Virginia’s Transportation Mess

Virginia’s transportation-funding system’s drive toward socialism seems to veering even further left. Readers may remember Governor McDonnell’s plan to increase funding for transportation schemes — mostly transit — by abolishing the gas tax (not as good as it sounds) and replacing with a raft of other tax increases, including heavy reliance on an Internet sales tax that would entrench the principle of states’ being able to tax out-of-state residents. The plan ran contrary to sound conservatives principles of transportation in several ways. Most notably, it replaced the “user pays” principle with a redistributive general taxation model. My colleague Marc Scribner detailed [3] exactly what was wrong with the governor’s plan in the Richmond Times-Dispatch.

The governor’s plan has been distorted by Virginia house and senate wrangling, but not in a good way. Details of the latest deal [4] to emerge from Richmond are:

• Replace the current 17.5 cents per gallon tax on gasoline with a 3.5 percent wholesale tax paid by distributors and a 6 percent wholesale tax on diesel fuel.
• Increase the 5 percent retail sales and use tax paid on most purchases to 5.3 percent.
• Apply a $100 annual fee on alternative-fuel vehicles, including hybrids.
• Increase the sales tax paid on the purchase of motor vehicles, currently 3 percent, to 4 percent.
• Increase the amount of general-fund money diverted to fund transportation from 0.50 percent to 0.675 percent, providing roughly $200 million in addition funds when fully phased in.
• Use a substantial portion of any future sales-tax proceeds generated from Internet purchases (if Congress passes the Marketplace Equity Act), or, if the act fails, replace the revenue it would generate for transportation, education, and localities through a 1.6 percentage-point increase in the wholesale gas tax.
• Not all of the 0.3 percentage-point increase in sales tax goes to transportation. Part of the overall revenue generated by the increased tax will go toward an increase in education funding and other general-fund priorities.

This plan retains all of the bad features of the governor’s plan. It breaks the user-pays principle so that non-transit users in the rest of the state will pay for the brunt of transit schemes in Northern Virginia. It still relies heavily on an Internet sales tax. Worst of all, it represents a massive tax increase. The price the governor and the Virginia lower-house speaker had to pay to get this tax increase agreed on also apparently includes the legislature’s giving up its power over redistricting. It defies believe that such a plan could be proposed in a commonwealth where conservatives have supposedly dominated state government. All conservative Virginians should oppose this plan, forcefully.