Sales Tax Wars

One of the coming battles in Richmond is the future of the Commonwealth’s sales tax.

Nearly fifty years ago, the Virginia retail sales tax was created by Governor Mills Godwin (version 1.0) to subsidize the state’s community college system.   Later the Assembly expanded that tax by another penny dedicated to K-12 education, and allowed localities to add their own penny, for a base level of 4 cents per $1.00.

In 1986, the Assembly changed course and added a half-penny but dedicated to TRANSPORTATION.  This was the first time the Assembly had ever used a general fund source to pay for transportation.  Previously the sources of Virginia’s road funding (gas tax, vehicle titling tax, registration fees) had all come from vehicle operators.

Recently Governor McDonnell has announced a proposal to divert general fund sales tax money from education to transportation.

This is a bad idea on many levels.  First of all, Virginia’s colleges and K-12 system have seen a steady reduction in General Fund help over the past four years.  (Much of that gap was filled by Federal stimulus money, which will soon disappear).

Secondly, this idea will permit out-of-state drivers to avoid having to pay for Virginia’s highways.  Unlike Virginia’s fuels tax, of which 30% is paid by out-of-state drivers, the state retail sales tax is overwhelmingly paid by VIRGINIANS.

Therefore the Governor’s proposal will shift the burden from New Yorkers traveling to Disney World to Virginians driving to visit Grandma. 

That ain’t right.

Of course, this discussion on equity takes place amidst the growing controversy of “brick and mortar” Virginia businesses being stuck with collecting retail sales tax, while large out-of-state corporations get a price break. 

Sales taxes should fund education.  Fuel taxes should fund transportation.  And apple pie should be made from fresh apples.




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