A lot of attention has been paid, both here on Bearing Drift and across the blogosphere, to the Governor’s transportation tax plan. Yes, it’s the largest tax increase in history and we know a lot of Republicans don’t like it. We can argue over whether tax increases are good or bad policy (usually bad, but not always), whether this one is too high (given our needs and the fact that thanks to inflation we’ve gotten 27 years of gas tax cuts, I don’t think so) or if this is a betrayal of Republican principles (it isn’t), but all of those arguments ignore the real problem the new law creates through the fundamental unfairness built into the new system. The real problem with this bill isn’t how much – it’s the “how” itself.
This law continues to make Northern Virginia and Hampton Roads the piggy bank for the rest of the Commonwealth, and the hybrid tax is a misguided, abrupt reversal of over a decades worth of government cajoling about alternative fuel vehicles. These two issues fundamentally undermine what would otherwise be an arguably necessary law to change how we fund transportation in Virginia. Instead, we have built in two very bad policy decisions, and those decisions are getting short shrift in the histrionics about the size of the increase.
The hybrid tax represents governmental schizophrenia in the worst way. Although I am firmly against using the tax code to reward and punish behavior, that is how the system has evolved and many of the policy decisions in the tax code flow from that philosophy. For almost a decade, it was the policy of both the federal and the Virginia governments to encourage the purchase of alternative vehicles. The federal government provided a substantial tax credit for purchasing a hybrid car, which was only phased out in 2010. Virginia still allows hybrid car owners to use HOV lanes regardless of the vehicle occupancy on certain roads for vehicles purchased before 2011. And as anybody who drives I-66 in the morning can tell you, many, many people bought hybrids and took advantage of those credits. They did what government wanted them to do.
The hybrid tax represents a 180 degree shift in the government’s stance on hybrids. Instead of encouraging their use, they are now being actively discouraged through a tax penalty. This penalty comes on top of the higher price tag, which already means a heftier car tax bill for these vehicles. Now, with the additional $100 tax, a good chunk of the savings the consumer realizes from the better gas mileage ends up going back to the state anyway. Whatever benefit having a vehicle that uses less gas may have provided is completely wiped out by that tax – the equivalent of the tax a hybrid owner would pay on 571 gallons of gas under the old system. Further, it singles out a single type of vehicle for extra taxation, which is something we have decried at the federal level – the gas guzzler tax was passed by a Democratic Congress and signed by Jimmy Carter – and have resisted in Virginia. This is just bad policy. It makes zero sense for government to coerce consumers into adjusting their behavior and then immediately turning around and penalizing those same consumers when they comply.
It’s like giving a cat a treat and then kicking him if he eats it. It makes no rational sense. What’s next? Banning 32 ounce Big Gulps? The hybrid tax should have been dropped in the very beginning of the process.
But the hybrid tax pales in comparison to the regional sales tax increases. If anybody wants to make an argument about unfairness, I can’t think of anything done legislatively in recent memory that is as misguided and unfair as the additional tax burdens imposed on Northern Virginia and Hampton Roads by this law. Sure, the increased sales tax revenue is supposed to be channeled to projects specifically in those regions, but that doesn’t mitigate how ridiculous this provision is.
The fundamental point of taxation is that everybody pays for goods and services that benefit the entire community. When I pay my state taxes, some of that money is going to go to people, projects, and places that have almost no impact on me. I’m paying salaries for teachers at a school my kid will never attend, to pave roads that I will never drive on, to put police on the streets of a city I will never visit. But the same is true for everybody else. Unless, of course, you live in Northern Virginia and Hampton Roads. Not only do you get to pay for everyone else’s roads, you also have to pay – again – for your own. This increased revenue to Northern Virginia and Hampton Roads simply means those regions have a dedicated funding source – and that means they don’t need as much money from the general pool of resources the state has to divvy out . I don’t believe, not for one second, that this law is going to actually result in significant increased money for roads in NoVA and Hampton Roads. And, frankly, the projects identified in Northern Virginia that will get funded – like widening Route 28, or the 28-66 interchange which are both desperately needed – would have gotten funded anyway because they are top regional priorities. In the end, this bill simply allows the rest of Virginia to continue picking the pocket of Northern Virginians and our friends in the Tidewater.
As usual, Northern Virginia gets treated like the piggy bank for the rest of the Commonwealth, and I am truly tired of it. Singling out specific regions for higher taxation is unfair and misguided policy, even if it may be politically expedient.
Government breaks down when we start picking winners and losers on such a specific, hard to justify, basis. The bill would not have been worse off without either the regional sales tax increases nor the hybrid tax. It still would still have accomplished the governor’s goals of transitioning from a cents-per-gallon gas tax and increasing revenue for transportation. This is just flat out bad policy and something that should be addressed in future General Assemblies.