How to make a politically problematic transportation bill downright toxicVirginia

Reading over Governor McDonnell’s changes to the transportation bill, a couple of things are apparent:

1. The regional taxes remain mandatory, though, following the Attorney General’s advisory opinion, they are more artfully applied to Northern Virginia and Hampton Roads than was the case in the original bill. Now, rather than calling out localities by name for special tax hikes, which runs afoul of the constitution, the Governor’s office has used the old legislative trick of setting “objective” criteria for where the taxes would take effect — and only Northern Virginia and Hampton Roads currently meet the new criteria.

The one thing about shifting to these numerical criteria, though, is that they are open-ended, and could, through population growth and other factors, see higher taxes imposed automatically elsewhere in Virginia.

In short, the Governor, following the Attorney General’s road map, has put a ticking time bomb in the tax code.

2. The General Assembly can tax whatever it wants. The upshot of Attorney General Ken Cuccinelli’s advisory opinion, as employed by Gov. McDonnell, is that the General Assembly can tax just about anything under the sun and not run afoul of the constitution if the legislation is properly camouflaged.

But consider the tax on home sales in Northern Virginia (the ill-named “regional congestion relief fee”). It’s supposed to raise $30 million per year, all of which will be used for transportation (and there’s a lockbox to make sure of it).

To normal people, this looks an awful lot like a property tax, something the state cannot do. To the AG’s office, this is a mere transaction tax, and so is perfectly fine under the law. But unlike transactions for, say, hats or baseballs, these home sales revenues are going directly and only to transportation. What rational basis is there for such a connection? Houses don’t travel. And selling a house does not generally put strain on the road network. But the tax was allowed to stand, again, based upon the AG’s advisory opinion.

The problem, again, is lack of proper camouflage. If the Governor’s office had not dedicated the funds to a specific purpose, and instead allowed them to go into local government general funds, the disguise would have been just good enough to pass legal muster. As the amendments are written now…

Hmmm. Sounds like the basis for a legal challenge — which I’ve been told is almost guaranteed.

One could say the same thing about the hotel tax. And some diligent lawyer may be looking into that right now.

What we are left with, then, is a bill that is closer to constitutional, though not entirely so…contains the nasty surprise of future tax increases for the rest of Virginia…and seems to give the General Assembly the ability to tax you, me, the guy behind the tree and the tree, too.

Truly, then, it’s an historic bill — not only because it finesses almost all of the constitutional issues with enormous skill (thanks again to the able hand of the AG’s office), but also because it took an already politically problematic piece of legislation and made it toxic.

That took real effort.

  • http://www.facebook.com/shaunkenney Shaun Kenney

  • Greg L

    If I’m reading this right, small localities such as Fairfax City and Manassas City and so on do not meet the thresholds for these taxes. That could set up some interesting dynamics where dense but small localities end up with a pretty significant economic advantage over the counties that surround them, and quite an incentive for towns to try to incorporate as cities in order to avoid these taxes.