Bacon's Rebellion

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NoVa: More Obscure, Hidden Taxes Coming Your Way

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by

James A. Bacon
in

Northern Virginia approaches a decision point on tax increases of some $300 million to $400 million to support regional transportation projects. The Northern Virginia Transportation Authority will meet Thursday to vote on each of the seven new taxes and fees in the funding package, according to the Washington Examiner (which, by the way, has done a fabulous job of covering transportation and land use issues in the Washington region).

A number of contentious issues have come up. Loudoun County is worried that a share of the bonded indebtedness taken on by the regional transportation authority might count against Loudoun’s indebtness, possibly jeopardizing its AAA bond rating. (See last week’s Examiner coverage of this topic.)

Now, it appears, objections to a five percent sales tax on automobile repairs have surfaced. The tax would raise an estimated $33 million a year. Objection No. 1: The measure would set an unfortunate precedent as a tax on services. It’s not difficult to imagine the levee breaking on that one, leading to a flood of taxes on a multitude of services for a multitude of narrow-bore needs and adding significantly to the tax burden over time. Objection No. 2: Local auto repair shops are worried that the tax will place them at a competitive disadvantage, sending consumers across county lines to shops not subject to the tax.

Objection No. 3 (this is my concern, not one mentioned in the story): Although the tax is related tangentially to car ownership, it bears only the most tenuous and indirect connection between how much a citizen pays into the transportation system and how far, and when, he drives. Its sole purpose is to raise money in the most obscure and opaque way possible so citizens don’t see or understand how much they’re being taxed. A rational transportation-funding system would make the taxes fully transparent, and would be structured to incentivize citizens to drive less.

I know this point is really subtle, because it has gone virtually unmentioned by every elected official involved in the debate, but when people drive less, there is less traffic congestion! I know that’s an awfully difficult concept for some people to wrap their arms around, but I keep thinking that if I repeat it often enough, the idea might penetrate.

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17 responses to “NoVa: More Obscure, Hidden Taxes Coming Your Way”

  1. Anonymous Avatar
    Anonymous

    So Jim you are favoring the milage tax instead right? (which is easy enough since we have to register every year)

    The problem with this is it treats normal miles and congested miles the same

    There are many people that commute less than 20 miles each way. Because of the congestion it can take over an hour.

    I guess it ultimately comes down to how should the money be spent

    The ultimate solution might be a maintanence fee using the milage tax and then a transportation imprvoement corridor fee f(or new construction) using the congestion tolls that Larry keeps talking about.

    NMM

  2. Ray Hyde Avatar
    Ray Hyde

    “when people drive less, there is less traffic congestion!”

    I don’t think so. When fewer people drive to the same place there is less traffic congestion.

    Let’s not confuse traffic congestion with traffic: they are different things.

  3. Ray Hyde Avatar
    Ray Hyde

    “The ultimate solution might be a maintanence fee using the milage tax and then a transportation imprvoement corridor fee (for new construction) using the congestion tolls that Larry keeps talking about. “

    Yes, that is more like it. Let’s look at a system wide solution and not just congestion taxes.

    —————

    Notice that NMM distinguishes between regular miles and congested miles. I’m pretty much convinced that what the congestion tax will do is NOT provide for new construction, because it is simply too expensive in places that are congested already. Instead, it will be an incentive for people to drive someplace else (more “regular” miles.)

  4. Andrea Epps Avatar
    Andrea Epps

    I am having visions of the next GA session already. The new word will be AMENDMENT. At least with VDOT 527, those of us within the first implementation phase can suggest revisions to the statute. ( Up to a year)

  5. Jim Bacon Avatar
    Jim Bacon

    NMM, You nailed it exactly. As I have argued many, many times on this blog, the system for financing Virginia roads and highways should have the following components:

    (1) A mileage tax (with the tax adjusted for the weight of the vehicle) that pays for roadway maintenance

    (2) Congestion tolls in highway corridors (like I-95) and cordoned areas (like Tysons Corner) to optimize traffic throughput in congested areas and pay for improvements within those same corridors and cordons,

    (3) Privately financed construction of major new roads, payable with congestion tolls (when economically justified),

    (4) Local improvements paid for by Community Development Authority bonds, with the bonds to be repaid through tax increment financing, and

    (5) General Fund revenues to pay for improvements with a compelling economic-development or public-safety justification (such as, for purposes of illustration, the Third Crossing to expedite hurricane evacuation and port development in Hampton Roads).

  6. Anonymous Avatar
    Anonymous

    Perhaps if the cost of car repairs gets high enough, people won’t do the repairs and they will drive less :)!

