Virginia: Taxes Won't Get Larger, But the Potholes Will

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Virginia legislators last week proved themselves totally incapableof raising revenue, no matter how serious the need. In the wake of a ruling from the state's Supreme Court that struck down the previous regional transportation funding regime, legislators recently assembled in a special session with hopes of resolving the resulting $3 billion transportation funding shortfall that will hit the state over the next six years. In part as a result of regional rivalries, that special session ended in complete failure last week when not one tax increase could be agreed upon.

As one legislator stated proudly, "For now, asking families to pay more is something the public doesn't support, and as we've seen, nor does the General Assembly". What this sentiment fails to consider is that the public also does not support the gross underfunding of transportation that will result from this session. Even the business community, a group traditionally opposed to tax hikes, has begun to voice serious frustrations regarding the inability of the Virginia government to produce a means of paying for needed transportation improvements.

Two major plans to boost tax revenues were proposed during the session as a fix for Virginia's inevitable transportation shortfall. These plans included options such as raising taxes on the sale of real estate, vehicle sales taxes, state and/or regional sales taxes, and the gas tax. One of these options even included some progressive elements, such as eliminating the sales tax on groceries.

The gas tax is an especially appealing option in Virginia, where the tax hasn't increased since 1987. As a result of inflation, Virginians are currently paying the equivalent of 47% less per gallon than they did at the time of the last tax hike. In 2008 dollars, this amounts to about a 15 cent tax cut on each gallon purchased. While this is somewhat good news for lower-income families hurt by rising gas prices, it's very bad news for the state transportation infrastructure. A change in the gas tax could improve infrastructure funding while a low-income tax credit, as proposed by the Virginia-based Commonwealth Institute, could provide ample protection for poor families.

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