Virginia’s legislature is trying to raise money for transportation needs. But Virginia legislators of both parties are giving up economically sensible principles they once followed, in the foolish pursuit of so-called “bipartisanship.” The resulting “bipartisan” deal is worse than what either Democrats or Republicans came up with separately, and seems to confirm the aphorism that “bipartisanship is the marriage of evil and stupidity.”
The Senate’s Democratic majority had supported a state gas tax increase. It might not have been the wisest idea to raise taxes in an troubled economy that is barely growing at all (especially since the state budget has grown enormously in recent years), but at least the gas tax falls on those who actually use the roads, and makes those who benefit from the roads pay for them.
The House’s Republican majority had opposed statewide tax increases, preferring smaller regional tax increases. Transportation needs are most severe in regions like Northern Virginia, which also have the economic resources to pay for them. A statewide tax increase is not well-tailored to their needs, because of the state’s outmoded regional transportation funding formula, which discriminates against densely-populated areas and in favor of rural areas. Raising taxes statewide effectively makes places like the Northern Virginia region pay for unneeded roads in rural parts of Virginia like the Bristol region, which receives more than twice as much back in road funds as its citizens pay in transportation-related taxes, while Northern Virginia pays much more in transportation taxes than it gets back in road funding. (Northern Virginia also pays the lion’s share of state income tax in Virginia despite having just a fraction of the State’s population).
From the Washington Examiner, it now appears that both sides are giving up their principles to adopt something worse. The Republicans are giving up their opposition to statewide tax increases. And the Democrats are giving up the idea of a gas-tax increase that embodies the user-pays principle in favor of support for an increased grantor’s tax on homeowners. That tax would hit already hard-pressed homeowners hard and make homeownership in the state less desireable.
A grantor’s tax is economically destructive to a state that levies it, unlike a gas tax. Unlike a gas tax, which is paid by out-of-state motorists who use state roads and buy gas in the state, the grantor’s tax is paid only by homeowners in the state. Economists say that grantor’s tax increases reduce home values and thus cut local property tax receipts.
The grantor’s tax is also an unfair means of transportation funding: homeowners must pay the tax even if they seldom drive or use the roads. And unlike a gas tax, it does not produce reliable revenue from year to year, as long-term transportation planning requires.