"Virginia’s Transportation Debate
February 24, 2013
From the office of Senator Bill Stanley
Phil Rapp, Communications Director
As a result of the historic vote this past weekend in the Virginia General Assembly, the solution to fund the state’s transportation budget is unfortunately on a fast track to be one of the highest tax increases in state history. The Senate and House of Delegates have approved a bill that if signed into law by the Governor, will cost tax payers as much as 6.1 billion dollars over the next five years (at a minimum, an average of over 1.2 billion dollars per year in new taxes). While I applaud the sincere hard work and dedicated efforts of the Conference Committee which was tasked to write this bill as a means to find a solution to an important issue for Virginia, and understand why both Delegates and Senators decided to vote for this measure, I voted “no” on the bill (HB 2313, Speaker Howell, Patron).
Here is the summary of the main points (and tax increases) of the bill:
ü Increase the state sales tax from 5.0% to 5.3% (In Northern Virginia and Hampton Roads, the sales tax is increased to 6%);
ü Eliminate the current 17.5 cents per gallon flat tax (at the pump) on gasoline, and replace it with a new per gallon gasoline tax to the wholesale price (“at the rack”): +3.5% paid by gas distributors (which will be passed on to consumers at the pump) note: the sales tax will be based on the February 20, 2013 price with any future decreases not going below this floor amount.
ü Increase the diesel fuel wholesale tax to 6%;
ü Apply a $100 annual fee on alternative-fuel vehicles, including hybrids;
ü Increase sales tax on new vehicles (cars and trucks) in a graduated amount from 3.0% to 4.0% this year, and increase it further to 4.3% by July 2016 (an increase of an additional minimum $375 per new vehicle when fully implemented);
ü Increase the amount of general fund money diverted to fund transportation from .5% to .675%, raising approximately $200 million when phased in completely. General fund monies are used for public schools, Medicaid, public safety, and core services of government;
ü Use a substantial portion of any future sales tax proceeds generated from the Internet purchases (if the U.S. Congress passes the Marketplace Equity Act), the proceeds will be distributed as follows: 55.5% for schools, 22.2% for local government, and 22.2% for roads and public transit. However, if the act fails to pass in Congress (and it hasn’t passed so far) by 2015, this bill will replace the revenue it would generate for transportation, education, and localities through an additional 1.6% increase in the wholesale gas tax, thereby increasing the new wholesale gas tax from the 3.5% level to a higher level of 5.1% per gallon by 2016. If this Marketplace tax is passed, small businesses will be forced to comply with the different tax rates of thousands of state and local jurisdictions throughout the United States. While all of the big online companies will be able to comply with this requirement, this may force their small business competitors online out of business;
ü The personal property tax paid by Virginians would increase from 3.5% to 4.3%;
ü The tax on vending machines sales rises from 4.5% to 6% in Northern Virginia and Hampton Roads, and increases to 5.3% in the rest of the Commonwealth;
ü Heavy equipment used for contracts on road construction, railroads, docks, etc., will be increased from 3.5% to 4.3%;
ü Except for the increased tax on motor vehicles, all other tangible personal property will be taxed now at 5%;
ü The bill creates the formation of new regional taxing authorities that could potentially add nearly $550 million tax dollars per year in Hampton Roads and Northern Virginia;
ü In Northern Virginia, commercial, industrial and residential land and building sales will have an additional tax of 25 cents per $100 of value;
ü In Northern Virginia there will be a 3% hotel tax;
It’s clear, that more than six different taxes and fee structures are being increased under the shadow of the fixed gas tax being abolished.
It’s also important to note that while the 17.5 cents per gallon tax would disappear under this new bill, the tax increases at the wholesale level will automatically occur and be passed on to us consumers. For example, should the wholesale price per gallon reach $4.00 per gallon, which is very likely, the new 3.5% wholesale tax will equal 14 cents per gallon. And if the aforementioned Marketplace Equity Act tax is not passed by the Congress, the additional 1.6% tax increase imposed by this bill will bring the new tax per gallon to 20 cents, or 2.5 cents more than the current 17.5 cents tax rate.
