Virginia Gov. Bob McDonnell is popular as all get-out, a possible 2016 presidential candidate, a possible (perhaps the only credible) candidate to unseat Sen. Mark Warner, and so on. He’s also proposing one of the most short-sighted tax reforms you’ve ever seen:
Declining funds for infrastructure maintenance, stagnant motor fuels tax revenues, increased demand for transit and passenger rail, and the growing cost of major infrastructure projects necessitate enhancing and restructuring the Commonwealth’s transportation program and the way it is funded. We simply cannot continue to do what we have always done and expect this problem to go away. The gas tax is a stagnant revenue source, and no changes to it will provide a reliable growth mechanism for transportation in the state.
That’s a good start, right? The gas tax hasn’t been raised in more than a decade, and pump prices are (thanks to Newt Gingrich, surely) down from last summer, thanks to a number of market factors, including lower demand. Most economists and climate change campaigners would call this the right time for a modest gas tax increase.
That’s not what McDonnell wants:
Eliminate the current 17.5 cents per gallon motor fuels tax on gasoline: The viability of the gas tax as the state’s primary revenue source for transportation has been eroded by greater vehicle fuel mileage, the introduction of alternative fuel vehicles and the impact of inflation.
The gas tax is less lucrative because various economic and policy incentives have people using less of an unrenewable resource. And that’s a problem, somehow.
Replace the current gas tax with a 0.8 cent increase to the Sales and Use Tax (SUT) dedicated to transportation.
So, if you don’t drive—if you just make use of public transportation (which you pay for) and goods transported on the highways (the prices of which take into account things like gas prices and taxes)—you pay more, and the guy who fuels up a car pays, effectively, less.
Impose a $100 annual Alternative Fuel Vehicle Fee and dedicate the revenues to transit: The governor is a strong supporter of alternative fuel vehicles. He has directed that Virginia’s state fleet be converted to natural gas vehicles. And he knows that alternative fuel vehicles will only continue to grow in popularity and use in the years ahead. In fact, over the past four years, as gas prices have grown from less than $2 per gallon to as high as $4, more Virginians have turned to alternative fuel vehicles. There are over 91,000 of these vehicles currently registered in Virginia. This is a great development for energy security and conservation, but it does present a challenge to how transportation funding has been derived in America for the past century. Drivers of alternative fuel vehicles that use natural gas or electricity pay no motor fuels tax at the state or federal level and thus do not contribute to the primary means of funding roads. However, these vehicles still have the same impact on Virginia’s roadways as conventional fuel vehicles.
This would make some sense if, at the same time, people weren’t being incentivized to use more gas.
I assume this will play well politically for McDonnell. Everybody hates paying the gas tax! But this idea is like a reducto ad absurdum of hippie bashing and ignores decades of policymaking that was responsive to environmental research and the oil trade.