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Virginia politics Richard Falknor on 10 Jan 2013 06:57 pm

McDonnell Tax Scheme: Too Many Moving Parts, Open Questions?

UPDATE JANUARY 10!  The astute Peter Samuel (TollRoadsNews) draws our attention to Dr. Ron Utt’s “Governor McDonnell’s Seppuku Transportation Plan” (BearingDrift) where the author and longtime Heritage expert declares “Sadly, the Governor’s new views on transportation are not unique, nor are they materially different from those of Maryland’s Governor Martin O’Malley, President Barrack Obama, the Sierra Club, the Piedmont Environmental Council, Smart Growth America, and a host of other progressive entities and persons. While there is not the time or space here to get into the flaws in the many individual components of this plan, one can’t help but be impressed by the Governor’s and the Attorney General’s apparent breathtaking turnaround on the Silver Line (Dulles Rail), one of the largest and costliest real estate deals on the East Coast, which — by the sponsor’s own admission to US DOT — will have no lasting impact on congestion or air quality. Nonetheless, the Governor’s proposed tax increases will fund a $300 million grant to Dulles Rail, provided that ‘the reforms identified by the U.S. Department of Transportation Inspector General are implemented.’ In human speak what the governor is saying is that this funding will be withheld until a corrupt and mismanaged, multi-billion dollar wasteful boondoggle is reformed into just a multi-billion dollar, wasteful boondoggle.”

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McDonnell Tax Scheme: Too Many Moving Parts, Open Questions?

“Governor, we have known you for a very long time, and I applaud you for many initiatives you have undertaken in your years of public service.  But I am frankly shocked that a Republican Governor, and especially during this horrible economic climate, would choose to burden taxpayers more by proposing to raise the sales tax! Basically, we are supposed to be happy that we will pay less for gas, but more for everything else! Do you think the majority of people will not see this for what it is?  Our Republican leaders must stand firm against the tide, and truly serve those whom they are elected to serve.  There are other ways to raise revenue, like cutting spending. Why not cut the budget 1-1 1/2% and use that money for transportation?  If families can relinquish spending a penny out of every dollar, certainly the government can.  ‘Tax and Spend’ is how we got in this financial mess in the first place.   All the Democrats have to say is ‘Candidate X voted to raise the sales tax an additional .8%!’  In fact, most people will miss the decimal point and read 8%.  In reality, though, the sales tax is being increased by 16%!  This is a political nightmare for Republicans and horrible for ‘we the people.”’  –Catherine Ann Marshall, January 8, 2013.

We wrote in 2009 (click on foregoing link) that then-gubernatorial candidate Bob McDonnell had “the scent of a statist,” and nothing seems to have changed as we consider the governor’s “2013 Transportation Funding and Reform Package” increasing taxes and thus the reach of state government.

The McDonnell Team as we explained in 2010 (click on foregoing link) apparently sees the Commonwealth government as more of an economic and industrial and social planner rather than an impartial protector of free markets. 

This Team seems, in short, business friendly but not market friendly. James Pethokoukis (Reuters) defined the difference —

“Yet while a pro-business agenda may intersect at points with a pro-market one, they are not the same thing. Pro-market public policies make markets function fairer and more efficiently for everyone. They encourage competition and ‘creative destruction’ and entrepreneurial capitalism. Pro-business policies often shift taxpayer money and other government goodies to favored companies, raise barriers to entry and otherwise defend the status quo.” (Highlighting Forum’s.)

Instead of  advancing tax proposals to make Virginia more competitive — such as eliminating the state corporate  tax and thereby bring more real prosperity and consequently tax revenue to the Commonwealth — we are this week given a meretricious package that advertises no gas tax, but increases the state sales tax and adds an additional tax (‘fee increase’) for car owners.

And all this and more: under the questionable flag of ‘transportation improvement,’ the McDonnell Team is marketing these tax increases to a General Assembly GOP majority they hope to be docile lawmakers and to a media they hope will be  ‘reporters without questions.’