    The only real problem with this idea is that it is not statewide, so the tax can be avoided simply by taking the job to another locality. There are many services already subject to a sales tax, with transient occupancy and car rentals just two examples. The GA adopted a telecommunications sales tax that hit satelite services for the first time. Broadening the tax base often makes more economic sense than increasing the tax rate, and if the sales tax hit all services, it might actually be able to go down.

    Ray — the gas tax is a maintenance fee. Very little if any of it gets spent on construction now.

  7. Anonymous Avatar
    Anonymous

    Oh, and Jim, the gas tax is a mileage tax adjusted not for weight directly, but for miles per gallon, which is largely a function of weight. It even functions to some extent as a congestion tax, since you burn more gas per mile creeping and idling than sailing along at 55…RAISE THE FREAKING GAS TAX.

  8. Jim Bacon Avatar
    Jim Bacon

    Anonymous 11:51, I agree, it makes far more sense to raise the gas tax than the grab-bag of taxes, fees and fines that we ended up with. I also agree that the gas tax is a form of user fee. My problem with the gas tax, as I’ve explained elsewhere in the blog, is that the gas tax is living on borrowed time. As people shift to hybrids, electrics and other non-gasoline powered vehicles, the tax will cease to become viable. Twenty years from now, I predict, states will be abandoning the tax on a wholesale level. Federal transportation officials are already looking beyond the inevitable demise of the tax in the hope of finding alternate sources of road/highway funding.

  9. Reid Greenmun Avatar
    Reid Greenmun

    Before we raise any taxes we need to know what we need to buy, how much it will cost, and when it will be completed and available for our use.

    Do not fall into the trap of focusing on raising taxes, tolls, and fees without demanding that the right transportation projects are going to be built and the new tax money will be limited to only the true needs – otherwise we have billions sitting in a slush fund – and we ALL know what will happen then …

  10. Larry Gross Avatar
    Larry Gross

    I don’t have any doubt that a sliding scale for congestion pricing WILL have an impact.

    Here is some evidence. Right now, they are having a knock-down drag-out in California about their HOV-2 lanes …which are maxed and on some days function not much differently than the non-HOV lanes but here’s the kicker – many of the 2-person carpools are Moms with kids, and others who have essentially “recruited” an extra passenger – who would not have taken the trip to start with if they had to make it in their own car.

    The point made is that HOV by NOT charging is actually incentivising MORE TRIPs than if they charged.

    So now – they are saying that if they went to HOV 3.. that it might cut HOV use by 1/2 …. OR if they started charging for HOV2 and let HOV 3 be free.

    But, here’s my point. I think there IS a threshold and it can be determined just by messing with the price.. until they find the “sweet spot”.

    This is actually a separate issue from what Reid is saying – and that I also agree with.

    Can we spell ” S L U S H FUNDs”?

    the only good thing is that these funds will be in the hands of regional folks rather than Richmond folks… and politics will be more local.

    But yes.. if you want to worry about mega road projects or wantonly wasteful transit schemes – both can and will happen if a pile of money is collected from congestion pricing.

    Even though the transportation authorities will not be direct-elected – there will be no doubt who votes for or against certain projects.. for the most part – which I claim is a big improvement over trying to understand why VDOT/Richmond picked a road in Lynchburg over a road in Tidewater or whatever…

  11. Charles Avatar
    Charles

    The attitude of at least SOME of the unelected members of the NVTA is evidenced in the referenced article.

    ““If you eliminate a source of revenue, it means we will have knock projects off of our list,” said Falls Church City Councilman David Snyder, also an authority member. “I don’t think that is the way to go.””

    It’s all about the money for the projects, not about whether the taxes are fair, or helpful, or desired. “Cut our Budget? No Way” — and why not, they are UNELECTED and yet their power is based on how much money they have to spend.

    The only thing that keeps a politician from raising taxes is the fear of being voted out of office. We can’t vote the NVTA out of office. And if you look at where the projects are located, I bet most of them are in the districts and precincts and places where the NVTA members ARE elected.

    For example, the $14.9 million PWC is getting is for a road in the Coles District, which is Marty Nohe’s district, and coincidentally he is the county’s representative to the NVTA.

    BTW, Prince William County is also worried about the bond rating issue, and has instructed Marty to ensure that PWC is not on the hook to pay back the bonds. So who WILL be on the hook, if not any of the counties or cities?

    Will bond holders be able to sue me directly as a person living in the region? If not, who will they be able to go to? Certainly not the NVTA, which is unelected and has no actual tax base.

  12. Larry Gross Avatar
    Larry Gross

    re: bond ratings

    aren’t there at least 2 aspects?

    Certainly how much debt is one but the other is the revenues – i.e. the new taxes and fees which bond rating companies treat as “income”.

