The Republican governor says the gas tax should be replaced by a sales tax. But a sales tax hits everyone, whether they use the highways or not, and something closer to “user fees” should take the place of the declining revenues from the per-gallon fuel taxes.
“Declining funds for infrastructure maintenance, stagnant motor fuels tax revenues, increased demand for transit and passenger rail, and the growing cost of major infrastructure projects necessitate enhancing and restructuring the Commonwealth’s transportation program and the way it is funded,” he said last week. “The gas tax is a stagnant revenue source, and no changes to it will provide a reliable growth mechanism for transportation in the state.”
He’s right there. Cars (and people) use far less motor fuel than they used to. Part of that is because of better cars (much more fuel efficient), and part of it is the recession’s lingering effect of people traveling less.
The use of alternative fuels and electric cars has a lesser (but still noticeable) effect.
Still, McDonnell is wrong about how to fix the funding shortfalls: we should “replace the current gas tax with a 0.8 cent increase to the Sales and Use Tax (SUT) dedicated to transportation,” he contended.
Here’s why that’s a bad idea. A sales tax is as broad-based as any tax can be — everyone pays. But it’s also the least progressive type of tax. As a percentage of what they make, the poor and middle class have a far higher levy than the wealthy.
The sales tax is a particularly high burden for many low-income senior citizens, who simply don’t use the highways as much.
Many states try to make the sales tax more progressive by exempting things such as food and medicine. Yet every exemption lowers the amount they collect, so we’re back to the same problem: increasing needs and declining revenues.
The gas tax is imperfect, but it does at least resemble a user fee. The big rigs who use the highways more pay more, as a result. A sales tax goes the wrong way — it weakens the link between user and usage.
Such a scheme would be even worse in Texas, as I-35 and I-10 serve as conduits to traffic straight through our state — resulting in lots of usage and little in sales tax revenues to show for it.
What’s the answer?
Technology will likely provide that, as we find a way to tax miles traveled. There are privacy concerns to address with that, but they aren’t insurmountable.
McDonnell’s idea is bad for the Commonwealth, and would be worse for the Lone Star State.