A Series of Hidden Tax Hikes In the Bag

The bag tax is 5 pence in Scotland, but will be 5 pennies here in Virginia.

By Steve Haner

Politicians hate taxes that voters pay by check and love taxes that are buried deep on invoices or fully invisible. The 2020 General Assembly is raising taxes right and left (mostly left) but focused on that second method. These will be tax increases most people will never spot.

Governor Ralph Northam’s record introduced budget was based on several proposed tax increases (and of course the extra money collected by breaking his promise to continue last year’s tax reform effort). But legislators have not been shy, only sly, about building on that base with additional levies. 

Since the Governor was already proposing to raise Virginia’s motor fuels taxes, collected at the wholesale level and never seen on receipts, this was the perfect time to add addition revenue to the existing regional transportation tax regimes.

Since the Governor was already proposing to raise Virginia’s cigarette tax, also collected by wholesalers, this was the perfect time to expand the authority for a local tobacco tax to all those Virginia counties not allowed to impose it.

At least you may be able to see on future store receipts the new 5 cent tax on plastic bags.

House Bill 534 produced a curious roll call. It initially received 50 votes and failed, needing a hard count of 51 (the rule with tax bills). It received 52 votes on the second try, but the official roll call notes six Democrats “voted aye but intended to vote nay.” Intentions notwithstanding, they voted to impose a statewide nickel tax on plastic bags , with retailers keeping a penny from each transaction.

Another set of taxes that won’t be easy to spot will be imposed by all the counties granted new tax authority, including a meals tax of up to 6% with no required referendum. The difference between city and county taxing authority has been source of friction for a long time, with the business entities subject to these excise taxes shouting vive le difference.

There is a doozie of a fiscal impact statement on the bills that extend to Virginia counties more of the taxing powers now enjoyed by cities, this one prepared by the Joint Legislative Audit and Review Commission. Should every county made eligible impose every tax at the maximum authorized rate, they would collect $528 million in the first year of imposition and $570 million two years later.

Most of that would come from the authorized 6% tax on prepared meals and beverages. Now 43 counties have no meals tax, and 52 impose a tax of 4%. Would they all impose the maximum rate immediately? Probably not. They will eventually, count on it. Lesser revenues will flow from the new allowed taxes on admissions, cigarettes and transient occupancy.

If you haven’t noticed, gasoline is cheap right now. This makes it easier for the political class to add to those taxes, and the State Senate and House of Delegates are now discussing either an 8 or 12 cent increase in the basic state tax for transportation uses (and then indexed for inflation). But the basic statewide tax is no longer the only thing to consider.

The House has approved a new Central Virginia Transportation Authority and its funding scheme, using 7.6 more cents per gallon on gas and another 0.7% on the general sales and use tax, bringing it to a total of 6%. House Bill 1541’s most recent impact statement projects $179 million collected in the first year and $207 million by 2026.

The Hampton Roads region already has those regional taxes for transportation, but it is building upon them with House Bill 1726 and Senate Bill 1038, adding a regional grantors tax on real estate transactions, and another 1% to the transient occupancy tax on hotel rooms. The take on that will be $22 million in the first year and $26 million by 2026.

Not to be left out, the Northern Virginia region is also padding its transportation fund with higher grantor’s and transient occupancy taxes, with much of the funds devoted to transit. There is no published fiscal impact statement on House Bill 729. These are largely invisible taxes, so who cares?  They are certainly hoping you won’t notice.

The regional taxes for transportation are proving so popular the General Assembly may extend them, at least the additional fuel taxes, to all parts of the state that haven’t set up their own authorities. Senate Bill 452 does not spread the additional sales tax imposed for the regional authorities, however, just the added 7.6 cents in fuel tax. There was no House companion on this, so its chances of full passage are diminished. It also lacks (surprise) a fiscal impact statement with projected revenue.

Regional transportation taxes are now inspiring local school construction levies, an additional 1% on the sales tax. Halifax County started this trend last year. Pending House bills add about seven Southside Virginia localities to the list, bringing the sales tax in those (also collected off Internet sales now) to 6.3%. A pending Senate bill adds Gloucester County. This will spread statewide very, very soon.

