Tax phobia will make you do stupid things

For years, Virginia has had a problem everybody can identify: It’s running out of money to repair its existing roads, rails, airports and ports, let alone build new transportation infrastructure. The reason why is obvious too–the gas tax, unchanged since 1987 at 17.5 cents a gallon, doesn’t take in enough and will yield increasingly less as fuel economy improves.

Virginia General Assembly logoIt doesn’t require a graphing calculator to conclude that the easiest fix would be to hike the gas tax by a dime–the price per gallon has gone up by that much in the last two weeks, and we all seem to have survived.

But in the confused state of my state’s politics, the gas tax–which is buried in the retail price–has somehow hit an iron ceiling. Raising it, at least among most state Republicans, is now unthinkable; I’ve even seen that low rate sold as a competitive advantage over other states.

(You can also apply that argument to the commonwealth’s exceedingly low cigarette taxes, which have created a thriving market for cigarette smugglers.)

In January, Gov. Robert F. McDonnell (R.) suggested a way out of this artificial impasse: Get rid of the gas tax entirely and raise the sales tax from 5 to 5.8 percent. Having ensuring that car-free Virginians would underwrite free use of their roads by the rest of the East Coast, this plan would also sock hybrid and electric-vehicle owners with a $100 annual fee.

That economically insane proposal passed the House but got amended by the Senate to a saner plan bill built around adding a nickel to the gas tax and then indexing it to construction-cost inflation, plus a 1 percent wholesale tax.

Alas, the conference committee then went to work and gave birth to a mutt of a bill that passed the House of Delegates today. It would end the retail gas tax but then impose a wholesale tax–3.5 percent on gas, 6.5 percent on diesel–which would then rise with inflation.

That difference is supposed to account for the wear tractor-trailers impose on the roads, but it also punishes drivers who bought diesel cars for their greater efficiency. In the same vein, the $100/year hybrid fee is back. Apparently, Richmond only likes efficient vehicles if they run on gas alone.

The hybrid fee bothers me in particular–we bought a Prius in 2005–but then again we’ve benefited from being exempted from the state’s car tax. And why did we get that freebie? Because our county government wanted to encourage people to buy hybrids, but the state wouldn’t let them push people to buy more efficient vehicles in the most obvious way: yup, raise the gas tax.

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