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David Reynolds: Pay at the pump

How shall we pay for roads? It’s a simple question but Virginia likes to make it difficult. Every year governors and the General Assembly wrestle with the question, yet fail to come up with a satisfactory answer. 2011 is no exception.

Those running this state live in another state — the state of denial. As a result they believe they can get Virginia moving again by the following: building 18th Century toll roads; ending 20th century Prohibition; carving up Virginia; creating urban-rural wars; and the latest, by making interest payments instead of making roads.

None will work. Because few have the political courage to say that the solution to our transportation needs can be seen at every busy intersection. It is called the gas tax. It is almost the perfect tax — an easy to administer fee that directly benefits the user. If God imposed an angel fuel tax for every flight into heaven I would not object.

Yet here on earth the state’s ruling class believes that a hike in the gas tax is a punishable crime. The punishment, they believe, is being booted out of office. But you and I don’t hold office. So we have higher priorities. It is personal mobility and having that package delivered on time. Our punishment is different. We sit behind a wheel and don’t move. And that special package arrives late.

Virginians are smart. They know that such punishment is not necessary. They know that the state gas tax was last raised when many of us were too young to hold of a driver’s license. It was in 1987, over 24 years ago, when we last raised the tax. However, if the gas tax is raised just a Jefferson nickel, almost $200 million could be dedicated to meeting our transportation needs! Using data provided by DMV we know that in Fiscal 2010 $700 million was collected on almost four billion gallons sold in Virginia. At 17.5 cents per gallon that equals $40 million for each penny of tax.

We all know the tired arguments against raising the gas tax. Let’s take the GOP mantra: Hard working Virginians can not afford any additional taxes in these tough times. Fact: If the gas tax went up five cents an area worker commuting to Charlottesville with a car getting 20 mpg would have his weekly travel expenses increased by a whopping $1.25. That is less than the cost of one cup of coffee. For the whole week! And far less than February’s hike in pump prices.

Then there is the argument that Virginia would become less competitive with its neighboring states. Fact: The average gas tax in our neighboring states is almost a dime higher, ranging from $0.214 for Tennessee to $0.322 for West Virginia and North Carolina. Maryland is $0.235.

Then there is the argument that if the state tax is raised, the federal tax, now 18.4 cents, compounds the burden. That is one way to look at our political world — let the federal government do the heavy lifting. And complain.

As for those “No new tax” pledges, they mean no increase in the total tax burden. The voting majority will accept a “zero-sum” tax game whereby tax increases in one area are offset by deceases in another. Our new governor has failed to do that. According to one state senator, the $191 million in savings touted by Mr. McDonnell is mainly a shifting of who pays rather than addressing actual efficiencies to reduce costs.

Too many governors and too members of the General Assembly assume that every penny of the gas tax is passed on to the public. Not so. If that were the case the pump price difference would be exactly the tax difference. The wholesale distributor and the retailer are still in charge of setting prices. For example, the average pump price in North Carolina is six cents above Virginia while the NC tax is 9 cents higher. The same story holds for our other neighboring states.

Two more points. (1) When revenues are dedicated to specific programs, i.e., lottery proceeds that support public schools, there is broad public support. Otherwise we would not have lottery ads. (2) Out-of-state drivers pay up to a third of the fuel taxes collected in Virginia. I guess we don’t want others to help pay for our roads.

Now that you are with me, the issue becomes how to do it. Indexing is always politically safe. If Governor Baliles’ 1987 hike were indexed to inflation the state gas tax would be about double or 35 cents per gallon. Or a gradual increase of a few pennies a year should be politically safe. But, as usual, Richmond misreads Virginia.

So why blame government when the fault, dear Brutes, lies with ourselves. And the Japanese. Car manufacturers are building more fuel-efficient vehicles. We buy them. Why not build and buy more gas guzzlers? That way more gas would be sold and more tax collected.

Bad idea? That’s what I thought. Would you settle for buying less gasoline but add a nickel or a dime to it? Good! Virginia, we have lift off.

Column by David Reynolds