Issue link: http://read.dmtmag.com/i/141668
Policy taxes. Over that time, the state is expected to bring in an Raising roughly $3.4 billion over the next five years, extra $4.4 billion in revenue for infrastructure projects. In Virginia will be embarking on a path that links transportafact, Gov. Martin O'Malley (D) has already outlined $1.2 tion funding to consumer spending and fluctuations in billion for projects on which the state can break ground as the wholesale price of fossil fuels. While this will likely save soon as the new tax takes effect. drivers money at the gas pump, it could potentially devastate Interestingly, the Maryland legislation ties the increases to infrastructure accounts during an economic downturn. an unrelated Internet sales tax currentFurthermore, this form of taxaHighest 10 State Gas Taxes ly under consideration at the federal tion does little to encourage other level. If passed, a portion of the societally desirable outcomes, such Rank Company Country Internet sales tax revenues would be as using vehicles that have greater 1 New York 50.6 cents allocated for transportation projects fuel economy. Most important, it 2 California 48.7 cents and would allow lawmakers to reduce removes the nexus between using 3 Hawaii 47.1 cents the gas tax by up to 7 cents, reducing surface infrastructure and paying the burden on drivers and collecting for that use. People who don't even 4 Connecticut 45.0 cents revenue from out-of-state purchases. have cars will be charged for road 5 Illinois 39.1 cents Vermont and Maryland are just usage when they make general 6 Michigan 38.7 cents two examples of states making the purchases. Ultimately, Virginia's 7 Indiana 38.0 cents hard choice to raise taxes in a time of new transportation policy shifts the economic uncertainty. While the two burden from drivers to all Virginians, 8 North Carolina 37.8 cents approaches are unique to each state's regardless of whether they use the 9 Washington 37.5 cents fiscal circumstances and infrastructure state's roads and bridges. 10 Florida 35.5 cents needs, they highlight that policymakSource: Tax Foundation, "State Gasoline ers across the country are looking Vehicle Miles Traveled: Tax Rates, 2009-2013" inward to compensate for the lack of Oregon's Experiment action in Washington. While state gas For more than a decade, Oregon tax increases appear to be the most has dabbled with the concept of a Lowest 10 State Gas Taxes common approach, some are taking vehicle miles traveled (VMT) user Rank Company Country a completely different path to bolster fee, a tax levied on drivers based 1 Alaska 8.0 cents their infrastructure coffers. on the distance they drive, not on the amount of gas they purchase. 2 Wyoming 14.0 cents Virginia: Shifting the Every day, it appears the state 3 New Jersey 14.5 cents Funding Burden is increasingly closer to imple4 South Carolina 16.8 cents Virginia recently signed into law a menting this complex (but more 5 Oklahoma 17.0 cents transportation plan that takes the effective) way of raising funds for opposite approach. As one of Gov. infrastructure investment. 6 Missouri 17.3 cents Bob McDonnell's (R) legacy accom In a nutshell, a VMT scheme would 7 Mississippi 18.8 cents plishments, the law abandons the require keeping track of the number 8 New Mexico 18.9 cents state gas tax in favor of a number of miles a driver travels in a given 9 Arizona 19.0 cents of other tax increases to offset the time period, whether on a yearly decrease in revenue, some of which basis or between trips to the pump. 10 New Hampshire 19.6 cents are unrelated to road use but will be A VMT system is more attractive Source: Tax Foundation, "State Gasoline funneled into transportation accounts to lawmakers and infrastructure Tax Rates, 2009-2013" for infrastructure investment. experts alike because it would tax Specifically, the law eliminates the drivers according to their road use, 17.5-cent-per-gallon gas tax and replaces it with 3.5 and 6 not the fuel efficiency of their car. Given the proliferation of percent wholesale taxes on gasoline and diesel, respectively. hybrid and electric vehicles that don't pay as much (or at all) While not linked directly to inflation, the wholesale tax for use of the highway system, a VMT user fee would more philosophy assumes as gas prices rise over time, revenues efficiently and effectively account for wear and tear on the will rise as well. The law also increases the state sales tax on roads, giving state governments greater funds to invest in goods and services from 5 to 5.3 percent, with the boosted worn-out infrastructure. revenues allocated for transportation spending. In addition Several different methods exist for tracking this data, to a titling tax increase on car sales, the law also assesses a each with advantages and drawbacks. Oregon completed $64 yearly fee on alternative-fuel powered vehicles to ensure a series of pilot programs over the last eight years to electric vehicle owners are paying their fair share for use of determine which of these mechanisms would be the most (continued on next page) Virginia's roadways. July 2013 | Construction Equipment Distribution | www.cedmag.com | 51 48_Beltway_Feature_KP.indd 51 6/27/13 3:50 PM