  13. Ray Hyde Avatar
    Ray Hyde

    “My problem with the gas tax, as I’ve explained elsewhere in the blog, is that the gas tax is living on borrowed time. As people shift to hybrids, electrics and other non-gasoline powered vehicles, the tax will cease to become viable.”

    So, make it a fuels tax, then it will apply to the energy used to heat and cool McMansions. Kill two policy birds with one stone instead of having five policies just for roads.

    Even if you had a broad based fuels tax, it would still be a maintenance fee if you don’t adjust it for inflation for 30 years, or if it isn’t set high enough to begin with.

    “Privately financed construction of major new roads, payable with congestion tolls (when economically justified)”

    You mean, like the Greenway, which has yet to make a profit? How are we going to economically justify them? Is that going to include the value associated with the development they cause, as we do with Metro justification?

  14. Ray Hyde Avatar
    Ray Hyde

    “..many of the 2-person carpools are Moms with kids, and others who have essentially “recruited” an extra passenger – who would not have taken the trip to start with if they had to make it in their own car.”

    Huh? Howzat?

    OK, so there might be mom’s that moved daycare from home to in-town so they can use the car pool. Maybe the day care is funded by corporations as an incentive to keep workers coming to town. Wh is really to balme here.

    Who else has “recruited” a passnger that didn’t want or need to go into town? You think if a slug rider doesn’t get picked up that he goes home fo rthe day? No. All this says is that the car pools are working.

    What else it says is that when car pools and Metro are maxed out, we are going to go someplace else.

    Now, about those pesky zoning laws.

  15. Larry Gross Avatar
    Larry Gross

    perhaps an “energy” tax? Not sure how you get all the pieces and parts together…

    so you’d makes folks who use gasoline powered vehicles pay an electricity tax also?

    How would you know?

  16. Larry Gross Avatar
    Larry Gross

    the point made was that only those who are licensed drivers who choose to park and carpool are valid HOVers.

    Others.. who “use” HOV who never would have driven a separate car to begin with are not “true” HOVers.

    HOV was/is intended for those who willingly park a car that they would have driven and who get a benefit for doing so.

    Congestion pricing will give an opportunity to ferret out the true blue HOVers from the wannabies.

    but the energy tax you support affect everyone no matter when or where they drove… so it would have virtually no effect on congestion on major rush hour roads since it would apply to matter when/where you drove.

    The guy in Farmville who had no opportunity to carpool on a raod that was not crowded nor even had a rush hour would be penalized no differently than someone who had dozens of opportunities on a major commuter road.

    So .. you’d be taking taxes from the guy in Farmville to pay for roads for folks who wanted to drive solo at rush hour.

    Wouldn’t you, in effect, be subsidizing and incentivizing solo driving at rush hour….

  17. Ray Hyde Avatar
    Ray Hyde

    “but the energy tax you support affect everyone no matter when or where they drove… so it would have virtually no effect on congestion on major rush hour roads since it would apply to matter when/where you drove.”

    How many times do I need to say this? We need both an energy tax and congestion fees, or something that produces the same result.

    We have insufficient funds for road construction and maintenance of all types, even for the guy in Farmville. An energy tax achieves Bacon’s goal of charging by the mile and by weight. It encourages conservation, and the creation of less pollution. It discourages waste of all kinds, including home waste which is as big a source as auto waste.

    But it won’t fix congestion, and neither will congestion charging. Except for a few.

    Congestion is caused by having too much busininess in too small a space, period. That is something we can fix without resorting to taxes.

    As for the guy in Farmville, he is not being penalized. He has the luxury of driving without congestion on roads that are too sparsely used to justify their existence.

    He can do that because we have been taking taxes from people who drive solo at rush hour in order that he can drive solo at rush hour. The fact that there is no congestion for him doesn’t change the facts as to what is happening -he is driving alone at rush hour, even though there is no rush.

    I’m not asking that he not drive alone, only that he pays more for what he gets, at least enough so that we can afford to maintain it. If it turns out that the maintenance budget is spread around, so be it. Surely the roads that are heavily used need maintenance as much as the ones we allow him the luxury of keeping to himself.

    In exchange for that luxury, he may have to accept a lower wage. So the people in NOVA have the “opportunity” to carpool, but they also have better job opportunities. I think the best way to reduce congestion in NOVA is to export job opportunities to Farmville. Then we’ll have a balance between job opportunities and congestion. No reason why the guy in Farmville shouldn’t have some of both.

    I don’t see any difference between someone who uses an HOV lot and someone who arranges his HOV at home. A motorcycle is an HOV. The purpose of HOV is NOT to reduce congestion: it is to transport more people to the jobs in the same amount of time.

    Let’s call it what it is, and then we can see where the solution to congestion really lies.

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