Quite simply, the potential total price tag for Virginia tax payers over five years could be, at a minimum, 6.1 billion dollars.
I understand and agree that transportation is a core service of government that must be addressed, but its costs cannot and should not be satisfied by massive tax increases on the citizens of Virginia, and certainly not during times of economic strife and uncertainty that we have been enduring at this time. I had initially supported Senator Steve Newman’s approach to the transportation funding bill, which was a revenue neutral approach and re-allocated funds that Virginia already had in its possession. While it may not have been perfect, (as quite frankly, no plan ever is), the passing of the Newman Transportation plan would have helped in moving the debate on transportation in a more financially conservative direction. Unfortunately, we are now looking at bill that contains a complex set of tax hikes that affects every Virginian throughout the Commonwealth on a daily basis.
More specifically, the Transportation bill, in its current form, is nothing more than a tax on all Virginians with little or no direct relief for the transportation issues facing the 20th District. I have been fighting for funding for the I-73 corridor as a major step necessary to restore economic prosperity in Southside and Southwest Virginia – however, this bill ignores the funding need for this critical project.
I commend Delegate Charles Poindexter for his excellent Rte 58 bill (HB 1953) that would guarantee financial backing for the completion of the widening of Rte. 58, in Patrick County as a necessary transportation need for the economic growth of our region. In the Senate, both myself and Sen. Bill Carrico supported and fought for his bill for the continued funding commitment and we were thrilled that it passed; and, the Rte 58 corridor widening project is indeed included in this transportation plan. However, in the Transportation bill passed by the General Assembly, no increased funding for any expansion other than those already previously budgeted by Governor McDonnell will occur until the year 2020, and only then, the increase will be by a mere 20 million dollars. 8 years is too long for us to wait to begin to complete the widening of Rte 58, and the amount allocated is far from what is needed to complete the project in a timely manner. We need Rte 58 widened now as an essential component of our economic recovery and vitality in the future here in our area.
According to the Federal Highway Administration (FHWA), investments in highway construction deliver nearly 6 dollars of economic impact for every dollar invested. For every 1 Billion dollars invested in highway construction, more than 42,000 jobs are created. I firmly believe that Southside and Southwest Virginia have consistently been ignored over and over again on major funding to meet its transportation and job creation needs, while the northern and eastern regions of the Commonwealth consistently receive the lion share of the transportation budget.
If the gas tax and sales tax structures are to be revised along with additional fees being implemented without any incremental funding to our region, it becomes extremely important to send a clear message that we are not in support of taxation without a resulting benefit. Both Southside and Southwest Virginia cannot be ignored any longer. I am very disappointed with the decision by the conferees to specifically omit the I-73 project from the transportation bill.
The I-73 corridor is of national significance, connecting the Great Lakes with the Carolinas’ coast. The Commonwealth Transportation Board has determined that I-73 in Virginia would follow US 460 from West Virginia to Blacksburg, I-81 to Roanoke, and then parallel US 220 south through Franklin and Henry Counties to the Virginia-North Carolina line. The Transportation Board has already approved a 70 mile corridor of I-73 running from Roanoke to the Virginia-North Carolina border. Even though the construction of this highway would connect the sea ports of South Carolina to Southside Virginia, and onward west to the interior of the United States, funding for this segment has yet to be allocated by either the state or federal governments.
It cannot be denied that the transportation funding needs of Virginia have either been delayed or ignored for a number of years in the General Assembly. While this bill may meet many of the funding needs of the Commonwealth’s vast transportation system in Northern Virginia and Hampton Roads areas, it does little to benefit us in the 20th District. It is painfully clear that the Transportation bill passed this past weekend by the General Assembly is lacking a critical opportunity to help return economic prosperity to a region of the state where unemployment reaches over 16% in at least one our largest areas. This is a missed opportunity, and for the current transportation bill to focus instead on further funding in more economically advantaged areas is exceptionally disappointing on many levels. Unfortunately, this bill makes all Virginians, including the citizens of Southside and Southwest, pay out of their own wallets their hard earned money for road projects that benefit certain more affluent parts of the state, without providing a direct benefit to all of Virginia. "