“People Have Stopped Buying Automobiles”

By Dick Hall-Sizemore

That is how Aubrey Layne, Secretary of Finance, summed up his explanation to the House Appropriations Committee of April’s 15% drop in transportation revenue

All of the major components of the transportation revenue were down in April, but the biggest danger sign was in the motor vehicle sales and use tax. That source is the largest single state source of revenue for the highway maintenance and operation fund and the second largest source for the transportation trust fund. Its revenues in April were down 41% compared to April a year ago.

Despite the sharp drop in April, the year-to-date transportation revenues are still running 5.6% higher than for the comparable period last year, and significantly higher than the 3.3% decrease that had been forecast. However, the Governor’s stay-close-to-home policy, continuation of extensive telecommuting, and social distancing will likely bring the total transportation revenue below last year’s total. Revenues should pick up after July 1, when the increase in the gas tax becomes effective, although the increase will likely be less than was forecast in the session.

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14 responses to ““People Have Stopped Buying Automobiles”

  1. Lol. So Aubrey “Money Train” Layne is surprised that unemployed people and those forced by the government to work from home would stop buying automobiles. Has he updated his forecast of a $2B revenue shortfall for the state over the two year budget cycle?

    Sorry for the snark but I spend most days dealing with private sector companies that have to make realistic projections about where their revenues will fall over the next 12 – 18 months and take appropriate action now based on those estimates. I also read projections from governments like that in Maryland which seem much more realistic than those being made in Virginia.

    Our state government seems content to keep its head in the sand until “discovering” a full blown revenue crisis sometime this Fall.

    • And how do those projections made by the private sector companies at the beginning of 2019 look now in May 2020?

      • Lol. A little Hall-Sizemore snark. Obviously, everybody’s predictions made pre-COVID19 are kaput now. But, as you know, that’s not the point. The point would be measuring from April 1 through the end of this epidemic and its related economic chaos.

        Of course, private enterprise can’t vote themselves a price hike and then send out armed agents to collect. Maybe if they could they wouldn’t take honest projections and early cost cutting in accordance with those projections as seriously as they do.

        Seems like the Northam Administration will continue to lope along until the fiscal fiasco is obvious and then be “shocked, shocked I tell you” to find the shortfall is much worse than predicted. Channeling Mark Warner they will then insist that a massive tax hike is required.

    • Not that the cars aren’t trying… https://m.youtube.com/watch?v=_Z-CqPAAJUI

  2. I really don’t know the lag times on these taxes, the time it takes to get booked, so let’s give this one another month. Hard to believe fuel sales are down only 7% as the report reflects.

  3. A 7% drop does seem small, especially given the lag time in reporting. Traffic volumes have grown significantly the last couple of weeks.

    I suspect it will be quite a while for new vehicle sales to pick up in volume. I had my car serviced in April. The service foreman was very appreciative of my business.

  4. Frozen in the headlights of an oncoming train, might be one description of many of our leaders in one group of States versus another group that now is opening up to find success, with little cost. Compare Florida with New York for example.

    Is it no wonder that New York is broke for ways to Sunday now, and has been a ongoing disaster from the start of this pandemic while Florida has and is riding out of the storm with relative ease, even after so many New Yorkers fled there to escape New York.

    How much of this success and failure is leadership, or its absence?

    How much of it is the result of a philosophy that works, and one that never has nor will?

    One this is for sure, Florida has far more elderly citizens and half the tax burden, yet out performs New York by a country mile.

  5. The gas tax will increase in July, but the price of gas is still falling. Aren’t we about a dollar a gallon less now than last year? Where’s that show in the estimates?

    • The current tax is 5.1 percent of the statewide average wholesale price. However, there is a floor on the amount used to represent the statewide average wholesale price. It cannot be less than the average statewide wholesale cost on 2/20/2013. I don’t know what that floor is, but my understanding is that we hit that sometime ago. Therefore, the decline in gas tax revenues this year is probably not a function of the decline in the price of gas.

      During the last session, the GA abandoned the percentage approach (as Steve Haner and Jim Bacon urged for years in BR). On July 1, the tax will be 21.2 cents per gallon; on July 1, 2021, it will increase to 26.2 cents per gallon. In addition to the statewide gas tax, there will be a regional gas tax of 7.6 cents per gallon throughout the state.

  6. FWIW,
    In no case shall the average wholesale price be less than the statewide average wholesale price of a gallon of unleaded regular gasoline or diesel on February 20, 2013, which was $3.17 and $3.36, respectively.
    https://www.dmv.virginia.gov/webdoc/pdf/taxact_2013.pdf

    Thanks for the explanation.

    • To build on that concept, the local element of gaso tax (approx. 2% in NoVa and Hampton) did not have a “floor” until recently, so that revenue was going down with the pump price. I believe relatively recently that GA added a floor for that too, or tried to anyway.

  7. Wholesale floor is $3.14/gallon

  8. I want to say sales tax shortfall “not my fault” we bought a new RAV4 Hybrid when our 06 Prius became one of the early victims of COVID last February.

    OK but how about all of the Virginia localities? For some crazy reason in Virginia a huge chunk of our operating fund comes from locally taxing the bejesus out of newer cars only, each year as they depreciate. How does that make any sense? Virginia Way at work.

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