RICHMOND — Virginia’s gasoline tax would be eliminated and its retail sales tax would increase from 5 percent to 5.8 percent under a transportation funding plan Gov. Bob McDonnell unveiled Tuesday.
The governor’s proposal also would increase vehicle registration fees, impose a $100 annual fee on alternative fuel vehicles and shift revenue from the state’s general fund to provide more dollars for roads, rail and transit. McDonnell said the complete funding package could generate more than $3.1 billion in additional transportation funding over the next five years.
Administration officials said part of the revenue from a proposed $15 increase in vehicle registration fees would pay for the extension of passenger rail service to Roanoke, though it’s unclear how soon that would be available.
This doesn’t make the least bit of sense. Let’s make those who use the roads pay for the roads and keep the sales tax out of it.
McDonnell is not a strong businessman. Remember, he wanted to sell our ABC stores that made a profit of over a Billion dollars the past 5 years. He also allowed the VRS to be the ATM card for strapped localities, then said it was a mistake. Well duh!!!
To replace the gas tax revenue, the state would increase its retail sales tax by 0.8 percent and direct all of the new revenue to transportation. The tax increase would not apply to groceries, which are taxed at a rate of 2.5 percent.
The sales tax increase would generate $708.7 million in the fiscal year that begins July 1, $24.6 million more than the state’s gas tax would produce, according to administration estimates. By 2018, the additional sales tax would generate nearly $870 million, about $183 million more than the gas tax.
Under McDonnell’s plan, 85 percent of the new sales tax revenue would go to highway maintenance and the remainder to new construction.
If McDonnell thought of it, I suspect it probably isn’t in MY best interest.
I tend to agree with you. I don’t see any reason to increase the sales tax and lower the gas tax.
http://www.roanoke.com/editorials/wb/318775
Also agree, if the Gov. wants to support user fees like tolls on
major roads, he should also champion indexing the gas tax for inflation.
Raising the sales tax is a bad idea.
Totally agree and I hope Virginians will howl over it in unison.
I especially would resent raising it to something difficult to figure like 5.8 % Just leave it at 5%. It hasn’t been there all that long.
I don’t really mind this idea to tell you the truth. With all of the driving my wife and I do for work and taking our son to preschool I think I would rather have a higher sales tax and cheaper gas. Besides, I’m the one that puts gas into both our cars multiple times a week so I’m pretty in tune with just how much I’m spending in gas each week/month.
Just putting gas into our cars is my biggest bill (outside of our mortgage). It’s more than electricity, gas and cable… almost combined.
That is horrible. How far do each of you have to drive to work, one way?
$100 fee on alternative fuel vehicles ???? Is he nuts? We should be rebating $100 to owners of alternative fuel vehicles if anything.
So much for the incentive to buy a greener car. You will get hit up when you go to register that vehicle. Is he just being vindictive with that one?
This has all the markings of a plan from Connaughton’s shop, typical shell game or three card monte tactics that he plied her in PWC. Its also probably DOA despite the list of “supporters” ginned up by the Gub.
This is not a good idea. Sales tax hits low income people in every way, especially since sales tax is applied even to food. Everybody has to eat. Gas tax hasn’t been raised in decades, as I understand, and why on earth shouldn’t those who use to roads, pay there share of the upkeep?
IF sales tax is raised, food should be excluded.
@punchak
Wrong… read the article:
To replace the gas tax revenue, the state would increase its retail sales tax by 0.8 percent and direct all of the new revenue to transportation. The tax increase would not apply to groceries, which are taxed at a rate of 2.5 percent.
It really doesn’t make sense how .08 cents is going to outdo the gas tax.
@Mom
Shell game it is. I heard another report claiming that the additional sales tax revenue would go into a dedicated fund for transportation uses. We all know how secure those “lockboxes” are. Just as Moon cited the VRS as a piggy-bank for any use other than retirement pensions, so would this fund be used for everything but transportation. Mom is right – this has Connaughton written all over it.
It kind of reminds me of a thing about 40 years ago in VA when VEPCO (as Virginia Power was called) asked for and got (I believe) a $100 surcharge on heat pumps because they didn’t use as much electricity. Most of us said, “Yep, that is the intention”. It was then that we started to put bumper stickers on our cars that said, “The State of Virginia, owned and operated by VEPCO”.
I don’t remember that…probably because at the time I didn’t have a heat pump. What an incredibly stupid idea.
Punished for trying to save energy.
By the way, it was around the time of the fuel shortage.
I guess they are also called Dominion Power now. Shows how I don’t keep up with the times.
This is the most absurd idea I have ever heard about. So, an out of state truck that is going to drive on our roads every day may not be providing one penny into our transportation fund – but the person who does not drive often is going to pay more??
If he wants to solve the problem that the gas tax is not indexed – go index it. He is raising our taxes, I thought only D’s raise taxes. Sheesh.
