Tag Archives: Gas Tax

Virginia’s Transportation Problem

Virginia has a transportation problem. Traffic is badly clogged in both Northern Virginia and Hampton Roads and the primary funding mechanism in Virginia’s 2007 Transportation Bill was largely struck down by the Virginia Supreme Court in March. That was after the other funding mechanism in the bill, the abusive driver fees, had to be repealed because of voter backlash. Virginians have been complaining about transportation for years now and the General Assembly has completely failed to deal with the issue. As of now, not only does Virginia lack adequate capacity on its roadways, but it is facing a shortfall in funds for road maintenance.

But Virginia’s General Assembly is getting another chance to get transportation right. Governor Kaine has called for a June Special Session of the Assembly to deal with transportation. Everyone more or less agrees agrees what needs to be done. As a coalition of Virginia business groups said,

“We believe the Commonwealth’s transportation infrastructure is a critical component of its economic success and the quality of life of all Virginians. Additional investments of at least $1 billion annually must be made to sustain maintenance and construction costs,” the letter said. “The most appropriate solution is a package of revenue generators that are simple, sustainable, and sufficient and accrue from broad-based revenue options.”

The only question is how to raise the $1 billion a year Virginia needs.  Governor Kaine just proposed his plan to raised the needed money. He wants to increase the sales tax by 1 percent in Northern Virginia and Hampton Roads, raise the grantor’s tax, a tax on home sellers, from 10 cents per $100 of assessed value to 35 cents, increase the sales tax on cars by 1 percent and increase the annual car registration fee by $10.

So what is the Virginia GOP’s response? According to the Washington Post:

Del. David B. Albo, a Fairfax Republican involved in transportation negotiations, said Kaine’s plan had a “0.000 percent chance” of winning approval.

Many see Kaine’s tax proposal as a way of reaching out to Republicans in the House of Delegates. According to Jim Bacon, a conservative Virginia policy blogger,

Kaine appeared to adopt key elements of the plan — a motor vehicle sales tax, a vehicle registration fee and a grantor’s tax — because House Republicans embraced them last year when they crafted HB 3202, although not in precisely the same configuration. In his naivite, the governor no doubt assumed that if GOP legislators liked those levies last year, they would be OK with them this year. So, how did those charges become so unpalatable all of a sudden? It’s hard to avoid the suspicion that they are just opposed to anything that Kaine might propose?

Republicans aren’t the only ones who are down on Kaine’s plan. Liberals like Raising Kaine and Not Larry Sabato have blasted the plan, arguing that the sales tax increase is overly regressive and will hurt the working poor.

I largely agree that the sales tax isn’t the way to go. To begin with, it’s regressive. Sales taxes hit the poor the hardest and increase their tax burden as a proportion of their income the most.

Secondly, it has absolutely no connection to the people who will use the roads that are built with it. It will tax everyone at the same rate regardless of how much they use the roads or what choices they make. Jim Bacon is right in that “This highway funding mechanism will do nothing — repeat N-O-T-H-I-N-G — to encourage drivers to seek alternate modes of transportation or otherwise change the behavior that has created this crisis in the first place.”

Thirdly, the sales tax is only increased in Northern Virginia and Hampton Roads. Now, I know there is a somewhat compelling argument to be made that since NoVa and Hampton Roads are the localities that need transportation improvements the most they should pay for it. It’s a logic that is probably very persuasive to Delegates from the rest of Virginia. But that logic is wrong. Every year, NoVa and Hampton Roads pay far more into state coffers than they get back. Taxpayers in these two regions have subsidized the rest of the state for decades. It is time they finally got some help back from the rest of the state to pay for transportation improvements that will improve the economic climate in NoVa and Hampton Roads, which will in turn increase the amount of tax money they send down to Richmond to subsidize the rest of the state. It’s an everybody wins scenario.

Lastly, its already been rejected. In 2002 Northern Virginia and Hampton Roads had the opportunity to pass a referendum which would have increased their regional sales tax. The referendum failed miserably. Now Kaine is trying to bring back a solution that citizens rejected directly and put it through the General Assembly.

A gas tax increase would be a far better solution. As Lowell at Raising Kaine wrote:

Virginia’s gas tax is among the lowest in the nation and hasn’t been raised since 1986, which  means that inflation has seriously eroded its value.

Currently, the Virginia gas tax constitutes only about 5% of the total price at the pump, and that percentage is declining all the time.  Looked at the other way around, every 1-cent-per-gallon increase in the gas tax raises about $65 million per year. This means that to raise $860 million per year, the gas tax would have to be raised about 14 cents per gallon. This may sound like a lot, but to put it in perspective, the overall price of gasoline has risen more than $2.20 per gallon since May 2002 — about 16 times the 14 cents per gallon mentioned above.

