After last year’s resounding T-SPLOST flop, Georgia legislators are not expected to make any big moves regarding new transportation funding. But forget new transportation funding: Given the long-term decline in the purchasing power of the motor fuel tax, which will only accelerate as vehicles become more fuel-efficient, Georgia will have to consider alternate means of funding for building and maintaining roads and bridges. Increasing the motor fuel tax rate even just to maintain parity might work in the short term, but it’s probably not a solution in the long run.
Few of the most-discussed alternatives have obvious appeal. Tolls almost certainly will become a more important source of revenue, particularly on the interstates, but that’s a limited option. You’re extremely unlikely to face a toll booth between your house and the grocery store, and there are vast swaths of the state where tolls probably aren’t viable. Another option, tracking the number of miles traveled by a particular vehicle and levying a fee on its owner accordingly, is bound to raise Georgians’ libertarian hackles as a Big Brother-ish intrusion on their privacy.
So it sparked my interest that Virginia Gov. Bob McDonnell — whose conservative bona fides are strong enough that he was considered a leading contender to join the GOP’s 2012 ticket to make it more favorable to conservative activists — yesterday announced his proposal to address the gas-tax problem in his state. McDonnell proposed eliminating Virginia’s gas tax completely for most motorists, and replacing it with a 0.8-cent increase in the state’s sales tax:
While the gas tax has been stagnant, sales tax revenues have continued to grow with the economy, McDonnell said. His plan to increase the state’s 5 percent sales tax to 5.8 percent and dedicate all of the additional revenue to transportation would raise an additional $607 million over five years, he said. Eighty-five percent of the additional revenue would be spent on maintenance, the rest on construction.
The 17.5 percent tax on diesel fuel would remain unchanged because heavy trucks cause about 80 percent of the damage to Virginia’s highways, the governor said, and most of those vehicles come from out of state.
The plan also includes McDonnell’s previously announced proposal to increase the portion of the existing sales tax already earmarked for transportation. A half-cent already goes into the state’s highway fund. The governor’s proposal would increase that commitment to three-quarters of a cent over five years, generating an additional $811.5 million over that period.
When combined, the two sales tax changes would give transportation about one-quarter of sales tax proceeds.
There are some other elements to the plan, including a $100 annual fee for hybrid and alternative-fuel vehicles and a $15 increase in the state’s vehicle registration fee. Maybe most notably, the plan depends on Congress to pass a law allowing states to levy a sales tax on purchases from “out-of-state online and catalog sales.”
Any change as large as this one is bound to have problems. For one, it’s a shift away from a user fee (gasoline) toward a general consumption tax. That was one argument here against the T-SPLOST. And, in Georgia at least, the motor fuel tax was a more stable source of revenue than the sales tax during the recent recession: The motor fuel tax didn’t fall quite as sharply and has come much closer to recapturing its pre-recession peak.
But I’m curious what y’all think of the elements of McDonnell’s plan and whether Georgia should implement all, some or none of them. The gradual dedication of part of the existing sales tax to transportation, for instance, is a plan that was discussed before the T-SPLOST law was passed in 2010. Which elements of the McDonnell plan might make sense for Georgia?
– By Kyle Wingfield