Category Archives: Taxes

Interstate 81. Photo credit: Roanoke Times

The Commonwealth of Virginia has done some smart things in recent years regarding transportation policy. It has established the Smart Scale system for objectively ranking transportation projects. And it has reformed its Public Private Partnership process for attracting private-sector investment without giving away the store. But the assortment of taxes used to fund the state’s streets, roads, highways, and mass transit systems remains an incoherent hodgepodge of subsidies and cross subsidies that only remotely abide by the user-pays principle.

Governor Ralph Northam and the General Assembly kinda sorta took a step in the right direction yesterday by agreeing to new taxes to raise money for congestion-relief projects along Interstate 81, the transportation spine of western Virginia. But we can do better. It’s time for Virginia to seriously consider a Vehicle Miles Traveled (VMT) tax to cover the maintenance cost of the state’s roads, bridges and highways.

Under Northam’s amendments, tractor-trailer registration fees will increase later this year and the diesel tax will increase to 2.03% of the statewide average average wholesale price per gallon. That make sense. Freight carriers dominate traffic on I-81 and they account for disproportionate wear and tear on the highway. Also, according to the Roanoke Times, revenues will be distributed on the basis of truck miles traveled on Interstate highways between the I-81 Corridor Improvement Fund and other interstate projects around the state. Additionally, the gas and diesel tax will increase by way of a 2.1% wholesale tax in the I-81 corridor. All of those revenues will go directly to I-81 improvements.  Continue reading →

Photo credit: Roanoke Times

Governor Ralph Northam is pitching another plan to raise money for improvements to the Interstate 81 corridor: (1)  Increase the statewide diesel tax to pay for transportation projects across the state, and (2) impose a regular gas and diesel tax along the I-81 corridor to raise revenue directly for I-81. The combined measures would raise about $150 million a year for I-81, a fraction of the $4 billion in identified needs, reports the Roanoke Times.

The proposed budgetary amendment comes in response to flailing efforts by lawmakers to find a funding solution for western Virginia’s increasingly congested and accident-prone traffic artery. All previous efforts have floundered because they offended one constituency or another. The root problem, of course, is that everyone wants more money for their roads, but everyone wants someone else to pay.

The political horse-trading approach seems not to be working. Perhaps it’s time to step back from the deal-making and articulate some basic principles that people can buy into in the abstract. If we can gain agreement on the principles, perhaps we can take a fresh look at devising a workable solution. Herewith are some principles worth considering: Continue reading →

Graphic source: I-95 Corridor Coalition

From a purely economic perspective, the ideal system for funding road and highway improvements would be a Mileage Based User Fee (MBUF) in which motorists would pay in direct proportion to which they use the public road network. Charging for road usage would incentivize Virginians to drive less, thus reducing both congestion and carbon emissions. Plus, an MBUF (also known as a Vehicle Miles Driven tax) would replace Virginia’s increasingly antiquated and jury-rigged system of transportation funding that relies on retail and wholesale gasoline taxes, sales taxes, motor vehicle registrations, and other revenue sources that transfer wealth from low-mileage drivers to high-mileage drivers.

Aside from the fact that such a system would create winners and losers, which would complicate a political implementation, the idea of a VMT tax has been beset by practical issues. How would the technology work and how much would it cost to administer? How could peoples’ privacy be protected? And how does one account for inter-state travelers — if Virginia couldn’t collect the tax from out-of-staters using state roads and highways, would such a system unfairly burden Virginia taxpayers?

But the idea is gaining new respectability. The I-95 Corridor Coalition, a partnership of more than 100 state transportation agencies, toll authorities, and public safety organizations, is exploring the feasibility of establishing MBUFs. If Virginia converted its 22.39 cents-per-gallon gasoline tax and 26.08-cents-gallon diesel tax to an MBUF on a revenue-neutral basis, it would have to charge 1.02 cents per mile. (That compares to the IRS mileage tax allowance of 58 cents per mile.) Continue reading →