Gas tax alternatives

A couple of new ideas have been floated to address the state’s road money woes. One recycles an old idea — a regional referendum — that went down in flames a decade ago. Another, which would scrap the gas tax entirely and replace it with an increased sales tax, would bring an end to the old idea that the gas tax is really a user’s fee.

The latter idea comes from Del. Tim Hugo. It would seek to:

…eliminat[e] the state gas tax of 17.5 cents per gallon and replacing it by increasing the state and local sales tax from 5 percent to 5.9 percent.

Del. Timothy D. Hugo says his proposal would make Virginia the first state to scrap its gas tax. His bill also would allocate an additional 0.5 percent of the undesignated state retail sales tax revenue to the Commonwealth Transportation Fund.

Hugo outlined this idea to me earlier in the month and I’ve seen a draft working paper on this as recently as two weeks ago. The goal is one of those legislative holy grails — revenue neutrality. Maybe it is, maybe it’s not. The one thing it absolutely does is end the idea of fuel taxes as user fees and make the state’s sales tax even more regressive. Regardless, this approach will face tough opposition…and might possibly open a Pandora’s box if it survives.

The regional referendum proposal is a retread:

Del. Chris Stolle, R-Virginia Beach, submitted legislation calling for a regional referendum in Hampton Roads. Voters could choose whether to back a 1 percent sales tax increase to boost road funding in the region by $175 million to $195 million annually. Sen. Jeff McWaters, R-Virginia Beach, is introducing companion legislation in the Senate. In 2002, voters in Hampton Roads and Northern Virginia rejected such a regional approach.

As noted earlier, Hampton Roads residents defeated such a proposal a decade ago. Opposition to the Northern Virginia version helped launch the political career of one Ken Cuccinelli. But that was then, this is now and, surely, everything is different now, right?

In his morning email, Democratic strategist Paul Goldman suggested that the referendum be statewide (though such a referendum would only be advisory). Paul believes it’s time to trust the people on this one, and, if given the chance to voice their opinion on a gas tax, they would say “raise it.”

That bit of projection aside, Goldman notes that neither Mark Warner nor Tim Kaine like referendums, and neither does the Democratic leadership in the General Assembly. But looming over all of the ideas is Speaker Bill Howell’s sentiment that there just might not be enough time in this short session to address transportation funding at all.

Until all those who clamor for more road money can overcome Mr. Howell’s doubts, their plans aren’t worth the paper they are printed on.

  • Since when did the continued decline and destruction of our transportation
    infrastructure result in such tepid and inconsequential proposals which
    the proposers themselves admit is but a drop in the bucket? Why not be bold? Admit
    we have destroyed our major economic advantage by having built and first class
    transportation system, and then squandered that advantage by neglect and
    inattention. Tell us we need to double the gas tax and have reasonable tolls as well to make any significant impact on the deficit in maintenance and repair we have created, and of course then index the increase to inflation. Then admit the average gas tax payer would pay only $100 bucks per year more in gas tax. Stop with this failure of leadership over a measly $100 per year. Do what elected Delegates and Senators are supposed to do; lead boldly forward, not cower on the sidelines, waiting for your pension.

    • $100 may be measly to you, but when it’s added on to the rest of the tax burdens Virginia’s families have to bear, it is just another rock in a back pack filled with rocks they have to carry. And, worse, it’s not a long term solution to the problem.

      Our transportation system is no worse than any other states, Mike. The infrastructure problems we face are a national problem, not simply a state problem. And raising the gas tax makes no sense given that the gas tax itself is a dying funding mechanism. It needs to be replaced.

      That’s why Delegate Hugo’s plan is so important. I’ve talked about it with his staff, and I’m coming around to it. Tim has finally come up with a solution that gets rid if the gas tax entirely, and that’s critical. Increased fuel efficiency and the rising price of gasoline is only going to continue reducing the revenue we need for transportation. Ending the gas tax now and replacing it with a sustainable funding mechanism, like a sales tax, is a bold solution. As Norm notes, if we did this, we’d be the first and only state to do so.

      As for the arguments about regressive vs. progressive taxes, there is no real way to create a dedicated transportation revenue stream that isn’t regressive. We all use the roads, so we should all pay for them. Nobody can make an honest argument that they don’t use or somehow benefit from transportation infrastructure. My only complaint about Tim’s plan was the goal that it be revenue neutral, because I think it needs to raise revenue since that is part of the problem. The use if the .5% if the undesignated retail sales tax gets us new revenue, but I don’t know how much.

      • Once again, Brian has an idea in hand that just coincidentally offloads costs from his clients to you.

        Color me shocked.

      • Well Brian, for those commuters in the midtown/downtown tunnel who will pay $1,000 more per year, an increase of $100 per year in gas tax is looking like a much better alternative. Fact is Brian, the catastrohic failure of your party to deal with the destruction of our transportation infrastructure will cost you future elections, but like the republicans in the House of Representatives for whom the decline of our national infrastructure is “no big deal.” Sorry, to me and others, living in a first rate Nation is a big deal.

        • You are assuming that increased revenue from the gas tax would actually go to Hampton Roads, or northern Virginia. This isn’t just my party, either. Your party has been singularly unable to put any ideas on the table besides raising taxes to solve these problems. And since raising taxes was tried and became toxic to folks on both sides of the aisle, it’s pretty clear that we need new ideas. I have yet to hear much of that from you. Just the same old fingerpointing.