That is how it hit me. You can’t get north or south without going through Virginia. I want those folks paying if they run low on gas in VA.
There are a lot of ways to craft a revenue stream to support roads, maintenance and transportation infrastructure. Virtually none are politically feasible in Virginia. The gas tax wasn’t working. This initiative has some hair on it, but it may be the most responsible achievable approach. I give the Governor credit for not kicking the can to the next guy.
@Steve Peterson
There shouldn’t be ANY sales tax on food.
I agree, Punchak.
Beer is food, isn’t it?
I try not to be a knee-jerk contrarian, but this “plan” has lots of problems:
1. It loses the benefit of out-of-state drivers, who currently contribute about 30% of the gas tax revenue- reducing the burden to Va. taxpayers. The sales tax would gain some benefit from out-of-staters, but not nearly as much.
2. Gas prices, as with all commodities, are market-based, so when you remove the 17 cent tax, you won’t see the price of gas go down 17 cents. Similarly, if you raised the tax 10 cents, the price in comparison to other states wouldn’t necessarily go up that same amount. The price is set by what the market will bear and whatever the oil cartel decides it will be.
3. It will be easier to divert a sales tax away from roads than a fuel tax, dedicated or not.
4. A fuel tax and a sales tax are both regressive, but individuals can have some control over fuel spending by vehicle choice and driving habits. This is much harder with sales tax.
5. A fuel tax encourages desirable behavior- emitting less carbon. A sales tax does the opposite- hindering spending and economic growth with no social benefit.
6. A penalty for alternative fuel vehicles? I’m speechless!!
Other than the above, it’s a great plan1
standing ovation, middleman. You nailed it.
@middleman
Look! In the sky! Pigs!
I actually agree with you. His plan needs work.
I propose a parameter. Everyone who sees a flaw in the Governor’s transportation tax approach should not only identify the weakness (a la Middleman), but also propose his solution that will pass the General Assembly this session. One without the other is useless.
@Scout
BUT…BUT…this is the internet! That’s never been done before! Your way lies…..madness…
@Scout
I was ALMOST going to bite on this until I read “pass the General Assembly this session” part. It’s not at all a sure thing that McDonnell’s plan will pass and obviously none of us could honestly make that assertion regarding “our” plan. BTW- McDonnell’s plan to privatize the Va. ABC went down in flames, and now ABC is making record profits!
Having said all that, the obvious move would be to increase the gas tax and index it to inflation, for all the reasons in my previous post. There could be a rebate for lower income folk who demonstrate a need for it. The user-fee (miles driven) tax that’s been discussed would be much less desirable unless out-of-staters were required to pay, which would be an accounting nightmare.
I would say the chance of the gas tax increase being passed in the Va. legislature is better this session that last due to the Speaker’s newfound independence…
I don’t think the Speaker (let alone any significant number of Rs) would support a gas tax increase, MM. They had to find something quite different to break through the crust of the NNT (No New Tax/Norquist) crowd. By proposing to eliminate the gas tax altogether, they gave the ideology-paralyzed weenies some cover.
Your point is well taken that the Governor’s proposal might not make it. But it has a chance. I give him great credit, particularly in his last year, for having the gumption to go long on something that might solve an intractable mess, however inelegantly and with all the flaws you have identified. I’m quite sure they thought about those issues, but concluded that the Gas Tax couldn’t be raised in isolation, a mileage tax would fail and would miss all the out of state drivers, and that the scale of the shortfalls in transportation funding was so massive that they had to have a game-changer.
We’ll see what happens.
The Governor’s idea is a floating balloon. He floats it out there and let us shoot at it. If we miss, it gets enacted. This balloon blew up on release.
It seemed to be one of his dumber ideas…along with selling our profit making liquor stores that have been up and running for the past 75 years or so.
Washington times:
The Virginia Department of Alcoholic Beverage Control said the agency has seen retail sales increase to record levels consecutively for the past 14 years, even as discussions continue about privatizing the state’s liquor stores. The agency that runs more than 335 shops said it saw a record profit of $132.1 million in the last fiscal year and has contributed $1.7 billion to the state’s general fund during the last five years
Read more: http://www.washingtontimes.com/news/2013/jan/3/alcohol-sales-deliver-record-profit-virginia/#ixzz2HgDUSkif
Follow us: @washtimes on Twitter
@Scout
Scout, I’m not sure how an increased sales tax would appeal to the NNT crowd, gas tax notwithstanding. An increase in tax is an increase in tax to those folks, and by definition overall tax income would have to be increased if more money was to be made available for road construction.
I smell a rat here, and I’m thinking that if the wording were right, it could make it easier to divert some current funding from social programs to roads through the sales tax.
Seems to me the “gumption to go long” would involve the Governor standing up to the extremists in his party, work with the other party, and do what needs to be done- raise the d**n gas tax and fund our infrastructure!
