Newman floats revisions to McDonnell transportation plan
The Senate sponsor of Gov. Bob McDonnell’s transportation funding bill has filed a revamped version of the legislation that, among other things, would drop a proposed increase in the state’s retails sales tax and instead apply a 5.5 percent tax to the wholesale price of gasoline.
Sen. Steve Newman, R-Lynchburg, circulated the substitute bill this afternoon, one day before the politically divided Senate will vote on one of the biggest issues of the 2013 General Assembly session.
Newman, the chairman of the Senate Transportation Committee, has proposed scrapping McDonnell’s proposals to increase the sales tax from 5 percent to 5.8 percent , increase vehicle registration fees by $15 and impose a $100 annual fee on hybrid and alternative fuel vehicles. Newman’s substitute plan would impose a 5.5 percent sales tax on the wholesale price of gasoline, which would replace the 17.5 cents per gallon excise tax that is now levied at the pump.
“It doesn’t raise quite as much as the governor’s bill, but I think the governor’s bill always would have lost the fees, and that would have brought it much closer to what this bill would end up being,” Newman said.
Newman said the fees had “become problematic for the left and the right.” And, he said, “keeping the nexus with gasoline” appears to be important to senators in both parties.
McDonnell spokesman Tucker Martin said the governor is “always happy to welcome new ideas to the transportation conversation,” but noted that McDonnell’s plan “is the broad funding package our transportation system needs to be sustainable in the years ahead.”
The House of Delegates is scheduled to debate the governor’s transportation plan later today.
Attorney General Ken Cuccinelli, the presumptive Republican nominee for governor, endorsed Newman’s plan this afternoon, calling it the “best chance to get the votes needed to make improvements to Virginia’s transportation system.”
Newman said his proposal initially would be revenue neutral, but the sales tax on gasoline would grow with inflation and gradually reduce the need for the state to divert highway construction funds for maintenance needs.
But Newman’s revisions may not be enough to get 21 votes in the chamber, said Senate Democratic Leader Richard Saslaw, D-Fairfax County.
“None of that’s going anywhere,” Saslaw said flatly.
Newman’s plan would generate as much as $477.6 million for state transportation annually by 2018 and nearly $2 billion over the next five years, according to a summary circulated this afternoon. That’s less revenue than McDonnell’s proposal, which will generate an estimated $3.1 billion over five years.
But both plans count revenue that the state could generate only if Congress passed legislation that would give states greater ability to compel online retailers to collect state sales taxes. McDonnell projects that Virginia could collect $1.02 billion for transportation over five years if the act is passed.
– Michael Sluss
February 4, 2013 - 5:09 PM
How could this be revenue neutral? The wholesale price of gas is less than the price at the pump. 20 gallons of gas for a fill up generates $3.50 in tax revenue. At the current wholesale price that 20 gallons would generate under $3.25 in revenue which would be roughly a 7.2 % decrease in money. Newman’s proposal, as does McDonnell’s depends on having a crystal ball to guess what future revenue streams will be. Just raise the damn tax on products at the pump and dedicate the revenue to transportation. Clean, simple, no crystal balls, no guesswork, and no robbing the general fund of needed money for other state services.
Just raise the gas tax. It’s a no brainer, oh, we’re talking Richmond here. Children, let’s raise the gas tax so we can fix the pot holes and make sure the bridges we are riding across don’t fall into the river, Ok? pleezy, wheezy, easy, cheesy?
McDonnell’s childish plan at the very least would provoke a trade war with our neighbors. McDonnell would wreck the tax structures of MD, WV, NC whose locals would buy their gas in VA? As usual this is a very short sighted solution to a long term problem. Thank God this idiot will be out of office soon.
I have yet to see any public numbers regarding the number of vehicle trips on Virginia Roads by Virginia residents vs. out-of-state residents using Virginia roads as they pass through, obviously most likely using the interstate system. Example, if we have 17 million daily road trips, and let’s imagine 9 million are in-state and 8 million are by out of state drives then shifting the cost to Virginia residents through a sales tax increase rather than an equitable gas levy just doesn’t make sense. We need to understand who is using roads and how they are using them to find the best solution for financing. I think ultimately it is a bit of both and the dreaded issue no one wants to discuss – establishing tolls on Interstates that host the highest number of vehicle trips. Heavy users on I-95 need to pay for that, not users in Western Virginia, and likewise, with I-81 if that were to be proven the case. Drop the partisan B.S. and start looking at this thing as a revenue generating BUSINESS. It will shift the discussion profoundly.
