Transportation funding: Should Georgia follow another GOP governor’s lead?

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

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102 comments Add your comment

Hillbilly D

January 9th, 2013
11:38 am

My question would be “how much does the gas tax take in per year now and how much would the .8% sales tax increase take in”? If the proposed sales tax would take in more, it’d be a done deal because the Legislature has never seen a money grab they didn’t love.

I’m old enough to remember when we paid 3% sales tax as opposed to 7% now (in my area). That’s a 133% increase over the years and I can’t really see where we’ve benefitted by paying more. Lots of pet projects and backscratching for the connected and that’s about it.

Kyle Wingfield

January 9th, 2013
11:41 am

Hillbilly: The McDonnell plan is projected to increase taxes by about $600M over five years. Obviously, Georgia could adopt a similar framework but adjust the numbers so that the change was revenue-neutral. (And Virginia could, too — the plan still has to get through the Va. legislature.)

Kyle Wingfield

January 9th, 2013
11:42 am

Maybe worth noting: The McDonnell plan raises taxes by less than the T-SPLOST would have (if adopted statewide). But then, I haven’t done a comparison of taxes per capita here vs. there.

Centrist

January 9th, 2013
11:42 am

Simply making user fees of the gas tax and registration fees increase with inflation and match use makes a lot more sense than a general consumption tax.

Adding an additional layer of a user tax fees to cover uninsured motorists with minimum coverage would also allow insurance rebates for those who actually purchase required liability insurance.

Cutty

January 9th, 2013
11:42 am

The legislators and Deal would just put that extra revenue in the General Fund. I have a specialty car tag, and the money I pay for it should go to my alma mater. Instead it goes to build some road in far off Hall County probably. If you didn’t trust them w the T-SPLOST, why do you think you could trust them additional revenue from the sales tax.

Rafe Hollister preparing for an Obamanist America

January 9th, 2013
11:46 am

Don’t like the shift from user fee to a general tax, which the left is going to brand “regressive”.

Seems to me, just raise the gasoline tax a few cents, put a big tax on the sale of hybrids and electrics at point of sale, and implement an aggressive oversized load tax on the trucks that seem to constantly get bigger and heavier. This will raise revenue and hopefully save some road repairs. There are legitimate uses for diesel fuel that do not involve road use, so increasing diesel fuel taxes significantly seems unfair.

F.Y.I.

January 9th, 2013
11:47 am

Here are some revenue numbers for Georgia:

1 penny of motor fuel tax equals about $80 million a year in revenue.
1 percent sales tax on motor fuel equals about $180 million a year in revenue.
1 percent statewide sales tax equals about $1.8B a year inrevenue.

Aesop's Fables and other Lib Economic Theories

January 9th, 2013
11:48 am

As long as they don’t blow it on some silly choo choo train, it’d work for me.

I’d do some serious accounting of that maintenance budget, I smell some pork.

Hillbilly D

January 9th, 2013
11:50 am

Obviously, Georgia could adopt a similar framework but adjust the numbers so that the change was revenue-neutral.

In theory that’s true but I can’t remember how many of these “revenue-neutral” schemes over the years have turned out to be tax increases. That’s always been a favored ploy of the Legislature. In short, I don’t trust ‘em.

to cover uninsured motorists with minimum coverage

Not sure if the figure still holds but at one time about 30% of Georgia drivers were uninsured.

The legislators and Deal would just put that extra revenue in the General Fund.

You can just about take that one to the bank, in my opinion.

And since Hall County was mentioned, the Gainesville Times, not too long ago, stopped writing about “tax rate increases” in their articles. This began with a proposed property tax increase in Hall County. The Times now refers to them as “tax roll-ups”, which falls into don’t pee in my ear and tell me it’s raining territory.

Kyle Wingfield

January 9th, 2013
11:52 am

Centrist @ 11:42: Adjusting the gas tax for inflation doesn’t account for the decline in fuel purchased as vehicles become more fuel-efficient. That’s the whole reason for having this debate.

Bruno

January 9th, 2013
11:56 am

Kyle–Please clear up my confusion about the T-SPLOST vote. My West Georgia region was one of the few that passed the sales tax increase. Are we now subject to that increased tax within our region, or was the whole program junked because it didn’t pass state-wide??

Kyle Wingfield

January 9th, 2013
11:58 am

Sorry, Bruno: Most of my readers are in metro Atlanta, and I was referring to the vote here. The outcome in each region was independent of all the others, and there’s been no indication from the governor or legislative leaders that the law will be repealed. In fact, the House transportation chairman said in December it will not be repealed.

