Dr. Ron Utt has written a terrific piece in Bearing Drift on Virginia Governor McDonnell’s proposal to eliminate the state fuel tax of 17.5 cents per gallon of fuel purchased, and replacing it with an increase in the state sales tax.
Dr. Utt writes:
On 8 January 2013 Virginia’s Governor Bob McDonnell released a comprehensive transportation proposal that would increase transportation spending in the state by increasing taxes on all of the state’s citizens, not just those that operate motor vehicles and who now pay the state fuel tax of 17.5 cents per gallon of fuel purchased. Arguing that this fuel tax is “outdated and stagnant,” the Governor proudly proclaims that Virginia would be the first state without a fuel tax, as if this novelty act would somehow compensate for the proposed 16 percent increase in the state sales and use tax, the hoped for extension of this higher tax to all online purchases, and the many other taxes and fees his plan would impose on motorists and citizens.
There is much that is wrong with this plan; chief among them is the end of the fuel tax – which operates as a user fee falling only on those who use the roads. While this user fee/tax is far from perfect, it does closely connect costs with benefits, provides incentives to drive less and operate more fuel-efficient cars, and falls disproportionately on those who drive the most and those who operate cars with poor fuel economy. Is this a problem? Sadly, all of these market-based incentives and disincentives will disappear with the fuel tax, and those who drive the most and do so in gas guzzlers will no longer face any penalty now that their added costs to society and the transportation system will be covered by the state’s consumers through a higher sales tax.
The other disadvantage in shifting transportation funding from a user fee paid by the motorist to a broad-based tax paid by everybody is that motorists can no longer claim that they have earned a higher priority for road spending, as it is at present. Once this link is broken, the allocation of state transportation spending among the various and competing transportation modes will be determined by politics, not consumer choice, and the influential unions and environmentalists will be in a much better position to shift spending from cost-effective roads to costly and heavily subsidized and underutilized trolleys, trains, buses and bicycles.
Indeed, the McDonnell plan reveals that the Governor intends that such a shift will occur once the full plan is enacted into law. My colleague Karen Jaroch, a member of the American Dream Coalition, has prepared a detailed spread sheet of the governor’s transportation spending plans and concludes that overall it appears that 59 percent of future funding will be for roads and 34 percent for mass transit, while the remaining 7 percent or so will go for ports, aviation, and local transportation priorities. (Writer italics, as Karen Jaroch is one of our own Tampa opponents of rail, whose NoTaxForTracks.com fought and WON the battle against a referendum in 2010 to increase the local sales tax to fund a light rail boondoggle. We continue to fight, as our trusted servants appear determined to get some sort of rail transit in Hillsborough County!)
The Governor’s hectoring vision of what should be is in conflict with the modal preferences of the citizens he represents. According to the U.S. Census Bureau, 91 percent of Virginia’s commuters get to work by private car, while only 4.5 percent use transit, slightly less than the share of “commuters” who work at home. And yet this sad performance for transit occurs despite extraordinarily large subsidies for those who use transit. In the transit rich NOVA area, more than 85 percent of commuters don’t use transit, and in the Hampton Roads area and Richmond it is more than 95 percent.
Sadly, the Governor’s new views on transportation are not unique, nor are they materially different from those of Maryland’s Governor Martin O’Malley, President Barrack Obama, the Sierra Club, the Piedmont Environmental Council, Smart Growth America, and a host of other progressive entities and persons.
While there is not the time or space here to get into the flaws in the many individual components of this plan, one can’t help but be impressed by the Governor’s and the Attorney General’s apparent breathtaking turnaround on the Silver Line (Dulles Rail), one of the largest and costliest real estate deals on the East Coast, which — by the sponsor’s own admission to US DOT — will have no lasting impact on congestion or air quality. Nonetheless, the Governor’s proposed tax increases will fund a $300 million grant to Dulles Rail, provided that “the reforms identified by the U.S. Department of Transportation Inspector General are implemented.” In human speak what the governor is saying is that this funding will be withheld until a corrupt and mismanaged, multi-billion dollar wasteful boondoggle is reformed into just a multi-billion dollar, wasteful boondoggle.
One leading Virginia legislator calls this a “bold plan”, and I agree that it is: It is bold in the way that the Charge of the Light Brigade, Napoleon’s invasion of Russia, Dien Bien Phu, and Pickett’s Charge were also “bold plans.” Political prognosticators are already predicting that this risky scheme will go nowhere during the Governor’s last legislative session.
This is good news for the citizens of the state…no harm will be done to them. But one can’t help but wonder what lasting damage this scheme will do to the political careers of those involved. It is no secret that Governor McDonnell has ambitions to higher office, so one can only imagine the discomfort this will cause him as he next year visits with Iowa’s many conservative Republican caucuses in search of support. And closer to home, and time, good luck to Attorney General, and Republican gubernatorial candidate, Ken Cuccinelli in rallying his conservative base on this proposal.