But readers can make their own judgment: click here for the details of “Virginia’s Road to the Future:  Governor McDonnell’s 2013 Transportation Funding and Reform Package.”

One marvels at the political audacity of  increasing the tax on car ownership to pay for transit, and then proposing to use “the first $300 million of the additional 0.25 percent sales tax commitment to transportation” for Metrorail expansion with all the financial and other peril it brings to northern Virginia. The Marketplace Equity Act of which the McDonnell proposal speaks so confidently is not as universally admired as one might infer from the McDonnell pitch.  Click here to read former U. S. senator and now Heritage chief Jim DeMint’sNo Internet Taxation Without Representation: Subjecting online retailers to 10,000 local tax jurisdictions is a terrible idea.”

Tax Foundation: Governor’s “Smoke & Mirrors”

The Tax Foundation will have none of it.  Joseph Henchman and Scott Drenkard declared on Tuesday (click here) that “Virginia Governor Proposes Smoke & Mirrors Transportation Financing Plan” and summarized —

“But McDonnell’s plan to move away from user-related taxes and fees towards general revenues is going in the wrong direction. When road funding comes from a mix of tolls and gas taxes, the people that use the roads bear the cost of them. By contrast, funding transportation out of general revenue makes roads ‘free,’ and consequently, overused. Theory and past experience suggest McDonnell’s plan will result in further congestion and continual underfunding of transportation in Virginia. The next governor and legislature might see the reintroduction of the gas tax while retaining the higher sales tax. Virginia’s transportation problems are serious and require a serious plan.”(Highlighting Forum’s.)

FCTA’s  Arthur Purves – Decades of Shortchanging Transportation

Fairfax County Taxpayers Alliance (FCTA) expert Arthur Purves has long criticized the Commonwealth government for shortchanging transportation while allowing general-fund spending to soar –

  • In 2002 FCTA wrote, click here
“Fairfax County Taxpayer Alliance analyses show that between 1979 and 2002, Virginia inflation-adjusted spending increased 100 percent per student for public schools, 40 percent per student for public colleges, and 60 percent per resident for welfare. However, inflation-adjusted spending per resident for transportation was the same in 2002 as it was in 1979.”
  • In 2011 FCTA wrote, click here
“Massive spending on education and healthcare is one of the major reasons there is inadequate funding for roads and bridges. The other reason is Dulles Rail.”

This morning, long-time taxpayer advocate Purves emailed  —

“You do not need to raise taxes for transportation.  You will have adequate funding for transportation if you rein in out-of-control spending for public schools, the Virginia Retirement System, and Medicaid.”

Where Do We Go From Here?

Of course, Virginia needs a sound state transportation plan with adequate resources for roads. This is a core function of government.  Such a transportation plan, however, should be cost effective, and pork free —  with strong firewalls against raids by crony capitalists. The giant Dulles Rail schemes, for example, simply did not meet this test.

Heritage’s analysts, as we have written (click here and scroll down to ‘The Fight Against Dulles Rail Didn’t Start Yesterday’) have documented that disaster as it developed.

But the governor’s approach reflects a larger Virginia GOP policy deficiency than that of transportation.

We believe that too few Virginia GOP state lawmakers are ‘market friendly’ – and the governor’s statist inclinations are clear enough (see Cato’s rating of ‘C’ for governor Bob McDonnell in the foregoing link).

What can we do? One suggestion might be that the conservative Virginia base — including those Tea Parties not yet co-opted by the Virginia GOP Establishment — come together to work up genuine alternatives, perhaps first on transportation and then in other crucial areas.

Here is a possible start: perhaps a respected delegate of principle, energy, and learning might consider founding within the Virginia House of Delegates an equivalent to the House of  Representatives Republican Study Committee – the caucus of House GOP conservatives?

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