The debate over Governor Bob McDonnell’s transportation tax plan is heating up. The Governor has been stumping the state, giving speeches and enlisting the support of new businesses, labor unions and trade associations every day. The latest announcement from the governor’s office touts the endorsements of Richmond-based Universal Corp., the Virginia Aviation Business Association and the Virginia Airport Operators Council.
Tax package not regressive. McDonnell’s team also has released a report by Chmura Economics & Analytics, which concludes that eliminating the state’s 17.5-cent-per-gallon gasoline tax would overwhelmingly benefit consumers, not gas retailers. In other findings, Chmura found that replacing the gasoline tax with a 0.8-perentage point higher sales tax would not disproportionately impact the poor. Under the governor’s proposal, households with the lowest 20% of incomes would spend 3.3% of their income on gasoline and sales taxes compared to 3.4% now. Households in the second lowest income quintile would see a comparable reduction. Meanwhile, the surge in gasoline sales resulting from eliminating the tax would support 338 new jobs in gas stations around the state.
Rolling the Dice. The liberal-left Commonwealth Institute countered with a report of its own, arguing that the governor’s tax proposal is “rolling the dice” by counting upon Congress to pass legislation allowing Virginia to require out-of-state sellers to collect sales tax when selling products online to Virginia consumers. That legislation, which would account for one-third of the net new revenue raised, is one of three competing proposals and the odds of any one of them passing is minimal, says the Institute.
Wrong projects, wrong tax, wrong reform. Meanwhile, a coalition of environmental and smart-growth groups has critiqued the governor’s tax plan. Many of the key points will be familiar to readers of Bacon’s Rebellion.
- The wrong projects. The Virginia Department of Transportation “has spent too much money on the wrong projects. More funding should not be approved unless it is tied to critical reforms and better accountability.” The smart growth lobby singles out the U.S. 460 Connector between Suffolk and Petersburg, which will require $1.1 billion in public funds, as especially wasteful.
- Subsidizing driving. Eliminating the gas tax will abolish the user-pays principle in which those who use roads pay for them. Subsidizing drivers would encourage more driving, increase congestion and defeat the purpose of raising taxes.
- Critical reforms. Instead of raising more money, the governor should reform how existing dollars are spent. That would mean increasing maintenance funding; reevaluating VDOT mega-projects like U.S. 460, the Charlottesville Bypass, the Coalfields Expressway and Northern Virginia’s proposed North-South Corridor; reforming the Public-Private Partnership Act to make decision making more transparent and accountable; tying transportation spending to more efficient land use; and increasing funding for transit rail and inter-city rail.
Bacon’s bottom line: I concur with the points highlighted above except one: I don’t think rail and transit projects should be guaranteed 25% of new funding. Transit projects should meet the same strict Return on Investment hurdles as road projects. Unfortunately, the state does not conduct ROI analysis on any of its transportation projects. And that’s the problem. When there is no objective way to distribute transportation dollars, politics and ideology take over to the detriment of all but the politically connected.