Gov. Bob McDonnell’s proposal to raise transportation revenue with a sales tax increase is unfair and economically harmful
Gov. Bob McDonnell had a plan — this is how it goes. Dispatched Tuesday of last week, his plan aims to reform Virginia taxes to enhance transportation infrastructure. It does this by making two changes. The state sales tax — currently sitting at a flat five percent, the 43rd highest of all U.S. states — would be upped to 5.8 percent. The state gas tax would be stripped altogether – making Virginia the first state to do so and earning McDonnell an unlikely title: “progressive.” And cutting the gas tax is a bold, intuitive move; but coupling this with an increase in sales tax is a disingenuous, political tactic that helps finance the state’s deficits at the expense of its poor.
So first the round of applause. McDonnell’s proposal to eliminate the gas tax draws curiosity, initially, and is furthermore economically sound. The fuel tax has long been used to fund road construction in Virginia. McDonnell smartly points out that the gas tax hasn’t changed with inflation, making it a poor source of revenue that costs much for consumers while doing little to fund infrastructure. A weak tax at the pump has left state roads bumpy and transportation stalled as accounts slowly leak money.
Opponents say raising the gas tax could prevent pollution and re-fuel state transportation, especially considering Virginia’s gas tax, at 17.5 percent, is one of the nation’s lowest. But removing it altogether will not necessarily jack-up the hours spent driving — because no other states have done so, this argument lacks any evidence — while putting more money in citizens’ pockets.
It would be ideal if changing the gas tax would itself provide the solution. We agree with McDonnell, however, that changing the gas tax alone isn’t enough to close deficits in transportation revenue. Unfortunately, McDonnell has hitched the issue of gas tax revenue to a more controversial sales tax agenda. Tied to his proposal to slash gas taxes is the initiative to raises the sales tax. The sales tax notoriously affects low-income parts of the citizenry. Given that they spend more of their income on consumption than wealthier people, a bump in the sales tax affects them especially.
Alternatively, McDonnell could reduce the gas tax and make up the revenue in a more equitable way to consumers. One example is a Vehicle Miles Traveled Tax that has gained popularity in Europe. Such a tax would charge drivers based on the miles they travel: a more just approach to funding state transportation. If you spend more time on the road, you spend more time damaging and congesting it — and therefore a tax on miles, rather than gas, makes drivers pay in a manner that isn’t dependent on the size of their wallets or the miles their cars get per gallon.