Bruno

January 9th, 2013
11:58 am

HD @ 11:50–What’s up with these long posts recently?? You’re scaring me. ;-)

Hillbilly D

January 9th, 2013
11:59 am

Bruno

From what I understand, your region is subject to the T-SPLOST that it voted in. The regions that didn’t vote it in (including mine) are now supposed to put up 30% matching funds for projects as opposed to 10% for the regions that voted it in (I think those numbers are correct, if not they’re close). There is already a move afoot to rescind that 30% in the regions that didn’t vote for it. Keep an eye on that this session. There are more Legislators who represent people in the regions that voted it down, so the whole thing is likely to be reworked, is my guess.

Hillbilly D

January 9th, 2013
12:00 pm

What’s up with these long posts recently?? You’re scaring me.

I been pissed at the world lately. ;-)

Bruno

January 9th, 2013
12:08 pm

I been pissed at the world lately.

In the words of my Little League coach: “You don’t want to make a Hillbilly mad, especially when he’s got his boot on your head.” ;-)

Centrist

January 9th, 2013
12:10 pm

Kyle, you missed the other parts of my comment about raising raising the fees (besides inflation) “and match use”.

As noted from you and other posters – user fees are more popular than general taxes. That’s also why I annually propose fees to cover the mandatory liability insurance which so many drivers ignore, and legal folks have to pay extra defensive uninsured motorist premiums or self insure against the lawbreakers.

Hillbilly D

January 9th, 2013
12:11 pm

Bruno

You’re safe. I’m bare-footed, right now. :lol:

Kyle Wingfield

January 9th, 2013
12:13 pm

Centrist @ 12:10: I have no idea what you mean by “match use” wrt the gas tax. Please explain.

td

January 9th, 2013
12:14 pm

Kyle,

I have an issue with this type of approach because right now we probably receive 10 to 20% of our gas taxes from “pass through” drivers and this measure would take that money away and put all of the burden on the Georgia taxpayer.

Hillbilly D

January 9th, 2013
12:18 pm

td

Good point. Basically, I just think those of us who use the roads, ought to pay for them.

Cheesy Grits is gone but not forgotten

January 9th, 2013
12:18 pm

$100 annual fee for hybrid and alternative-fuel vehicles

This is essentially a liberal democrat fee.

Aesop's Fables and other Lib Economic Theories

January 9th, 2013
12:25 pm

I agree with Cheesy and hopefully won’t be struck stupid because of it. Most of these Eco Boxes damn sure don’t save any energy and they are too puny to do any damage to the roads.

Centrist

January 9th, 2013
12:25 pm

If the gas tax is not taking in enough revenue to cover road transportation maintenance and expanding use for a myriad of reasons including less fuel per mile consumption with better fuel efficiency – increase the fuel tax instead increasing the general sales tax.

Pretty simple.

Do the same for drivers’ license and registration fees (now that ad valorum taxes have been replaced).

Hillbilly D

January 9th, 2013
12:30 pm

(now that ad valorum taxes have been replaced).

Somebody can correct me if I’m wrong but it’s my understanding that you will still pay ad valorum taxes on vehicles that you currently own. It only goes away on cars you’ve yet to purchase, either new or used. People will still be paying ad valorum taxes for years to come, in some cases.

Dunwoody Granny

January 9th, 2013
12:34 pm

I agree with td that this lifts any burden of cost from those who are using our roads to pass through and puts it more squarely on state residents. Also, unless this sales tax is used to fund public transportation as well, it takes some of the burden from drivers and places it on those who use public transportation but don’t drive: children, seniors, bikers — anyone who spends money but doesn’t own a car.

JamVet

January 9th, 2013
12:35 pm

…including a $100 annual fee for hybrid and alternative-fuel vehicles.

What is the thinking behind that???

As for here in Georgia, I’ll just be happy when the double-talking GOP thieves stop charging us to use Georgia 400 into and out of the city…

Hiya, B.

Ant concert dates coming up?

JamVet

January 9th, 2013
12:35 pm

Redact ant to read any…

Bruno

January 9th, 2013
1:00 pm

Any concert dates coming up?

I haven’t been following the concert schedule recently. PB and I have been laying low, trying to save money. It’s her B-Day next week, however, so I’ll have to come up with something spectacular for her. Let me know if you see any interesting shows.

Latifah

January 9th, 2013
1:08 pm

Transportation funding should continue to come from the fuel tax, not the general sales tax.

Where we need to look for additional tax revenue is trucks. They put the most wear and tear on our roads and bridges. Sure the trucking industry always bleats that they’re paying more than their fair share but that’s just bluster.

Road Scholar

January 9th, 2013
1:08 pm

“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.”