A number of words to describe McDonnell and his transportation plan leap to mind: Insane, foolish and ridiculous are among the few that can be printed. I know people who live along the border of North Carolina who already buy their gas here to avoid higher taxes there. His plan would be a bonanza for border gas stations, even more so than for stations in general, which would see sales soar from passers-through filling up or topping off. Another effect would be encourage people to purchase even more ridiculous gas-guzzlers. Most of my neighbors have monster, four-wheel-drive pickups and SUVs, though most are older couples who only drive them around town. However, I have a neighbor who, about a year ago, traded in his 12 mpg Ford F150 extended cab for a Prius, when gas was flirting with $4 a gallon. That’s one good reason to not only keep, but to increase the gas tax. We’re not talking about creating hardships – my family has two vehicles, both fast, commodious, comfortable and safe, and both get more than 40 mpg. When I read that McDonnell actually wanted to impose a $100 a year tax on people who drive sensible vehicles, I thought the Times had made a mistake. Taxing people for doing the right thing? Only a Republican would consider that. McDonnell’s proposal – and everything his clone Cuccinelli proposes (covering up the exposed breast on the state seal?) underscores how incredibly out of touch with the world and the 21st century Republicans are. Yet, most of my neighbors, who stand to be hurt disproportionately by increased sales taxes, their assaults on Social Security, Medicare and other benefits they’ve worked all their lives to earn, vote for them. The essence of good propaganda: Convincing people to act against their own interests.
I agree, at least in part, with Wayne. This could be a straight-forward policy issue. What I see is a lot of really sloppy policy work. McDonnell’s bill, especially, has overwhelming flaws.
The most critical flaw is the assumption that there will be “new revenue from a proposed (but not yet enacted) federal law that would require online retailers to collect sales tax from their customers.” (I’m quoting from Dan Casey’s column in January 2013.) Competent policy developers/analysts know that the future success of any policy depends heavily on the assumptions used to develop it and to project future costs and benefits.
Given Congress’ gridlock and the lack of action on myriad bills (many of which are considered much more important than requiring online retailers to collect state taxes), the assumption that there will be new revenue as a result of Congressional action seems way beyond unrealistic — it could be downright disastrous. Michael, you note, “… both plans count revenue that the state could generate only if Congress passed legislation that would give states greater ability to compel online retailers to collect state sales taxes. McDonnell projects that Virginia could collect $1.02 billion for transportation over five years if the act is passed.”
What happens to McDonnell’s bill if Congress fails to enact the bill in a timely way and/or in the amounts and terms assumed in his transportation bill? The answer is that the entire effort could be doomed to failure.
Those who developed McDonnell’s bill should have developed a “Plan B” — what would the Commonwealth do if the assumed revenue enabled by federal legislation, in fact, can’t be collected? I haven’t seen this discussed anywhere, which really surprises me. If there is no Plan B, that’s another huge flaw.
In addition to the assumption pitfall, a tax on gasoline and related products is one of least regressive on the books, meaning that those who use the service or facilities (roads and related transportation services) pay more of their fair share for the use of those services, rather than shifting the costs to the public at large as McDonnell’s bill does.
Also, if McDonnell’s bill passes, is there wording requiring the additional 0.8 cent in tax revenue to be dedicated solely to transportation needs and projects? If not, the revenue can — and, given what we know about the history of politics in Virginia, eventually will — be raided for whatever purposes the General Assembly sees fit to use it. (Think raiding of the Virginia retirement fund and the recent shifting of the costs of that debacle to localities to pay, creating widespread and significant hardships for local governments.) I’ve seen some indications that the money would be dedicated to transportation but, whatever the source, the revenue needs to be tied down tightly to transportation.
One more thing: In terms of sound public policy, McDonnell is doing the policy equivalent of entering the Stone Age with with his proposed $100 annual registration fees for hybrids and electric vehicles. There is no way to perceive that the fee is anything but a penalty for participating in the benefits of progressive, environmentally sound technology and is a significant disincentive to purchase of those vehicles.
In terms of policy soundness and effectiveness, I think McDonnell’s bill is a policy disaster and Newman’s bill is not much better. I like Wayne’s plan much better — “Just raise the damn tax on products at the pump and dedicate the revenue to transportation. Clean, simple, no crystal balls, no guesswork, and no robbing the general fund of needed money for other state services.” It’s much better public policy!