The Lowly Litter Tax. Companion bills raise the litter tax paid by manufacturers, wholesalers, distributors and retailers from $10 to $20 (per year), and the higher tax paid by companies in the beverage trade from $25 to $50. The additional litter tax raises less than $1 million statewide. But it is a tax increase, somewhat ironic given the tax exists as an alternative to bag or bottle taxes.

Utility Gross Receipts Taxes. The General Assembly doesn’t want the State Corporation Commission to have much authority, but it will be well funded while it stands aside on utility regulation. House Bill 129 raises the allowed tax on public service companies to fund the SCC from 0.2% of their gross receipts to 0.26%, increases a tax on natural gas a similar amount, and raises small taxes imposed on electricity consumption.

The SCC must know how much more money it intends to raise, but fails to report it in the fiscal impact statement. It does note the allowed tax rates haven’t changed in 70 years, but these are excise taxes, so revenue rises with economic value. Without doubt, all the companies paying them pass through the cost of such taxes to their customers.

No legislation can change the basic fact that only people pay taxes.

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24 responses to “A Series of Hidden Tax Hikes In the Bag

  1. I had not heard about the tax on plastic bags. I hate plastic bags, especially at the grocery store, primarily because they don’t hold much and they have no firm structure. The result at the grocery store is I get a bunch of formless bags, with items spilling out of them. As a result of this tax, I assume stores will be more willing to offer paper bags.

    However, if this is supposed to be a bill to protect the environment, it is ironic. Research has shown that paper bags make a bigger environmental (carbon) footprint than plastic bags. The main problem with plastic bags is that people do not dispose of them properly and they get into the water. This is especially a problem near the ocean. On the Outer Banks, plastic bags have been banned altogether.

    It is not quite fair to include the local taxes in the list of taxes being imposed by the General Assembly. If those taxes get raised, folks can only blame their boards of supervisors. Commenters on this blog have long complained of the legislature’s restraint on local powers. Well, some of those constraints have been lifted. Be careful what you ask for.

  2. This is a very good summary – and I realize a lot of hard work and effort go into writing these while schmos like myself quickly read through them, so THANKS!

    On the “hidden” , yes, and as I recall, McDonnell started that technique when he raised transportation taxes and converted from a per gallon to a percent of price at the wholesale level – and before that even, not sure when it was done or who but in our region, the VRE commuter rail was funded by a 2.1% tax on fuel.

    To be, this is somewhat like a VAT tax which is popular in some other countries and yes.. since it is embedded, it’s hard for consumers to know it’s a tax.

    On the issue of taxes that keep going up and never down.

    On the gas tax – part of it is more about revenues going down from the original tax which has upended transportation planning and funding across the state. VDOT has had to dump hundreds of projects from it’s 6-year plan because projects were put on it in anticipation of predicted funding which fell short because of more efficient cars.

    Transportation is much more expensive that it used to be also. Adding transportation improvements to existing roads in urban areas is much more costly , sometimes 5-10 times more costly than working on roads in rural areas so it makes sense to let those localities have additional regional taxes to pay for that stuff – rather than taxing all state residents.

    Finally, apart from transportation – take something like School Resources officers – we never used to have and now it’s becoming a standard staffing. Those resources offers don’t get paid with existing funds.. the money has to come from somewhere. Yes, it would be nice if that money came from cutting back existing spending on something else but the real point is – government is doing more than it did before when it staffs additional security at schools. That’s a legitimate additional cost that all of us should be paying for.

    When govt does more – it means we pay more.

    Conservatives will argue that govt should not be doing more – but that’s a philosophical thing – if people want more security at the schools, it don’t matter what a minority, Conservatives think – they’re outvoted! That’s the way it works! The “tyranny of the majority” is enforced at every single election!

    • Larry,

      This is not a response to the above comment, but I wanted to address you about another matter.

      Yesterday, I behaved in a rude and ungentlemanly manner towards you in another thread. I accused you of lying and I used harsh language in doing so. The accusation was not justified and I should not have made it.