We’ve been having a shortage of necessary monies to address our needs for many years now.Should we keep doing nothing until we get the perfect solution? Adjust the gas tax NOW to inflation. For those who have electric or hybrid cars, increase their registration fees appropriately. Then work on the permanent solution.

Having a mileage/congestion tax does smack of Big Brother, but what is the fair solution? You use it, you pay (much like the gas tax). But the problem with the mileage/congestion tax is how and when you collect it. If you wait until the end of the year, it could be similar to the “birthday tax”. Could a system be devised to collect it each time you purchase gas/ recharge your car? But remember the gas tax is NOT collected at the gas station because of fraud by some owners/operators…it is collected at the tank farm…minimizing the number of tax collection locations limiting fraud.

Oh in the article in the Washington Post concerning the proposal in Virginia, you omitted that the revenue collected still will not address their annual needs. Solution? No, limited solution!

Road Scholar

January 9th, 2013
1:11 pm

“Georgia will have to consider alternate means of funding for building and maintaining roads and bridges.”

What about transit and bike lanes and paths? Sidewalks?

Road Scholar

January 9th, 2013
1:13 pm

“Tolls almost certainly will become a more important source of revenue, …”

Yeah, try tolling roads that the taxpayer has already paid for! I 85 managed lane ?

SBinF

January 9th, 2013
1:17 pm

“What about transit and bike lanes and paths? Sidewalks?”

Quiet hippie. Around these parts, the only funding for transportation goes to roads. Forget mass transit, bike lanes, paths, and sidewalks. Go back to Berkeley with the other latte-sipping liberals.

Road Scholar

January 9th, 2013
1:19 pm

“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.”

One truck did the damage of 40,000 cars to pavement structure back in the 1990’s. Since then our legislature has approved higher axle loads and multi- tandem trucks numerous times with no recognition of pavement damages. The life of some pavements, with overlays counted , last about 50 years. Our Interstates are over 50 years old- look at the State study on rural interstates. Many locations will need full depth replacement or thick concrete overlays soon. How to pay for them w/o trucks being held accountable?
Yes the consumer will eventually pay thru shipping costs, but…

Jefferson

January 9th, 2013
1:36 pm

An state income tax increase would be a better solution.

Don't Tread

January 9th, 2013
1:43 pm

Reporting your odometer reading to the government smacks of statism and opens doors for government abuse. (Democrats like that idea already, but of course I’d have to say no to that.

I’m not familiar with the trucking industry but don’t they have to register trucks to operate in the state (the decals you see on the sides of the trucks with the states on them)? Who does that money go to? If it goes to the state, then the fees for those should be adjusted to cover increased road maintenance caused by trucks, based on the weight that the trailer is rated to carry. You could also raise the diesel fuel tax a bit, but as someone else pointed out, that’s unfair to farmers and others who purchase diesel fuel for something other than a truck that uses public roads. There would have to be some sort of exemption for them, like a refund of taxes paid included in their state tax return or filing something quarterly to get a refund. (Yes, I know, more paperwork…)

Taxing hybrids and other alternative fuel vehicles seems to be counterproductive of their intended purpose (encouraging people to buy them to help us achieve energy independence). However, as these cars become more popular, you have to make up for the declining revenue somewhere, and not by government monitoring of the power meter. Sales and property taxes may be the only option left.

Road Scholar

January 9th, 2013
1:46 pm

“.. put a big tax on the sale of hybrids and electrics at point of sale..”
That would put a knife in their sales. Collecting an annual fee won’t, esp if the price of gas goes up…gas prices are not appreciably going down!

“I’d do some serious accounting of that maintenance budget, I smell some pork.”
Remember pavement overlays and patching potholes, mowing the roadside, collecting trash along our highways (GDOT spent $16MILLION last year on trash pickup—you slobs), and other maintenance work uses….OIL/GASOLINE.. ya’ know that stuff you complain about the price for!

“.. there’s been no indication from the governor or legislative leaders that the law will be repealed. ..”
Yes there has. Read the editorial in your paper yesterday concerning GDOT. The Gov has instructed GDOT to efficiently deliver the TSPLOST projects in the areas that approved it!

Centrist: My friend drives an “eco box (Prius)” and he drove to/from Toronto from here on 4 tanks of gas…over 50 m/gal!

Dunwoody: Only Fulton and DeKalb co’s collect sales tax for transit (Savannah and Augusta may also) But what about the other 157 counties? Also remember there is Fed gas tax collected…which 92 % at least is sent back to each state.

Sorry to post so much, but my work experience is in this area. The number of posts makes me feel like td, Jm, and others! But I KNOW transportation!

SBinF: Never been there! Try walking/biking esp for your kids on the edge of the traveled lane! Good Luck! My condolences!

