A
Sensible Tax
A
5-cent hike in Virginia's gas tax as a way to fund
transportation improvements is vastly preferable
to the
motley mash of taxes, fees and fines enacted last
year.
Senate
Majority Leader Richard Saslaw, D-Fairfax, has
offered a proposal to increase the
Commonwealth’s gasoline tax, which last was
raised in 1986. Saslaw would increase Virginia’s
gas tax by a penny per gallon each year for five
years. Alas, even if Saslaw’s proposal passes
the Senate, it appears to be destined for defeat
in the House. Even so, it’s a good proposal and
is superior to current approaches. Let’s see
why.
First,
Virginia’s tax on gasoline is 17.5 cents per
gallon. Since 1986, the consumer price index (CPI)
for urban consumers has increased 91 percent. This
means that the “real,” after inflation
spending value of these 17.5 cents has fallen to
about 9.5 cents. Putting it differently, if
Virginia spent $500 million on road construction
and repair in 1986, then the same amount of money
will purchase the equivalent of only $272 million
of road construction and repair today.
Whatever
we thought we were accomplishing with our gas
taxes in 1986, we’re now accomplishing much less
of that in 2008.
Yes,
it’s true that the General Assembly approved a
$1.1 billion per year transportation package this
past year; however, that tax package contained a
grab bag of taxes and charges, including the
notorious anticipated $65 million of abusive
driver’s fees. The economic impact of this
unappetizing stew is mixed and even somewhat
unpredictable. Further, this package backed away
from our traditional position that it should be
the Commonwealth that funds Virginia’s highway
needs.
Instead,
the package placed heavy reliance on regionally
approved tax initiatives in Northern Virginia and
Hampton Roads. Both regional plans contain a
potpourri of items reflecting tax-collecting
convenience and momentary political considerations
rather than sound, long-term transportation
policy. In Hampton Roads, for example, the package
includes additional taxes on rental cars and
automobile repairs, plus a grantor’s tax on real
estate sales. This is not the smart way to run the
proverbial railroad, though one must admit that
these regional approaches were superior to doing
nothing.
Further,
neither the Northern Virginia nor the Hampton
Roads regional tax initiatives conclusively deals
with those regions’ transportation problems.
Taking Hampton Roads as the example once again, we
see that this region’s new taxes will only
generate about $170 million per year, while the
major projects on its wish list (things such as
third crossing and improving Route 460 to
Richmond) cost $9 billion at current prices (52
times as much). Can this wish list be pared down?
Of course, but even if it is cut in half, the
funding mismatch still is apparent.
Sen.
Saslaw’s proposal has the merit of raising $250
million in additional funds annually to deal with
the needs of the entire Commonwealth, not simply
Northern Virginia and Hampton Roads. There are,
after all, significant road funding needs
elsewhere in Virginia, as anyone who drives I-81
can verify.
But
we shouldn’t forget that an increase in the gas
tax will generate other desirable effects. Higher
gas prices will encourage the use of public
transportation, inspire car pooling and cyber
commuting, and of course stimulate the purchase of
more fuel efficient automobiles. When all is said
and done, current Virginians are likely to drive
fewer miles. This will moderate highway
congestion, reduce highway deaths, and even dampen
carbon dioxide emissions. Not such a bad
combination.
Finally,
there is elemental justice attached to an increase
in the gasoline tax --- those who drive are those
who pay the tax. It’s a classic user tax that
provides incentives for people to change their
behavior even while it raises revenue. Sure, gas
taxes don’t have lots of political sex appeal,
but then legitimate, long-term solutions to tough
problems seldom do. Let’s not kid ourselves that
there exists an almost painless solution to our
transportation challenges magically paid for by
“someone else.”
Kudos
to Sen. Saslaw for focusing our attention where it
should be -- on the most economically sensible
long-term approach.
--
January 28, 2007
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