A gas tax benefit would have other benefits too. It would reduce the demand for fuel slightly, thereby helping reduce greenhouse gas emissions. It would be paid directly by the people using the roads, making heavier users pay more and allowing people to save on the taxes my making different choice in how they get around. Senate Democrats are on board for a gas tax hike. They passed one last session and are willing to do it again. However, its the no tax GOP who is unwilling to even consider a gas tax hike.

One final criticism. Kaine’s plan doesn’t envision any way to prioritize what projects get funding, beyond repairs to existing roads come first. To quote Bacon yet again,

No objective methodology for setting priorities. Nothing in this bill requires the commonwealth to establish an objective methodology for prioritizing projects based on their effectiveness at mitigating traffic congestion. There is nothing to prevent the usual suspects with the most to gain from boring into the political system like beetles into tree bark, canoodling administrators, making donations to elected officials, attending obscure public hearings, and bird dogging projects through the bureaucratic maze.

There is at lest one real positive in the Kaine plan. The grantor’s tax increase would be dedicated to a Transportation Change Fund, which would “increase investment in transit, rail, and innovative solutions to reduce traffic congestion like teleworking and ridesharing.” That is a major improvement over the way things are done. That would put about $155 million annually into mass transit, which would help create alternatives to driving for Virginians.

Kaine is at least trying here. He’s been willing to anger his political base, including the blog that was created to elect him, in order to propose a plan he had reason to think would be palatable to GOP lawmakers. But the House Republicans are saying “no” once again. It is pretty sad to see. Kaine was elected on an unambiguous platform of transportation reform. He’s now in his third year as governor and has yet to get a long-term, workable plan passed. Every time he has tried he has run into the roadblock of House Republicans. Even when the State Senate was in Republican hands Kaine was able to work with them and come to agreements. Yet the only thing House Republicans have proposed thus far is what turned into the awful 2007 transportation compromise that has already been almost entirely struck down or repealed. And Republicans wonder why there are only a handful of them left in Northern Virginia.

I’ll leave the end of this post to Jim Bacon. Virginians should take Kaine’s imperfect plan as a jumping off point. He has moved the ball forward at least somewhat on transportation and hopefully it won’t all come to naught again. Bacon addresses his list to “no tax” Republicans. But it really goes for everyone. Here’s what we need.

(1) Create a mechanism for actually raising money. We can’t build a transportation system for the 21st century with fiscal tricks and legerdemain.

(2) Be sustainable over time, and they need to be structured so that legislators can’t lay their hands on the tax money for other purposes.

(3) Display a direct and transparent nexus between who pays and who benefits from transportation projects.

(4) Address the “demand” side of the transportation equation, in other words, incentivize people to seek alternative means of mobility and access.

(5) Incentivize citizens and developers to adopt more transportation-efficient human settlement patterns.

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Look at that, people are price sensitive

A couple of days ago I noted that DC Metro ridership is way up in this era of high gas prices. Today, in the New York Times, I see that it’s not just DC, but the entire country that’s seeing a mass transit boom. In the New York region ridership is up between 5 and 10 percent, depending on the mode of transport, while cities in the South and West have seen increase of up to 15 percent.

Meanwhile, via Kevin Drum, I find this useful chart of average daily miles drive. Obviously, there is a large amount of seasonal variation in miles driven and gasoline demand, but after 2006 and 2007 , which had very little variation in average miles driven, there has been a small but significant reduction starting in about November of last year.

Obviously, it sucks that people are facing financial difficulties and are unable to pay for gas. But, in the grand scale of things, this is exactly what the United States needs. The only way for us to begin to confront global warming is to use less energy. Most economists would say the best way to do that would be to increase the gas tax and therefore the cost of fuel, reducing the amount of energy we use. American politicians have thus far lacked the political will to increase the price of gas, but now the markets are doing it for them. Granted, if Hillary Clinton and John McCain got their way we’d suspend the gas tax to reduce the cost again, but fortunately that idea’s not going anywhere.

Here in Virginia, in an attempt to deal with our choked traffic, a variety of state leaders have proposed raising our gas tax. The State Senate voted in February to increase the gas tax, but the House Republican caucus refused to go along. Now, after the Virginia Supreme Court struck down the regional tax authorities that were established by the 2007 Transportation Bill, there are calls to raise the gas tax again. Democrats are relatively united behind the idea and local business leaders are supportive. They understand that raising the gas tax is good environmental policy and will raise much needed revenue for transportation improvements.

But the state GOP is resolutely opposed. They’ve even stooped to the level of having Speaker of the House Bill Howell attack the state Chamber of Commerce at other business leaders for supporting the idea.

“I’m disappointed. I’m a little concerned that the quote ‘voice of business’ would be calling for a one and a half billion tax increase in a time of recession, a rough economic time,” Howell said. “Their businesses are certainly going to pay the additional expenses. I think it’s ill advised, ill thought out.”

