Gov. Bob McDonnell, never known to be short on words, consumed several minutes of radio air time this morning defending the compromise transportation bill passed by the General Assembly and making the case for new revenue to pay for the state’s infrastructure needs.
The Republican governor even cited the example of his party’s most popular president of the modern era, Ronald Reagan, to defend a plan that has come under attack from anti-tax forces in the GOP. McDonnell noted that Regan pushed for an increase in the federal gas tax 30 years ago to address highway funding needs.
McDonnell appeared on the Virginia News Network’s monthly “Ask the Governor” program this morning, and the program’s first caller asked about the bill that is heading to McDonnell’s desk.
“I just wanted to know why you would have been willing to sign the largest tax increase in the history of Virginia when you ran on a campaign of no increased taxes and smaller government,” the caller said.
After calling the representation “factually incorrect,” McDonnell launched into response that consumed several minutes of air time and was interrupted only be a commercial break.
“Over the last three or four years, I’ve done everything that I had available to me as a tool in order to try to improve the transportation infrastructure of Virginia,” McDonnell said. “It’s a jobs issue. It’s a quality of life issue. It is an issue that affects every man, woman and child here in Virginia, is having a good network of roads an bridges. So I have tried everything that we can with the tools that we’ve got.”
After returning from a commercial, McDonnell told host Jimmy Barrett that he was dismayed when Virginia dropped from first to third in the annual CNBC ratings of the best states for business. Virginia’s low grade for infrastructure cost the state its top spot, the governor said.
“This issue of transportation really gets down to what do you believe what kind of business structure we ought to have,” McDonnell said. “Parents can’t go to their kids’ soccer games or can’t go their ballet recitals on time because it takes and hour, and hour-and-a-half to get there. They can’t spend time doing homework at night. We can’t get job creators to come to Virginia. I’ve recruited all over the world. They ask me about workforce. They ask me about transportation. A lot of times they don’t want to come or don’ want to expand because of the problems. And so I decided, Jimmy, you know, governors are elected to govern – not talk, not pontificate, not make excuses like they do in Washington, D.C. In Richmond, we get things done
“And so I decided this was something we needed to try to get done this year if we’re going to keep a strong economy.”
McDonnell then outlined the plan he proposed in early January. It would have eliminated the state gas tax, increased the sales tax from 5 percent to 5.8 percent, increased annual registration fees by $15 and applied a $100 annual fee to alternative fuel and hybrid vehicles.
“The whole point is the gas tax in a declining revenue source,” McDonnell said. “At the same time, asphalt’s gone up 350 percent. It’s simply a math problem. It isn’t a political issue. When your revenues for supporting transportation are going down, and your needs are going up, you’ve got a problem. It’s a quality of life issue. And so I said that we would address it.
“My original proposal: get rid of the gas tax and replace it in a revenue-neutral manner with the sales tax, increase the user fee 15 bucks, do a couple of other things. During the course of the process, the final bill has come out share it makes a couple of other changes in the tax structure, and then puts some regional self-help provisions in place for Northern Virginia and Hampton Roads, because they have unique construction and transportation problems.”
The plan heading to McDonnell’s desk would scrap Virginia’s 17.5 cents per gallon tax on gasoline and apply a 3.5 percent tax on the wholesale price of fuel and a 6 percent tax on the wholesale price of diesel fuel. The legislation also would increase the retail sales tax from 5 percent to 5.3 percent, increase the vehicle sales tax from 3 percent to 4.3 percent, and dedicate a greater portion of the existing sales tax to transportation.
The package also includes revenue Virginia could generate if Congress passes legislation enabling states to compel online retailers to collect sales taxes. If Congress does not act by 2015, the wholesale tax on gas would increase by another 1.6 percentage points .The overall plan would pump more than $880 million into the state’s transportation programs by 2018.
McDonnell said his administration will conduct “a legal and constitutional and policy review” of the bill when it reaches his office.
“But, our initial analysis is, in the first year, unless you’re driving a diesel truck, in the first year this bill is revenue neutral,” McDonnell said. “The average citizen who doesn’t live in Northern Virginia or Hampton Roads isn’t going to pay any more than they do now. Because it’s a conversion from a gasoline tax, in part, to a sales tax. In fact, the gas tax under this bill is cut 35 percent. I wanted them to get rid of it. They didn’t do it. I said I would not sign a gas tax increase, and so they cut the gas tax 35 percent. So we will have the lowest gas tax in the continental United States. That’s a fact. And I think that will drive gas prices down. That’s a good thing for Virginians all over the state.”
McDonnell went on to say that about $400 million of $880 million the plan would generate annually by 2018 would come from existing tax proceeds — provided that Congress pass legislation enabling states to compel online retailers to collect sales taxes.
Then, McDonnell invoked Reagan in making the case for taking action this year.
“Governors have to solve problems,” he said. ” You have to do it with your conservative principles. Over the last three years, I have gone through a series of things to try to fix transportation. I audited VDOT four times. You remember back in 2010, found $1.4 billion laying around from the previous administration, not doing things right. We’ve used surpluses. We’ve dedicated two-thirds of the surplus to transportation. I’ve created an infrastructure bank. I have used bonds in order to leverage scarce resources, in a time with incredibly low interest rates, to be able to get hings done. That helps to fix things for three or four years. We have done public-private partnerships, using the private sector, and toll roads to be able to get things done. So, every tool that I’ve currently got available, we’ve done. But I got to the point where we said, look, this is a problem that’s got to be fixed. Otherwise, our ability to grow the private sector, to have entrepreneurs and job creators and leaders in the business community to grow new jobs for Virginia, it’s going downhill.
“So I look at what Reagan did in 1983. Reagan is not certainly looked at as a liberal, if you know what I mean. And in 1983, Reagan proposed and signed a bill to increase the gas tax 125 percent. He increased the federal gas tax from 4 cents to 9 cents. And I’ve read his speech that he gave in in a weekly radio address about why he did that. And he said, look, we have not increased the gas tax in 23 years in the United States of America. He said we have a magnificent infrastructure system and I am not going to let our magnificent infrastructure go downhill, because if you don’t pay for it today, then you’re going to be paying a lot more in the future and we’re going to hurt our quality of life. That’s Ronald Reagan, January of 1983. So, I think his analysis was generally right. I think it’s a conservative principle to pay as you go.”
With that, it was time for another commercial break.
– Michael Sluss