The whole NNT thing is pure marketing and is not a rational position, so its ins and outs aren’t particularly logical, MM. But coupling the sales tax with the elimination of the gas tax gives the veneer of revenue neutrality, give or take a few bucks here and there. It’s tough enough to get anywhere with the sales tax proposal, but you can see from the roll-out that they lined up a lot of people that one might have suspected would have opposed it. I think they knew for sure that increasing the gas tax couldn’t muster the votes.
@ Moon – why is selling off the ABC stores so “dumb.” What possible rationale (other than greed) is there for the state to be in the business of selling beverages, especially in a market to which it has granted itself a monopoly. There is a lot of debate at sites like this about what the proper role of government should be, but does anyone really think it should be the bartender for the Commonwealth?
@Scout
Greed and tradition.
Why sell off something that makes money. This isnt the Women’s Christian Temperance Union. why make profit off of the lottery? I think we should be way past the sin tax.
On a little more serious note, the state and feds are already making money off the tax on the liquor. Now, if they were both willing to drop their tax on spirits I might be willing to give up my greed and love of tradition. I don’t see that happening.
I see the self-righteous part of this debate as..well..self-righteous. No one is forcing anyone to drink. When liquor stores are in private hands, there is more organized crime involved. Virginia is well regulated and competitive in cost.
Selling booze does not strike me as a core governmental function.
If you read the history of how it came to be, it makes perfect sense. Back in the 30’s, it was a core function as prohibition was ending.
I am not tied into core function too much to start with. One could say that about lots of things–providing libraries and schools for starters.
As long as the state takes the tax….they have a hand it it. Like I aid, when they no longer take the tax…then we shall see.
Selling booze does not strike me as a core governmental function.
Moreover, it’s easier to sell something that makes money than something that doesn’t. Believe me, I know this from direct experience.
I wasn’t going to get into this but have a couple of comments/questions. Has anyone ever looked at what happened to the state government’s “take” from alcohol sales in those states where they have privatized the sale of alcoholic beverages? Also, on this note, what happened to the price of your favorite beverage when the sales were privatized? Look in the WashPost on Monday, Tuesday and sometimes Wednesday and compare the price of booze in DC with the prices in the local ABC stores. The whole Virginia ABC thing is a carry over from the days when it was very difficult to buy a drink. Some may remember the time when if you bought a drink at the bar while you were waiting for your dinner reservation, you couldn’t pick up your drink and carry it to the dining room–a serving person had to do that. There also was a time when you ordered a mixed drink–even one mixed with water, that the booze and the mixer came in separate containers.
As to the gasoline tax vs. sales tax. There is no tax that cannot be diverted to some other use than that for which it was originally intended. No politician has ever found a tax they didn’t like especially when they can use it for their own purposes. Hopefully folks are going to write to their state senators/delegates about the sales tax vs gas tax idea. Other wise, all this chit chat is just that chit chat.
@ Steve Peterson–one question–why are you still driving gasoline powered cars? Why not a hybrid or a diesel? I have two diesel cars–one a, a 7 year old VW Jetta, gets 55 MPG on the highway and about 35 MPG in town. The other, a 1 year old VW Passat gets about 40 MPG on the highway and 30 MPG in town. My neighbor across the street has a Toyota Prius with over 200,000 miles on it and it’s like a Timex–it just keeps on ticking.
@George, I remember when you couldn’t buy liquor by the drink in Virginia. The closest thing was going to your own private bottle club where you checked in your scotch and a nice bartender in a tux made you a drink and you paid for the privilege of drinking your own booze.
You paid a corkage fee for each bottle.
http://www.abc.virginia.gov/admin/hist1.htm
http://www.abc.virginia.gov/admin/abc75th/abc75th_history.html
Here is what is happening in Maine: http://www.sunjournal.com/news/maine/2012/09/06/plan-liquor-contract-could-increase-maines-cash-fl/1246924 Maine has a sort of hybrid system right now, they have licensed one company to be in control of booze sales. They are considering changing that since it would increase the state’s revenue.
@Scout
Scout, we’re in agreement on NNT rationality, but unfortunately it ain’t just a marketing position- there are a loud group of people that fervently believe that we should “starve the beast” until most social programs are gone.
Basically, what you’re saying is that the new sales tax will be revenue neutral with the loss of the gas tax revenue, so the NNT’s won’t scream too loud. Unfortunately, that also means it won’t do anything to fund new infrastructure. This is leadership?
It won’t be revenue neutral, but it will be part of a package that gets rid of an unpopular tax. That’s where the cover is for the ideologically crippled NNT crowd.
@middleman
We should starve the beast, but since the beast can borrow and spend without collecting said taxes…. we should stop borrowing and increase taxes. And show Americans just how much their desires for increased gov’t spending actually costs.