The Campaign Spot

Trading a Sales Tax Hike for Eliminating the Gas Tax?

The midweek edition of the Morning Jolt offers a look at the ambitions of Stanley McChrystal, the predictable pattern of Obama meetings with foreign leaders like this week’s one with Karzai, a strange entertainment event at the White House, and then this breaking news out of Richmond…

Could Virginia Become the First State to Completely Eliminate Gasoline Taxes?

Would you trade eliminating your state’s gas tax for an increase of eight-tenths of a percentage point in the sales tax?

That’s what Virginia Gov. Bob McDonnell is proposing. His spokesman, Tucker Martin, lays it out:

The Governor will eliminate the gas tax and instead tie future transportation funding to Virginia’s sales and use tax, which will move from 5% to 5.8% with the new .8 dedicated completely to transportation.

 This will make Virginia the first state in the nation without a gas tax. Virginia will be a national leader.

 The switch from the gas tax to the sales tax is essentially revenue neutral in its first year.  And Virginia’s sales tax will remain lower than all of our neighbors and the District of Columbia.

 This change simply ensures 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 (corporate income/personal income) works. That is what will make transportation funding sustainable again.

 Right now Virginia’s transportation challenge breaks down like this: Virginia is sending $364 million a year from our construction account to our maintenance account. So instead of financing new projects, we’re having to use that money just to repair old roads. That crossover amount is anticipated to grow to $500 million by 2019. Long and short, Virginia needs new transportation funding to the tune of at least $500 million a year by 2019. This plan does that.

 This plan generates $844 million in new, additional annual transportation funding in FY 2019. It eliminates Virginia’s crossover issue. It provides $3.1 billion in new funding for transportation over the next 5 years, including $1.8 billion in new funding for construction projects.

Further, by eliminating the gas tax, Virginians will pay $3.5 billion LESS at the pump over the next 5 years. And there will be no sales tax on gasoline either.

Grover Norquist doesn’t like it. His group, Americans for Tax Reform, offered a counterproposal that, among other things, pulls more money for transportation from the state’s general fund, calling transportation a “core function of government” that must be met before other spending interests of state lawmakers are considered.

The greens are likely to scream bloody murder, as shown on the blog, Bacon’s Rebellion: “The new tax would punish pedestrians, telecommuters, cyclists, carpoolers and mass transit riders, who are doing the virtuous thing of driving less, while subsidizing the voracious appetites of drivers.”

Here’s the thing: all of those virtuous non-drivers still get the benefit of all of those roads and bridges that the state maintains; those groceries don’t just magically appear on the supermarket shelves, nor do the employees of every business they use just teleport into their jobs. So if transportation benefits everyone – I seem to recall Elizabeth Warren emphasizing how universal the benefit of roads and bridges are this summer – why shouldn’t everyone pay for them?

On the other hand, I might prefer paying a tax on something specific rather than a higher sales tax on everything I buy here. Why do I get the feeling swapping one tax for another will amount to a wash?

Pat Mullins, chair of the Republican Party of Virginia, offered this statement:

“Big ideas don’t come along that often in politics. Yet Governor McDonnell’s proposal to end the gas tax and still put more money to transportation is just that – a big idea that addresses one of our Commonwealth’s most serious problems.

 This plan acknowledges the reality that gasoline use has likely peaked, and higher mileage vehicles will only drive those numbers lower and lower. At the same time, it provides a dedicated stream of revenue that will grow as our economy expands.   

 I applaud the Governor for bringing this big idea to the table, I look forward to working with both Governor McDonnell and the General Assembly to both end the gas tax and improve our Commonwealth’s aging roads by seeing this proposal enacted into law.”


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