      I am sorry, and I hope you will accept my apology.

      I have no doubt that in the future I will regularly disagree with you on many subjects, but henceforth I will try to do so in a civil manner.

      I hope you are having a good day.

      Wayne

  3. Well, so far, the new GA majority is comfortable continuing to take aim at tax measures which impact the least affluent the hardest. Gas, plastic bags, utilities? We may all use them but the lower your income, the more these will be felt.

    • Shhh. They are not supposed to notice….

    • Agreed.

      I would like to introduce the term “Bloombergian” to the lexicon as a way to describe governmental actions such as this new tax on plastic bags.

      Bloombergian – adj. – intended to control the behavior of people by means of regressive taxation, bans on consumer goods and/or laws dictating certain behavior. Related terms: arrogant; elitist; tyrannical; dictatorial.

      I know Mr. Bloomberg did not invent the dictatorial, nanny-state school of government, but he is certainly its most vocal and well-known proponent at this point in time.

    • Paternalism all the way.

  4. I like plastic grocery bags. We use them to get rid of kitty litter. Not sure what we’ll do when we have to start paying 5 cents per bag. It may be cheaper to buy plastic bags off the shelf. I doubt that’s what the solons in the General Assembly intended. We’ll see…

  5. HELLO! … we are creating havoc with all this plastic we have grown used to.
    For you who think it is just adding to the tax take, go get a couple of real bags to take to the grocery store and it won’t cost you a thing.

    According to National Geographic …
    • Production increased exponentially, from 2.3 million tons in 1950 to 448 million tons by 2015.
    • half of all plastic has been manufactured in the last 15 years …
    • Production is expected to double by 2050 …
    • every year, about 8 million tons escapes into the oceans from coastal nations. That is the equivalent of setting five garbage bags as full of trash on every foot of coastline around the world.

    Plastic trash is wreaking havoc in the ocean. It first caught my attention when I read about the dead beached whale whose stomach was found to contain 64lbs of plastic trash. Since then another whale died with 88lbs of plastic trash in its stomach. Since plastic is pretty light … that is a huge amount of plastic.

    The problem of plastic trash is actually worse in developing countries where garbage collection is often non-existent, but microplastics are everywhere. Plastic does not biodegrade like paper but it does break down into “small particles, often less than one-fifth of an inch across,” once it is subject to wind, water, and sun etc.

    These microplastics have been found throughout the world … on Everest and in the deepest trenches of the sea. They are also found in drinking water and in the air we breathe. Once the plastic is transformed into microplastic bits they are almost impossible to retrieve.

    Here is a thought from PIRG ..,. you could be ingesting a credit card a week’s worth of microplastics, and that credit card’s worth of microplastic contains additives put into the plastic to make it stronger and more durable, even though almost ½ of the plastic manufactured is ‘single-use’. Those single-use plastic bags, food wraps, straws, utensils and such may persist in the environment for hundreds of years after they are discarded.. Restricting their use is inevitable and the right thing to do.

    The plastic waste problem is so ubiquitous that it has prompted efforts to write a global treaty at the UN. Here in the US hundreds of municipalities have “instituted fees or banned single-use plastic bags. If Va passes a law that in some way restricts the use of plastic bags, they would be joining 8 other states and DC who have current restrictive legislation.

    I hope VA decides to not be last state to address this community issue. We don’t need single-use plastics. There are plenty of readily recyclable, compostable and reusable alternatives.

    https://www.nationalgeographic.com/environment/habitats/plastic-pollution/
    https://uspirg.org/reports/usp/beyond-single-use-plastics

    • A nickel tax won’t change any of that, it really won’t. I agree it needs fixing. Got me a nice pile of reusable bags. The plastic in the oceans worries me more than some things that worry others. But we spend energy and capital on problems that we cannot solve (because of money to be made). Water is the big issue – keeping the trash out, keeping the freshwater supply safe, not over taxing the aquifers….maybe because I grew up on a series of deserts…

      I remember laughing myself silly when the tobacco settlement resulted in a series of new taxes. Granted, they were high taxes, high enough to actually deter behavior, but all that accomplished was making the government dependent on the continued financial health of that industry. Do we want to tax plastic or actually get rid of it?

