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Poor to pay more to fund roads, report says

RICHMOND – Virginia’s multibillion-dollar transportation funding package will put a heavier burden on lower-income households than on more affluent families, according to a Richmond-based think tank.

“The tax increases in the package would require low- and moderate-income Virginians to pay a bigger share of their earnings for transportation than wealthier households,” the Commonwealth Institute for Fiscal Analysis said in a recent analysis of House Bill 2313.

The General Assembly passed the legislation this year to create a long-term source of revenue for road construction and maintenance and mass transit.

The plan, which Gov. Bob McDonnell signed into law this month, bumps the sales tax .03 percent to 5.3 percent and implements a 0.7 percent local sales tax for the clogged regions of Northern Virginia and Hampton Roads. Two new fees will also be imposed – $64 annually for a hybrid or alternative fuel vehicle and a 4.15 percent vehicle titling tax. A new 15-cent-per-$100 value fee on real estate transactions in Northern Virginia and Hampton Roads will also be implemented, as well and hotel taxes in these two regions will increase by 2 percent.

At the same time, it eliminates Virginia’s 17.5-cents-per-gallon gasoline tax, which McDonnell notes has been producing less revenue because of more fuel-efficient cars. The plan also imposes a 3.5 percent tax on the wholesale price of fuel.

The Commonwealth Institute, which describes itself as a nonpartisan group especially concerned about low- and middle-income Virginians, said the tax overhaul will hit lower-income Virginians the hardest.

“On average, a median-income household in Virginia, earning about $51,000 annually, will pay roughly $80 more a year – around 0.2 percent of its income – in the new taxes included in the transportation package,” the report said.

“Households in the bottom 20 percent of the income distribution (earning less than $21,000) will pay between three and six times more of their income than the top one percent of households (earning at least $509,000).”

Suppose, for example, that a family scraping by on $15,000 a year pays an additional $60 in sales tax; that would represent 0.4 percent of its income. In contrast, if a household earning $500,000 a year pays an additional $500 in sales tax, that’s just 0.1 percent of its income.

The Commonwealth Institute cites another factor why Virginia’s poorer households bear a heavier burden when sales taxes rise: “Low-income families also spend most or all of their earnings on goods subject to the higher taxes.”

Besides the increase in the statewide sales tax, residents of Northern Virginia and Hampton Roads will face an additional sales tax of 0.7 percent to fund transportation and transit projects in those areas. The regional taxes will generate about $1.5 billion for the Northern Virginia Transportation Authority Fund and $1 billion for the Hampton Roads Transportation Planning Organization.

According to the Commonwealth Institute, low-income households in Northern Virginia and Hampton Roads will pay a portion of their income that is up to eight times more than the portion paid by the richest 1 percent of households.

“The legislation includes no measures to make the funding responsibility more equitable,” the report said. It suggested that Virginia use tax refunds or rebates to offset the impact of higher sales taxes on low-income families.

The institute also criticized the transportation funding plan because “it shifts the cost of paying for highway improvements and routine maintenance away from drivers, who benefit the most from better roads. Less than 10 percent of the package resources come from driving-related revenues.”

Even so, car owners will feel some impact from the transportation funding law. It raises the sales tax on motor vehicles from 3 percent to 4.3 percent over the next four years. And the annual registration fee for hybrid, electric and alternative fuel vehicles will increase from $50 to $64.

When a bipartisan majority of legislators passed the transportation bill, they acknowledged that it was a difficult compromise.

“This transportation bill isn’t perfect, but it will fund the construction and maintenance we need to reduce gridlock, grow our economy and improve Virginians’ quality of life,” Delegate Charniele Herring of Alexandria, who chairs the Democratic Party of Virginia, said in a recent press release.

A fellow Democrat, Delegate Vivian Watts of Fairfax, agreed.

“It is an important step in moving Virginia forward. Virginians have waited too long for a long-term transportation funding plan, but now we have a plan that provides much needed revenue to fix and build Virginia’s transportation infrastructure,” said Watts, a former state transportation secretary.

Besides providing money for roads, the new law also will create nearly 40,000 construction jobs, proponents say. Moreover, it will make Virginia the first state with a dedicated revenue source for intercity passenger rail.

“Without this bill, Virginia was at risk of losing nearly 60 percent of its intercity passenger rail service,” said Danny Plaugher, executive director of Virginians for High Speed Rail. “Now the commonwealth is at the forefront in advancing a true multi-modal solution to easing congestion on our roadways and runways.”

Still, the concerns raised by the Commonwealth Institute resonate with many Virginians.

Lauren Arcudi, a student at Virginia Commonwealth University from Reston, said she is relieved to see efforts to improve the transportation system especially in congested areas like Northern Virginia.

But she added, “The sales tax increase is definitely going to affect me because I am a student and I don’t make much money.”

Arcudi said the tax burden for the transportation program should be distributed more fairly. “The fact that bothers me the most is that the people with the less money have to pay more,” she said.


What’s sad is the money to fund this report probably comes from our virginia tax money. And how come the Rest of Virginia can’t pay a bigger share or go without?

The tolls will never go away, and whenever a new or improved road had a toll added, even though it’s a “temporary” thing, it turns into forever. That is the problem I have with tolls.

I understand why the NOVA folks take issue with the distribution scheme, and I believe it needs to be revised. However, the population centers of the state (NOVA specifically) subsidize the ROVA simply because if they didn’t, ROVA would not have the funds to build or maintain any roads. The folks who live in areas like SWVA barely squeak by as it is. (Not that it matters, but I do NOT live in SWVA)
I also understand that those in NOVA might be inclined to remind me that those in SWVA can always make the choice to live elsewhere, but in reality, may people do not have the means to move.
As to the subject of the article, I thought 99% of the world understood the simple fact than when ANY tax is raised or implemented, heck, all costs for that matter, hit lower income people harder BECAUSE they are lower income…I must be missing something.

@enuf, who says the tax money will even go to roads or transportation at all? We’re dealing with a govt in Richmond that takes from the north and gives very little in return. And gives DTR to MWAA which can do whatever they want since nobody overseas them.

Okay…so who is going to guarantee that we get all the extra tax money spent on our roads up here?  We all know we don’t get our fair share now…I can see our extra tax money slipping into other road projects elsewhere in the state.

Simple, people who earn more should pay the same percentage as the people who make 30 thousand dollars. Reston association is a prime example of of the lower income brackets paying more of their earning for dues then the high dollar earners. A sliding scale baseed on income, problem solved.

I am fine with slightly higher taxes as long as they are state wide. NoVA already generates most of the states tax money why should we pay for southern roads then tax this area more only to pay for northern roads.

How about the politicians keep fighting to get our fair share of the money we already send down there?  Taxing more isn’t the solution.  The problem is we get pennies on the dollar now.  If it was more equitable, or even close to what we send down there, we wouldn’t need a regional tax.

Talk about voodoo math/statistics. So does the poor and lower middle class use the roads less? I seem to pay a lot more taxes on my income where as the poor and lower middle class get credits to the point of not paying any income tax.
Percentages mean nothing except for a few to complain. How come these same people don’t complain when an across the board raise of say 4% for all teachers. A teacher making $30K, only gets a $1200 raise whether good or bad, where as the teacher making $100K is getting a $4K raise…..

The true problem with the new tab bill is in a few years, that money will towards other state needs and northern va will back without roads. Remember the toll road was suppose to go away too!

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