          • Well, last time I checked, building new infrastructure cost money, a simple and incontrovertible fact. You clearly live in a fairyland if you think we can pay the same tax rate that now has half the buying power it did in 1987, and sustain our transportation infrastructure. Fact is, we now have an estimated $10 billion in deferred maintenance and repair, and face the lack of new federal money for construction in a few short years.
            Brian, I used to think you had good sense. If you continue to believe that we can sustain our infrastructure without raising the tax rate, you are simply nuts. That is all there is to it.

          • No, Mike, I’m saying it’s time for new ideas and the gas tax is an old idea. The best part if the sales tax answer is you never need to index it for inflation. I agree with you that we need more revenue. I just don’t think raising the gas tax is a long-term solution. I’m starting to think Tim’s idea here is pretty solid.

          • Actually, I would agree, but for two decades, the perfect has been the enemy of the good. So raise the gas tax this session to $0.40, index it, and set up a commission to determine the long term solution that is at least as robust.

      • Evan

        The trouble is, if the plan is revenue neutral it doesn’t really fix anything. We need hundreds of millions of new dollars just to do required maintenance, let alone build the network we’ll need for the millions of new VIrginians we can expect in the coming years.

        Aside from that, some significant percentage of our gas tax revenue comes from out of state commuters. I’d hate to shift the burden for our transportation network entirely onto the VA taxpayer.

        • That’s a fair point about out-of-state drivers, but that’s the federal government provides highway money to states. It is our network, after all. It’s not exactly fair to force somebody else to pay for it.

  • It would be nice to see some numbers, such as the total VDoT debt outstanding and blended rate, and also input costs (labor/materials/overhead) so we could consider alternatives to new taxes. I’m finding it surprisingly difficult to source any numbers for either of those things.

    What businesses are doing these days is figuring out how to do more with less, and government will have to follow suit, whether it likes it or not.

  • I actually like Hugo’s idea. The fringe right tries to portray dedicating a portion of the Gas Tax to mass transit as “theft”. Even though the idea became Federal law under the Reagan Administration. Well, mass transit users do pay Sales Tax.

    Why not go to 6% flat, with a larger portion to Amtrak Virginia and the State Transit Fund?

  • Wally Erb

    Tax and spend legislators with another proposal to increase
    regressive taxation at the expense of the middle-class and low income.
    When will these ineffectual gang of south-side legislators learn that
    the responsibility of the interstate system is that of the federal and
    state governments and not a regional burden.

    Opening up a new revenue stream unrelated to transportation is an
    inadequate methodology perpetrated by ineffectual legislators seeking to
    mitigate their shortcomings in redistributing existing related revenues
    streams and/or their rates. Appropriate transportation revenues such as
    excise, fuel, permits, commission, and so forth are already in place
    for this purpose. This expansion by revenue diversity masks the true
    cost of related projects and further degrades the existing process. As
    to costs relating to the interstate highway system, use and raise those
    rates as necessary; don’t throw another monkey in the mix.

    Mark my words, if a proposal is placed on the ballot, a multimillion
    dollar media effort funded by corporate welfare developers and bankers
    will be unleashed on residents.

    • Wally, I don’t think so. Business leaders have been burned so often by the ineffective and disjointed policies of the republican caucus that I don’t there would be any enthusiasm for a referendum to do what we elected people to do in the General Assembly. The failure to govern and deal with transportation is so profound that everyone of these bozos should resign in disgrace and apologize for taking up space yet still drawing a pension.

  • Wally Erb

    Moreover, sales tax increase will place additional pressure on local Commonwealth sales and encourage consumers, especially in larger ticket items, to seek alternative suppliers especially on the internet or military exchanges (for those applicable). Ironically, the patron in South Hampton roads can avail himself of these military privileges.

  • The referendum isn’t about the gas tax. Do you read these bills before you write about Hampton Roads issues?

    • Brian,

      Remember that Leahy was the same blogger who wanted to include the Car Tax in a transportation deal as if the Car Tax was a state (rather than local) revenue source.

      Maybe BD needs to keep him away from Transportation, as he doesn’t have a clue.

    • NormLeahy

      Must not feed the trolls…

      • From the front page summary “Hampton Roads may get a second whack at a gas tax referendum” WHAT gas tax referendum?

        • Evan

          There were referenda in 2002 in NoVA and Hampton Roads. Course, those were sales tax increases, as is this one. So . . .

  • I need a primer. Being from Missouri, but 15 +/- resident of the Commonwealth, I am confused. Back in the show-me state, all gas taxes are dedicated funds for the sole purpose of transportation. I am annually in this annual debate of mixing up apple and oranges for what–to me–should be straight up or down discussion of transportation needs and how to pay for them. And yes, if MODOT needs more money….guess what? they have to go to the voters and ask them to vote for it. I do not for the life of me understand why our “conservative voice” cannot or will even look at other ways to do things.

  • To give an indication of the incredible disconnect within the disfunctional
    McDonnell political operation and the Commonwealth, just a few short weeks about
    the Speaker of the House, Bill Howell, made a speech before the Chamber of
    Commerce in Fredericksburg in which he decried the proposals on transportation
    coming up in his own caucus and said he saw no problem and if there were there
    was no time in this short session to deal with it anyway. Now this from a man
    who for two decades has prevented any meaningful effort to sustain our
    transportation infrastructure, and when faced with congestion, disrepair,
    collapse, abandonment, absurdly high tolls, PPVs to benefit international
    conglomerates, says we have no time to deal with this strategic function.
    Now, is it just me, or are Delegates and Senators just now starting to understand their electibility is on the line because of the failures of McDonnell and Howell to govern this Commonwealth?

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