      • Your tobacco tax analogy is spot-on.

        Jane T. is 100% correct about the environmental damage done by plastics, and I agree that something needs to be done about it.

        However, like you, I do not think a tax on plastic will improve the situation.

        For the record, my wife and I have been taking reusable bags to the grocery store for more than ten years.

    • “Here is a thought from PIRG ..,. you could be ingesting a credit card a week’s worth of microplastics, and that credit card’s worth of microplastic contains additives put into the plastic to make it stronger and more durable…”

      So… ..wouldn’t that in turn make me stronger and more durable?

      😉

  6. According to the report from PIRG plastic bag bans work. In 2017 after hundreds of local governments and the state of CA banned single-use bags, 72% fewer plastic bags were found during beach cleanups, compared with 2010. A ban also reduced by 50% the amount of bags thrown out by Seattle homes.

    Sounds like doing something is better than nothing …. and since plastics are made from fossil fuels we could actually approach this from a different angle. WVA is planning a plastics manufacturing center. Wonder which major banks are investing?

    • “Sounds like doing something is better than nothing…”

      Not really. Taking ineffectual action has essentially the same effect as doing nothing, but wastes a lot of money in the process.

    • Jane, my reusable grocery bags are the trunk of my car. If I relied on public transportation, it would be impractical to carry them to my job, to have them with me at all times. That person will be paying the 5 cent tax, not I. That’s what makes it a regressive tax. If the government wants to take a position of plastic bags then they can ban them as other localities of have done. Or tax the producers of these bags–create an incentive for the free market to find a better solution.

      • The tax is a ‘less liberal’ option. What the environmentalists are looking for is a ban of single use plastics … those straws and such as well as the bags.
        I get your comment about carrying bags around but I would bet there is another way. We did do without before and can certainly come up with something not as cumberson as the kind of bags that you and I have.

      • The tax is a ‘less liberal’ option. What the environmentalists are looking for is a ban of single use plastics … those straws and such as well as the bags.
        I get your comment about carrying bags around but I would bet there is another way. We did do without before and can certainly come up with something not as cumbersome as the kind of bags that you and I have.

  7. As far as gasoline tax, I have been in favor of increasing that because the low gasoline tax sets the stage for fuel marketers to grab higher profit margins in NoVA. In other words, I am hoping we can increase the tax and not see the full price impact at the pumps. Also it addresses the issue of taxing out-of-state visitors which we tend to let them off the hook, in favor of hitting up NoVA for any needed funds. Similarly I tend to support support the meal taxes, and wish Fairfax could do that (got voted down).

    Plastic bag thing: does that solve a problem or just another in-your-face move by liberals? Fairfax we incinerate our trash to get the energy, also my household is donating bags getting Trex to make plastic benches from our bags. So now I will take the paper bags from Giant, and toss those out I guess with the recycling.

  8. Virginia’s General Assembly session’s “Series of Hidden Tax Hikes In the Bag” should be labelled Virginia’s murder of its working middle class, using death by a thousand cuts.

    The fact that these new laws are designer built to hide the myriad of new taxes from the taxpayer is the greatest indictment of all.

    Our government is upside, down. Tasked to represent and benefit the people, the government instead bleeds the people, so as to advantage those who run government and their crony allies, now most particularly non-profits, most particularly those in education and health care, al0ng with special interests in housing, transportation and energy, who share in these ill gotten benefits.

    Meanwhile the working class get the bill, along with grossly reduced and too often failing services, making their life ever harder, now to the point where families and kids are exceptions not the rule. More and more of our younger middle class kids can no longer afford marriage, children, a home of their own, nor a good education either, which is not only highly expensive but increasingly hard too find, pay for, and benefit from.

    The good news is that these awful spirals of taxes and impositions on middle class working people are beginning to be reversed in some states. And this fact is increasing becoming clear to more and more people, up and down the line.

  9. Pingback: Sweet 16 (Tax Bills) Will Cost Virginians Billions | Bacon's Rebellion

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