A late entry into the transportation funding debate

The Thomas Jefferson Institute has offered what it calls a “friendly amendment” to the Governor’s transportation plan. In brief, the plan would focus on maintenance and leave it to the next governor to decide how to address construction and transit funding. The specifics of the TJI plan:

First, it raises the gas tax at the rate of inflation (using an inflation rate of 2.5% a year) after raising the current gas tax of 17.5 cents by a full 20% — or 3.5 cents – the first year. Under this plan in five years the gas tax would be 23.19 cents per gallon, or an increase of 5.69 cents. That will raise an additional $284.5 million a year based on each penny of gas tax producing $50 million in revenue.

Which is a tax increase, to be offset with a rather novel, if long overdue, solution:

Second, this tax increase would be “offset” by indexing to inflation the current state income tax brackets. The income ceiling for the tax brackets would increase each year by the same inflation factor as the gas tax will increase (2.5%). The income tax brackets would be adjusted so that “revenue neutrality” is achieved to the increase in the gas tax. The economic modeling results below take this into consideration.

There’s ample room to quibble over tinkering with the income tax to offset increases in the gas tax. But it’s still an interesting approach. TJI says it will be revenue neutral.

Further, the group accepts the Governor’s proposal to increase the amount of sales tax revenue devoted to transportation. They get into the weeds, though, with this part of the proposal:

Re-pass the last major transportation law from 2007 (HB 3202) to conform to the Supreme Court’s ruling.

Localities should be given more leeway in funding transportation. The Supreme Court ruled that unelected government bodies cannot raise taxes. The original HB 3202 law (a bill crafted with the leadership of then-Attorney General Bob McDonnell) gave the authority to raise various fees and taxes to the local elected governing bodies – the Boards of Supervisors, City Councils, etc. Governor Kaine changed this legislation and the Supreme Court struck down that change.

There’s plenty of argument to be made that local governments should have more responsibility for and control over local roads. They would need revenue to do so. My understanding is that the regional authorities portion of the existing transportation bill will receive particular attention from the House-Senate conference committee.

But this part of the plan is problematic in that it’s largely opaque, and is based on a plan that was tossed over the side by the Supreme Court, Nevermind who did what to the funding formula — the terms “HB 3202” and “regional authorities” are dog whistles that will bring opponents out of the woodwork.

And there’s also this bit:

Virginia should ask to be a test case where federal transportation construction monies are sent directly to state without federal strings attached. If construction projects can be completed more quickly and more economically with these block grants, then Virginia will prove that the entire federal transportation construction program could become a block grant to the states. Should this idea work it would be the same as having 30-40% additional federal transportation funds available without raising additional taxes. This would be a huge benefit to our state and its economic future.

It’s not quite as far-fetched as the internet sales tax monies the existing plan relies upon, but it still requires Congress to do something innovative. That’s a sucker bet.

This isn’t a sweeping plan, and does not pretend to be. It does contain some interesting ideas for addressing road maintenance, but leaves it to the next governor to do the heavy, and very expensive, lifting on construction and transit.

It’s safe to say Senate Democrats will dismiss it out of hand because it is limited in scope and does not raise the magical $1 billion per year they want.

A conference committee, though, may be able to use parts of this proposal to help craft a larger deal.