This afternoon Gov. Bob McDonnell unveiled an eye-opening plan he said would solve Virginia’s transportation funding woes once and for all: He wants to abolish the 17.5 cents-per-gallon gasoline tax and replace it by raising the general sales tax from 5 percent to 5.8 percent.
Because I may be doing a column about that proposal soon, I’m interested in your thoughts about it.
McDonnell says this will raise more than $500 million each year for transportation infrastructure projects in Virginia, which have been sorely hamstrung in recent years. Of course, that’s because the legislature irresponsibly hasn’t raised the gas tax since 1987.
From the governor’s email:
“That’s right, no more gas tax at the pump. No sales tax at the pump either. When this plan passes the price of gas will go down, and Virginians will spend $3.5 billion LESS at the pump over the next five years.
“We then propose increasing the sales tax from 5% to 5.8%, still below every neighboring state and the District of Columbia, and putting that increase into transportation from here forward. The advantage of that change? We’re ensuring that transportation receives the new funding it needs in the years ahead by tying it to a mechanism that moves in tandem with economic activity and inflation. That is how every other tax works. That is what will make transportation funding sustainable again.
The fact is, the gas tax is a declining revenue source. It is fixed at a flat 17.5 cents per gallon and does not fluctuate with inflation. Cars are getting better and better mileage. More Virginians are buying alternative fuel vehicles. Many have called for the gas tax to just be increased. But that’s not a long-term solution. All that would do is lead us back to the same revenue shortfall a few years down the road, and the same old debates. We need a complete change in how we fund transportation or else no new “solutions” will work. We can’t remain tied to an outdated model.”
What are your thoughts on this? Here are a few of mine:
1) Right now, the gas tax is a user fee. People who drive on the road are paying for their construction and upkeep through the gas tax. (Eexcept when the state unwisely borrows money for that stuff, which it has done under McDonnell. Then we all pay). McDonnell’s plan removes all burden from the driver, and places it on everyone.
2) “Everyone” includes those who don’t have cars — mostly the poor and the elderly who don’t drive any longer. In that sense, it can be seen as a transfer of wealth from the poor to the rich. They won’t have to pay gas taxes on their gas-guzzling SUVs any longer, but the poor schlep who rides the bus (because he can’t afford a car) will help finance road construction through every purchase he makes.
3) This isn’t the first unusual transportation funding scheme McDonnell has proposed. Remember the last oddball one? That was to sell the state liquor stores to finance highway construction. That idea was a miserable failure.
4) This one is likely to do better because of its simple, “Abolish the gas tax!” headline / sound bite. A lot of people will think that sounds just peachy — just like they did when Jim Gilmore cried “Abolish the car tax!” That one is still with us, in part, by the way.
5) McDonnell’s statement “the fact is, the gas tax is a declining revenue source. It is fixed at a flat 17.5 cents per gallon and does not fluctuate with inflation” is a pile of BS. The only reason it’s a declining revenue source is that the legislature has irresponsibly not increased it since 1987, and they’ve irresponsibly declined to index it to inflation. THOSE are the only reasons why its a declining revenue source. That was by choice.