Interstate 95 and eliminated fees on hybrid vehicles. Without these two provisions, the proposal would generate $52 million less revenue than originally proposed.
We recently criticized the Governor’s proposal for distancing the cost of roads from those who use them. The House’s removal of the toll provisions exacerbates this problem. Other critics of the plan are concerned that the plan’s diversion of sales 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. revenue could create funding issues for education, public safety, and healthcare. Further, its reliance on funding from yet-to-be passed federal legislation regarding online sales tax collection is problematic. What will lawmakers do if this funding, which is completely out of Virginia’s control, doesn’t come to fruition?
The Senate recently rejected multiple funding proposals—including two originated by Senators and the Governor’s original plan. What happens to the House version of the bill now depends entirely on the Senate. They have until midnight tonight to vote on the proposal. For the bill to pass the Senate, it would need support from both sides of the aisle—a very unlikely prospect considering that it has the opposition of both Democrats and Republicans in the Senate.
The Governor staunchly defended his move from gas tax-funded roads to sales tax-funded roads in a recent press interview, noting that he “prefer[s] the sales tax to the gas tax because the gas tax is in a long-term decline.” We’ve continually argued that the majority of transportation funding should be derived from user-related charges such as tolls and gas taxes. Failing to do so leads to overuse, congestion, and infrastructure deterioration. Since these are the ultimate problems Governor McDonnell originally hoped to solve, the current plan on the table is moving in the wrong direction.
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Follow Liz Malm on Twitter @elizabeth_malm.
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