Centrist

January 9th, 2013
1:48 pm

I think the simple answer to this headline blog question is Absolutely, positively, NOT

Some trial balloons drop instead of rise.

SBinF

January 9th, 2013
1:52 pm

“Reporting your odometer reading to the government smacks of statism and opens doors for government abuse.”

I don’t want to spoil your right wing rant, but you realize that millions of people record their odometer reading for tax purposes, right?

Road Scholar

January 9th, 2013
1:53 pm

” You could also raise the diesel fuel tax a bit, but as someone else pointed out, that’s unfair to farmers and others who purchase diesel fuel for something other than a truck that uses public roads.”

I believe a tax break was approved in Georgia (who would have thunk it) for businesses including farms from paying motor fuel tax since they regularly do not use roads.

“However, as these cars become more popular, you have to make up for the declining revenue somewhere, and not by government monitoring of the power meter.”

Thus the desire by some for a mileage/congestion tax. As the road becomes more congested you pay more per mile (besides using more gas for congestion).

Kyle Wingfield

January 9th, 2013
1:59 pm

Hillbilly @ 12:30: You are correct. I think the change is for cars purchased after March 1 — but that date is coming from memory and might be wrong.

JamVet

January 9th, 2013
2:01 pm

Go back to Berkeley…

Don’t be so afraid of the post-1950s.

Join us in the 21st century.

Or better yet, don’t!

Kyle Wingfield

January 9th, 2013
2:01 pm

td and Dunwoody Granny: Do out-of-staters necessarily pay the gas tax more often than the sales tax? Might they actually spend more toward our infrastructure via a sales tax? I don’t know the answers off-hand, and I don’t know if anyone’s even tried to estimate them. But it doesn’t strike me as such an open-and-shut matter.

Dusty

January 9th, 2013
2:02 pm

I was falling sound asleep over this borin…err delightful blog when Jefferson got me wide awake. “A STATE INCOME TAX INCREASE would be a better solution’ he wrote..

Nonononono .No tax raises. I’m hugging my little bag of savings tight to my chest and nobody is going to have any of it!!!

Do not raise my taxes. It makes me sharpen axes. Those are the facts I sees! So be nice now, PLEASE!!

Kyle Wingfield

January 9th, 2013
2:04 pm

Road @ 1:08: I didn’t read the Wapo’s write-up and thus didn’t “omit” anything from it. There was a complaint from a Democrat in the article I did link that it wasn’t enough money, but “enough money” is usually in the eye of the beholder.

If the plan would raise $3B for transportation and that includes an increase of $600M, that means it’s increasing state transportation funding by about 25%. That’s a pretty hefty increase.

Kyle Wingfield

January 9th, 2013
2:05 pm

“try tolling roads that the taxpayer has already paid for”

The I-85 HOT lane was different — but if future tolls are either to access new lanes or are imposed as replacements for the gas tax, I think that’s reasonable in principle. (Which is to say there’d be a difference between a $1 toll and a $100 toll.)

quick work break

January 9th, 2013
2:06 pm

So the very conservative Governor from my home state is proposing a large tax increase on Virginians? Bring it on. I can already see how that will play out in the Presidential primaries.

Centrist

January 9th, 2013
2:08 pm

The current fad (and that is what it is when you consider the cost-benefit ratio) of hybrids and electric cars will not stick without uneconomic government subsidies.

Coal is burned to create the electricity for the highly toxic, short lifetime batteries in those relatively expensive cars – there is no cost or environmental savings. It is simply a feel good/ marketing/ political issue the public has largely (and properly) rejected.

Subsidies are intended to create markets and encourage faster technological breakthroughs – but more often than not, they fail because technology improvements are built over time instead of massive up front investment. Energy storage, solar energy, and wind energy have current technological shortfalls that make them uneconomic even the many decades of subsidies and environmental issues. Natural gas is our current best energy option, followed by nuclear, coal, and oil. Hopefully, there will be alternative energy and storage breakthroughs – but they will come over time instead of the attempted forcing of technology.

Road Scholar

January 9th, 2013
2:13 pm

Kyle – Hillbilly: House Bill 386 changed the advelorum requirements for cars purchased after Dec 31, 2011. It requires private sales after Jan 1 2013 to include sales tax! It also allows for the sales tax on NEW vehicles purchased after Jan 1 2012 to possibly replace the advelorem (birthday tax). Go to the GA Dept of Revenue website to see if you qualify. You can opt in after March 15, 2013. Also after Jan1 2013, you do not pay sales tax for dealer vehicle sales…don’t get excited… you pay 6.5% fee (that increases to 7% over time) that replaces your advelorem tax in future years!