McDonnell’s insane transportation plan: no gas tax

We knew there would be some nutty proposals in the Virginia legislature this year, and some serious attempts to fix transportation funding, but Governor Bob McDonnell managed to stun everyone yesterday with a real doozy: eliminate the gas tax entirely. Seriously.

Virginia sorely needs money for transportation. While McDonnell is borrowing $3 billion from the future to fund a few mega-road projects (many also unnecessary and wasteful), there isn’t enough money to keep maintaining existing roads and bridges, or fund 8-car trains on Metro to relieve Rush Plus overcrowding, or build light rail Northern Virginia needs.

Virginia’s gas tax is also one of the lowest in the nation. It brings in less money per gallon of gas, adjusted for inflation, than anytime in history, and is less than half in real dollars what it was in 1933. That’s why a lot of Virginia legislators are calling for real action on transportation this year.

Even a few Republicans are maybe interested in finding a tortured path around their promises not to ever raise taxes, like Delegate Dave Albo’s not-entirely-insane idea to raise the gas tax but give Virginia residents an income tax break to offset it.

Jim Titus suggested Virginia consider a variant of a proposal Maryland debated last year, to extend some or all of the sales tax to gasoline instead of raising the gas tax. Gas is exempt from the sales tax, which means that while the gas tax raises some revenue, the state’s general fund loses the revenue that would have come from taxing the sale of that gas just like it taxes housewares or computers or anything else.

McDonnell’s plan takes the opposite tack. He would eliminate the gas tax entirely, but also keep exempting gas from the sales tax. He said, “That’s right, no more gas tax at the pump. No sales tax at the pump either.”

The state would then collect no money at all on people buying gas, even though it collects money from people buying most anything else. It even has a sales tax on groceries, unlike DC and Maryland. This means you would pay something for buying grapes and ginger but not gasoline.

But wait, isn’t McDonnell’s plan a transportation funding plan? McDonnell would then raise the sales tax by 0.8 cents on the dollar. This would bring in $183 million a year by 2018, but less now. Meanwhile, many people say the state needs about $1 billion a year for transportation. Fairfax County alone says they need $300 million a year. The Washington Post calls the revenue from this plan “paltry.”

Governor McDonnell proposes dedicating the first $300 million the sales tax raises to the Silver Line. He’s certainly doing this to try to win the votes of northern Virginia legislators. But the state should already have been providing at least $500 million or more for this project years ago. McDonnell, instead, withheld the money and now is trying to use it as a bargaining chip.

This is insane

This is not just a silly proposal or, like most from the tax-phobic Virginia Republicans, ineffective. It’s actually deeply harmful.

While it raises a small amount of revenue, it more significantly shifts the burden of paying for transportation away from people using transportation and onto everyone. Don’t have a car? Except for the car tax, you will still pay for Virginia roads as much as everyone else. Live close to your job? Too bad, you pay the same as someone with a 50-mile commute.

It’s notable that McDonnell didn’t propose making transit free. If we’re talking radical ideas, how about that? It’s a close equivalent to having no gas tax, as road users pay some (but not all) the cost of road maintenance through the gas tax (and Virginia covers other costs with revenue from other sources), and transit users pay some (but not all) the cost of transit through fares.

Virginia’s gas taxes also have a regional impact. Some people already prefer to buy gasoline in Virginia versus DC or Maryland because it’s cheaper. If Virginia goes for McDonnell’s idea, the gap between Virginia gas prices and DC and Maryland gas prices would widen. More people would buy gas in Virginia. Some would even drive out of their way to go to a gas station in Virginia, making traffic even worse.

But for all that, the state wouldn’t even benefit one bit. When Virginia steals companies away from DC and Maryland with corporate tax breaks, it’s a net loss for the whole region, but at least from Virginia’s point of view there’s an upside in that they get other revenue. This doesn’t have an upside, except possibly a very tenuous general attraction for a few people to live in Virginia because of the gas taxes; but if any of those people exist, they drive a lot, meaning they’ll worsen traffic for everyone else.

There’s more

Besides the sales tax, there are a few other elements to the proposal.

It would raise vehicle registration fees by $15 per year and allocate 50% to transit and 50% to intercity rail, raising about $109 million per year. The latter portion would fund commitments the state has already made for expanded Virginia Amtrak service.

Another element is to charge alternative fuel vehicles $100 per year. McDonnell’s argument is that since these use less gas, they should contribute to the costs of road maintenance. But it’s particularly ironic that he’s looking to have these vehicles pay for road maintenance while exempting regular gas-guzzlers.

Finally, McDonnell is hoping Congress will pass the Marketplace Equity Act, which lets states charge sales taxes on online purchases. But it’s very dubious to count on this bill, as observers think it has only a small chance of passing. Plus, absent the Governor’s plan, this bill could give Virginia money it also needs for education, public safety, and other priorities.

McDonnell has somehow managed to come up with one of the worst transportation funding plans conceivable. It’s even worse than doing nothing, and doing nothing should not be an option. The legislature needs to laugh him out of the room and either come up with something better, or hope that the next governor has better sense.