[…]

“I really don’t think it’s representative of the business community at all. And for good reason, it’s not a pro-business thing,” Howell said. “The state chamber of commerce does not represent the small business, it represents the large businesses that are going to do OK. They don’t speak for business, I don’t believe.”

If we want people to use transportation less we need to let the price of gas go up. Given Virginia’s need for money for transportation raising the gas tax makes a lot of sense right now, both economically and environmentally. Economists have long told us that increased prices would lead to reduced demand. Now, with gas prices, people have again proved it. Increasing the gas tax would increase the money available to transportation and would reduce the demand for transportation. This is a win, win proposition for the state.

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If We Really Want to Stick It to the Oil Companies

As much as I can understand the impulse to stick it to the oil companies, a windfall profits tax would be a terrible idea. In an economy like ours, which relies on innovation by private companies to grow, confiscating profits when we decide someone has made “too much” money makes no sense. We have a tax rate on companies that is set in advance. It would destroy companies incentives to suddenly decide “we’re taking more of your money.”

However, given that the oil companies are busy raking in record amounts of money, it does seem like an opportune moment to take back some (or preferably all) of the $20-50 billion in direct subsidies we give them annually. That would probably bring in more money than any of the “windfall profits taxes” that are being proposed would bring it, plus it would have the benefits of moving the government out of the “we’ll help this company/sector succeed’ business and eliminating the distortions in the market caused by subsidies. And if we really wanted to stick it to the oil companies, we could go after the royalties they owe us for drilling on public lands.

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Stupidest Policy Ever

In the wake of the gas tax idiocy that we’ve recently seen, James Fallows held a competition to determine the stupidest bipartisan policy ever. The winner? Ethanol! The wonderful policy we’ve dreamed up to pander to a few Midwestern farmers and as a result, has led to us BURNING OUR FOOD to run our cars. Yep. I can’t disagree. Burning your food to drive is pretty fucking stupid.

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Good for Us

I see via Matthew Yglesias that Americans don’t seem to have bought into John McCain and Hillary Clinton’s gas tax holiday idea. Its not much, but even the small majority that oppose the idea is progress. Obama’s strong stand and repeated attempts to explain the issue coupled with the universal disdain for the idea expressed by economists, environmentalists and other experts of all stripes led to people actually opposing the idea. What a stunner!

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Howard Wolfson is right

I can’t quite believe that I’m actually writing this, but Hillary’s spokesman Howard Wolfson actually got something right about Hillary’s gas tax proposal. He said that the gas tax issue is “”an important policy difference that says something larger.”

He’s right. It says that Hillary Clinton, his boss, is a political whore. Barack Obama and his campaign have said it before, but never really pushed on it, but they’re right. Hillary Clinton really will say and do anything to become president.

The gas tax pander is the most recent and perhaps the most egregious. But it is hardly the only one. See, for example, Hillary’s response to Obama’s “bitter comments.” She could have sat back and let the media have a field day. They certainly would have, even without Clinton jumping on the issue. Instead, she chose to do the Republicans work for them. She chose to portray the likely Democratic nominee as an out of touch elitist. Hillary is right that the last two Democratic nominees have lost because they were successfully portrayed as elitist.

But Barack Obama is no elitist. How many serious presidential candidates have still been paying off their student loans less than 4 years before they ran for president? How many chose to go and work in poor neighborhoods after college, making a salary of $10,000 a year, when they could have had a job at almost any Wall Street firm. How many were raised by a single mother? Is Barack Obama an elite? Sure. He’s a member of the US Senate (not an institution known for its large percentage of average Joes) and is running for the presidency.

Hillary has done this on politics. She has gone from agreeing not to count unsanctioned primaries in Michigan and Florida, a policy supported by her close advisers Harold Ickes and Terry McAuliffe supported, to arguing to count them now that she needs them to improve her slim chances of winning the nomination.

Hillary has done this before on policy as well. Her pandering on Iran is nearly as bad. She has deliberately chosen to rattle the saber again and again, from her vote on Lieberman-Kyl to her recent threat to obliterate Iran were they to attack Israel. She’s done it on drivers licenses for illegal immigrants. And, most damningly, she did it on her vote to go to war, without even having read the national intelligence estimate.

Hillary Clinton is willing to say anything to become president. She has proved it again and again in this campaign by putting politics before principle. Do we really want someone so blinded by ambition to be our next president?

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“Politics as Usual”

From Robert Reich:

When asked this morning by ABC News’ George Stephanopoulos if she could name a single economist who backs her call for a gas tax holiday this summer, HRC said “I’m not going to put my lot in with economists.”

I know several of the economists who have been advising Senator Clinton, so I phoned them right after I heard this. I reached two of them. One hadn’t heard her remark and said he couldn’t believe she’d say it. The other had heard it and shrugged it off as “politics as usual.”

Thats her best defense. Politics as usual.
(Hat Tip: TPM)

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