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Taxes or User Fees to Pay for our Roads?

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It’s time Virginians learn the difference between taxes and user fees. Gov. Bob McDonnell has forced the issue by proposing to boost spending for Virginia roads by diverting more money from the General Fund. In so doing, the governor would tilt the financing mechanism further from a user-pays system and toward an automobile-subsidy system.

Philosophically, this is fundamental. One principle of governance says, “People who use roads should pay the full cost of building and maintaining them.” The other principle says, “People like driving on roads but don’t like paying for them, so I’ll subsidize their transportation preference with taxes imposed upon the general public.”

Republicans claim to loathe social engineering. They rightly distrust those Greens and environmentalists who want to corral the population into high-density housing and force them to ride mass transit. But Republicans are social engineers of a different sort. They support tax and transportation policies that underpin the auto-centric society. Then, when the cost of those policies becomes prohibitively expensive, they turn to public subsidies to maintain an unsustainable status quo.

Once upon a time, Virginia funded most of its road building through the state motor fuels tax, supplemented by federal grants paid for by a federal motor fuels tax. It wasn’t perfect, but it worked reasonably well. Generally speaking, the more miles you drove, the greater the burden you put on the road system, and the more tax you paid. People who walked to work, biked to work or worked at home didn’t pay as much. The salesman who drove 1,000 miles a week paid a lot more than the little old lady who drove 10 miles a week. There was a rough justice in the tax.

But the Old Dominion has largely abandoned that approach. Through inaction, legislators have capped Virginia’s gasoline tax at 17.5 cents per gallon since 1986. Due to inflation, the purchasing power of that tax has declined by more than half — way more than half, actually, if you consider the higher rate of inflation in construction costs. But the demand for more roads, bridges and highways has not diminished at all. To maintain road funding, lawmakers have boosted other taxes. But they have done so in a sly, underhanded way: by breaking up the taxes into little pieces that are harder for taxpayers to notice, and relying upon revenue sources that automatically increase over time.

Today, barely one third of the dollars spent by the Virginia Department of Transportation comes from the motor fuels tax. Here’s where the state funds come from this year, according to an October VDOT estimate for Fiscal Year 2012:

Motor Fuels Taxes………………………………$866.8 million
Priority Transportation Fund (PTF)……….$156.0
Motor Vehicle Sales and Use Tax …………..$531.1
State Sales and Use Tax ………………………..$501.6
Motor Vehicle License Fees…………………..$237.4
International Registration Plan………………$63.2
Recordation Tax…………………………………. $34.6
Interest Earnings………………………………… $27.8
Miscellaneous Taxes, Fees and Revenues….$12.9
Total State Taxes and Fees……………………..$2,431.4

McDonnell would further sever the connection between those who use Virginia’s roads and those who pay for them by doing three things: (1) Phasing in the transfer of an extra 0.25% of the state’s 4.5% sales tax to transportation over eight years, (2) dedicating 75% of any end-of-year General Fund surplus to transportation, and (3) dedicating an additional 1% of all General Fund revenue to transportation in years when revenues increase more than five percent.

Within eight years, the motor fuels tax could account for perhaps one quarter of VDOT funding. Why is that so bad? After all, we use General Funds to underwrite the cost of schools, corrections and Medicaid. Why not roads, too? Here’s why. When government subsidizes the cost of building and maintaining roads, people drive more.

When people drive more, they increase the wear and tear on roads and they aggravate traffic congestion, both of which intensify the pressure on government to raise more taxes. Thus tax subsidies beget more tax subsidies. That is fiscally unsustainable. By comparison, when government pays for public education, people don’t go out and have more children. When government pays for prisons, criminals don’t go out and commit more crime.

In an economically ideal world, Virginia would eliminate every transportation tax listed above except the motor fuels tax and raise that tax by enough to offset the lost revenue. That would mean roughly tripling the gas tax. Virginians wouldn’t be any worse off — by definition, the overall transportation tax burden would be the same.

Actually, I could make the case that Virginians would be better off: (a) because the tax would be totally transparent and they would know what they’re paying, and (b) they could reduce the amount of tax they pay by modifying their behavior — driving less.

Admittedly, there is one big problem with shifting to an all-motor fuels tax.

That tax, as I have oft preached and McDonnell noted in justifying his raid-the-General Fund proposal, is living on borrowed time. Gas tax revenues will decline as automobile gas mileage improves and as people buy more alternate-fuel vehicles. But the solution isn’t subsidizing transportation with General Funds, it’s replacing the motor fuels tax with a Vehicle Miles Traveled tax.

Any VMT tax would pose administrative challenges, so we need to start studying the options now in order to get the kinks worked out when it’s time to make the switch. Just as welfare breeds a pathological culture of poverty and bail-outs encourage bankers to gamble recklessly with other peoples’ money, subsidizing roads leads to more driving, more gasoline consumption, more congestion, more pollution and greater dependence on foreign oil.

Genuine conservatives will oppose McDonnell’s transportation-funding proposals and support a philosophically consistent increase in the gas tax — a true user fee.James A. Bacon is the author of “Boomergeddon” and publishes the Bacon’s Rebellion blog at

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