Fact Check: Fueling the Debate Over Taxes
In a campaign that has lately shifted the debate to taxes, state Sen. R. Creigh Deeds, the Democratic Party candidate for governor, says Republican candidate Robert F. McDonnell is exaggerating the potential cost that Deeds' proposals would cost Virginia's families.
Leaving aside the GOP's questionable claim that Deeds' total tax tab would amount to about $7,800 per family -- which would require yet another foray into the thicket of computations and counter-computations of the impact of cap-and-trade regulation on American consumers -- let's focus for the moment on the bill for transportation.
Deeds says Virginia needs at least $1 billion in new revenues every year to fix its transportation woes.
He does not specify where the new money will come from, other than to say that he will not use any money that now supports the state's public schools. He tells a scrum of reporters that he will not raise any taxes that go to the state's general fund, such as sales and income taxes. But he promises in writing that, as governor, he would enact a bipartisan, comprehensive transportation plan, "even if" it includes new taxes, to fix "a multibillion-dollar backlog."
For taking this stand, Deeds has won plaudits from some, including the editorial page of The Washington Post. The Post praised Deeds for "political guts" in acknowledging that taxpayers must foot the bill for "tens of billions of dollars in new revenue." The same page dismissed McDonnell's plan, which spurns any new taxes for roads, "as phony-baloney."
Yet when McDonnell accused Deeds during a recent debate -- and now in ads that began airing Oct. 10 -- of supporting "another billion dollars in taxes" or a "billion dollar tax increase," Deeds said McDonnell was lying.
In press releases and other venues, the GOP has gone further, accusing Deeds of wanting to more than double the state's gas tax. Deeds would have to tack on at least an additional 20 cents a gallon to the gas tax to raise $1 billion a year, Republicans argue. That's because the Virginia Department of Transportation says 95 percent of all traffic revenues come from fuel taxes, which raised $809 million last year. Only nine states charge less than Virginia's 17.5 cents per gallon, and Deeds has voted to raise the gas tax before. Each penny in the tax raises less than $50 million.
(The American Petroleum Institute, a trade association, also notes that Virginians actually pay 1.8 cents per gallon more, owing to a 0.6 cent-per-gallon tax on petroleum storage tanks and a 2-percent sales tax on fuel in those areas that collect additional revenue for the Northern Virginia Transportation District.)
At the request of House Speaker William J. Howell (R-Stafford), House appropriations committee staff, in an Oct. 1 memo, calculated that a 20-cent increase in the gas tax would cost the average two-car family an $300 a year, or $1,200 over the next governor's four-year term.
How does it all add up?
First, for Deeds to say "even if" the comprehensive, bipartisan plan contained new taxes is a polite fiction. Unless Deeds knows of a traffic fairy, the plan would have to contain new taxes.
At the same time, Deeds has never said he would raise the $1 billion by doubling the gas tax or boosting it by 20 cents. It's also true that the General Assembly has not raised the gas tax since 1986, when it bumped the gas tax by 2.5 cents to the current 17.5 cents a gallon--and that more than doubling the tax now, as the GOP has asserted Deeds would do, would be well nigh impossible in a recession, especially with Republicans in command of the House of Delegates.
(And yet, such a tax levy is also not unheard of: four states charge as much, and Virginia could add a dime to the current levy and still be under the average state gas tax in the U.S. today, which is 28.9 cents per gallon, according to the American Petroleum Institute.)
So it's not fair to say that Deeds has promised to crank up the state gas tax by an additional 20 cents a gallon, as some Republicans have alleged. FactCheck.org reached a similar conclusion--although, strictly speaking, McDonnell's "Jobs Governor" ad also does not accuse Deeds of ''a billion dollar gas tax increase,'' as FactCheck.org says.
But it's also disingenuous for Deeds to call his opponent a liar for following the only available breadcrumbs on his plan to their logical conclusion and repeating the same thing that has won Deeds praise from some corners -- namely, that Deeds would ask Virginia's residents and motorists to pony up upwards of $1 billion more for roads each year.
After all, if Deeds is serious about finding $1 billion a year, or anything close to it, Virginians would ultimately pay, whether through higher fuel taxes, titling fees, debt service, tolls, other taxes or some such combination thereof.
And that brings us back to the $300 a year figure. Taking Deeds at his word when he says he would follow the example of former Democratic Gov. Gerald L. Baliles, we thought it might be instructive to reexamine what Baliles did.
In September 1986, a special session of the General Assembly was called to address transportation. As recommended by the Commission on Transportation in the 21st Century, Baliles hoped to raise $571 million the first year for a total of $6.3 billion over 10 years. That works out, when adjusted for inflation, to a little over $1 billion a year--or just about the sum Deeds and some transportation experts have said would be needed now.
Baliles got less than what he wanted, but still a record tax increase at the time. The package raised $421.7 million the first year, of which Northern Virginia pocketed about $22 million. To pay for it, Baliles put together a bipartisan coalition and a plan that raised four taxes. The sales tax rose by half a cent to 4.5 cents per dollar; the titling, or sales tax, on motor vehicles went up 1 percentage point to 3 percent; the annual fee for license tags jumped $3 to $25; and the gas tax rose by 2.5 cents per gallon. At the time, the gas tax increase put Virginia in a tie for fourth place among other states in the U.S.
All together, the $422 million in new revenues cost $125 a year for a family making $30,000 a year. Adjusting for inflation, that $422 million translates into $831.6 million today-- and an inflation-adjusted tax bill of about $295.58.
(Of course, the Census Bureau estimates that there are 1.8 million more Virginians today to share the burden, and they are also wealthier, since the household median income has increased from $52,373 in 1987 to $61,710 in 2008.)
A final note: if Deeds were to follow in Baliles' footsteps and obtain an increase of 2.5 cents per gallon today, the cost per two-car family--calculated using the same criteria used by the House Appropriations committee staff--would be about $37.50 a year.
But if Deeds, also like Baliles, raised the tax to the fourth highest in the U.S., that would mean jacking up Virginia's motor fuels tax to about 41 cents per gallon as Connecticut now levies, according to the American Petroleum Institute, a trade group for the U.S. oil and natural gas industry.
October 18, 2009; 9:00 AM ET
Categories: 2009 Governor's Race , 2009 Governor's Race Fact Checker , Creigh Deeds , Fredrick Kunkle , Robert F. McDonnell , Transportation
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