Virginia Transportation Funding Compromise Meets Opposition

By Whitney Spicer, Capital News Service

Critics of the transportation funding compromise reached by legislative negotiators say the plan would place a huge burden on Virginia taxpayers.

The Virginia House of Delegates Friday passed House Bill 2313, which would raise about $900 million a year for transportation and transit projects. In the House, several members urged approval of the bill.

The 98-page compromise must win approval the Senate before it can be signed into law by the governor. The legislative session ends Saturday. 

The new plan, which was hammered out by a 10-member conference committee over the past week, would potentially raise close to $900 million a year in transportation revenue.  It could be the first transportation funding overhaul in Virginia since 1986 if it passes this week.

The compromise would:

• Raise the state’s sales tax from the current 5 percent to 5.3 percent.
• Add a 3.5 percent motor fuel tax at the wholesale level and a 6 percent diesel tax. 
• It would eliminate the state’s 17.5-cent-per-gallon gasoline tax.
• Create regional authorities in Northern Virginia and Hampton Roads that could raise funds independently to spend on transportation.

The transportation agreement also includes an Internet sales tax that would generate revenue for the state of Virginia under the Marketplace Equity Act. According to the transportation conference report, 57 percent of Internet sales tax revenue, or $183 million a year, would go toward transportation.

A clause in the agreement provides a contingency if Congress fails to pass the Marketplace Equity Act by January 2015. In this case, the wholesale tax on gas would rise from the proposed 3.5 percent to 5.1 percent.

“It deals with the economic engines of our state,” said Delegate Vivian Watts, D-Fairfax. She said the plan would ease congestion in Northern Virginia and Hampton Roads.

Eliminating or Reducing Gas Tax Central to Debate

McDonnell hopes to wean Virginia off the gas tax, which he says is a declining revenue source because of more efficient cars.

“When we launched our effort to fix transportation, we called for decreasing Virginia’s reliance on the steadily decreasing transportation revenue source of the gas tax,” the governor said. “The plan agreed to today achieves that goal.”

According to McDonnell, the new plan would reduce the amount that Virginians pay at the pump by an estimated 6 cents per gallon. He said this would add up to almost $272 million per year saved by motorists.

But Democratic Sen. Richard Saslaw of Fairfax said the transportation compromise would not accomplish that goal.

“They haven’t really eliminated the gas tax at all. They’re just collecting it in a different manner. No one should be fooled by that,” said Saslaw, the Senate minority leader.

Attorney General Ken Cuccinelli was among the growing number of conservatives who spoke out against the compromise, saying it "contemplates a massive tax increase."

“In these tough economic times, I do not believe Virginia’s middle-class families can afford massive tax increases, and I cannot support legislation that would ask the taxpayers to shoulder an even heavier burden than they are already carrying, especially when the government proposes to do so little belt tightening in other areas of the budget.”

Grover Norquist, president of Americans for Tax Reform, claimed the transportation bill would raise taxes by $6.1 billion over the next five years.

Fairfax Sen. Chap Petersen wrote on his blog that the bill was "the very opposite of fair, equitable and uniform."

"Instead, it’s a grotesque combination of tax cuts, tax rebates, tax increases, new taxes, old taxes which are phased out (and then reappear elsewhere), regional alliances, regional funds, regional goals, statewide goals, special projects, and exceptions to all the above.  All boiled into one report which will be voted on with zero public comment," he wrote. 

He continued: 

There are some benefits, such that there is new money dedicated to transportation, which allegedly obtains $800M in new statewide revenue by the out years.  Most of this is accomplished by raising the titling tax on vehicles, raising the sales tax to 5.3%, and then “replacing” the retail gas tax with a wholesale gas tax (don’t ask — the rationale is too lame to be worth explaining).

On top of that, regional plans with the sales tax rider and hotel taxes will add significant new regional revenues, up to $350 million in northern Virginia, which will be controlled up here (and not by the CTB).  As always, these “regional” taxes are not a good precedent.  We are becoming two Virginias — with two different tax rates.  Inevitably one half will rely on the other.

Patch Editor Erica R. Hendry reported for this story.

See Also:

Governor’s Transportation Plan Hits Roadblock