Virginia Gov. Bob McDonnell (R) has been stumping for his new transportation plan, which would eliminate the state’s gas tax and instead fund transportation via an expanded sales tax. The plan would shift the cost of transportation funding away from those who use the system and onto Virginia’s poorest residents. But so far, it has encountered little resistance:

Virginia Gov. Bob McDonnell’s controversial transportation bill passed the House of Delegates Finance Committee on Wednesday, moving past its first hurdle in the state’s 2013 General Assembly session.

In a 14-8 vote along party lines, the committee passed McDonnell’s package, which calls for eliminating the state’s 17.5 cents per gallon gas tax and raising the state sales tax from 5 percent to 5.8 percent.

McDonnell’s plan would wallop the poor, while letting the richest Virginian’s (not to mention any out of state drivers passing through) off largely scot-free, as this chart shows:

“Eliminating the gas tax paid by highway users and raising taxes on all other Virginians to pave our roads makes no sense,” said State Sen. Chap Petersen (D). “Indeed, eliminating our traditional road funding because cars are more efficient makes about as much sense as canceling your child’s college fund because tuition keeps rising.”

Virginia Gov. Bob McDonnell (R)

Even with the proposed elimination of the tax on gas, the governor’s plan would result in higher taxes for Virginians across the board. However, the proposed tax changes will fall most heavily on lower-income families.
That’s because as a share of their income, low- and moderate- income households spend more than high-income households buying the basic necessities of life like clothing, toiletries, and school supplies, which are subject to the state’s sales and use tax.

For example, a family making less than $21,000 a year, among the lowest 20 percent of the income distribution, would see its taxes rise by about .21 percent under the governor’s plan. But at the other end of the spectrum, households making over $509,000 a year, in the top 1 percent of the income distribution, would see an increase of just .05 percent.

Under Virginia’s current tax system, the richest 1 percent pay a 5.2 percent effective tax rate, while the poorest Virginians (those making less than $19,000) pay 8.8 percent. McDonnell’s plan would raise those rates, but do so in a way that the gap between what the richest and poorest Virginians are paying would expand. In addition, the plan would shift the responsibility for paying for Virginia’s highways from people who most use the roads (including those from outside the state) to poorer residents who can least afford it.

Gov. Bob McDonnell (R-VA)

Some have suggested that is why the gasoline tax is good, because people buy less gas and then the air is clean. That’s not the policy reason. You tax things to raise revenue to provide government services, and so that’s is the purpose of it, not to create those kinds of policies. But Neil, the whole goal here is to create a way to have a sustainable method of funding our roads and bridges and other transportation assets for the future so we can create more jobs, so that businesses will come and locate here, so entrepreneurs will start up here, so families can spend more time with their children, parents. That is the whole goal and do it in a way consistent with conservative principles. Look, it’s a different idea. We shouldn’t be afraid of new innovative ideas.

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McDonnell’s plan will result in the cost of highways being borne by low-income Virginians — as the sales tax disproportionately affects those at the bottom of the income scale who are more likely to spend all or most of their income — and by those who use mass transit, walk or bike. It lets out-of-state drivers who use Virginia’s roads off without paying a single cent. As the Washington Post’s Robert McCartney wrote, “the gas tax is a nearly ideal way to fund highways. It’s borne by the people who use highways. It penalizes fossil fuel use and thus is environmentally friendly. Out-of-state drivers, rather than Virginians, pay a sizable chunk of it.”

Virginia already has a regressive tax system, with the richest 1 percent paying a 5.2 percent effective tax rate, while the poorest Virginians (those making less than $19,000) pay 8.8 percent, according to the Institute on Taxation and Economic Policy. Increasing the sales tax is only going to make that disparity worse, while making those who don’t use the state’s highways pay more for their upkeep.

Virginia Gov. Bob McDonnell (R), seeking to address a looming shortfall in his state’s transportation funds, has proposed a plan to boost transportation funding by repealing the state’s gas tax and replacing it with increased sales taxes and a surcharge on alternative-fuel vehicles, the Washington Post reports:

Gov. Robert F. McDonnell proposed Tuesday an ambitious overhaul of how Virginia pays for roads, rail and transit, including eliminating the gas tax and replacing it with an increase in the sales tax.

The overall plan, which would raise an estimated $3.1 billion over five years, also would increase vehicle-registration fees and add an annual $100 charge for drivers of alternative-fuel cars. McDonnell’s proposal calls for a increase in the state’s sales tax from 5 percent to 5.8 percent and projects using $1 billion in Internet sales tax revenue from legislation pending in Congress.

While McDonnell’s plan would raise revenues, it would do so in an assortment of wrong-headed ways. It would shift more of the tax burden to low-income Virginians, since sales taxes are inherently regressive (low- and middle-income earners spend a larger portion of their incomes than do the wealthy). The sales tax would still exempt gasoline while being applied to groceries. And McDonnell can’t count internet sales tax as a definite, since it’s still unclear whether that authority will be granted by Congress.

The shift would also mean that visitors who stop to fill up their gas tanks in the state would still get the benefit of using the roads without paying taxes that support them. It also incentivizes the highway system, a perverse goal considering the bulk of the state’s transportation costs come from Northern Virginia, where there is already a public transportation system that would better serve Virginians if it was made even more robust. And it shifts costs to walkers, bikers, and public transportation users, who would be just as responsible for paying for roads as drivers.

If McDonnell is already willing to abandon his no-tax pledge to fund transportation, there are better ways to do it. He could raise the gas tax, which is currently bringing in less money per gallon of gas than at any time in its history. Or he could close corporate tax loopholes, which drain $12.5 billion a year — four times the amount of revenue his plan raises — from the state’s coffers.