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Tax Law

State Net Capitol Journal – January 21, 2012

Budget & Taxes

VA GOV PITCHES RADICAL TRANSPORTATION FUNDING PLAN: Virginia Gov. Bob McDonnell (R) proposed a radical plan this month to address his state's transportation funding shortage: replacing the state's gas tax, a shrinking revenue stream, with an increase in the sales tax, a revenue stream that is immune to improving fuel economies, alternative energy vehicles and inflation. 

The proposal, which would raise Virginia's sales tax from 5 percent to 5.8 percent and make it the only state in the Union without its own gas tax, wasn't particularly well received by the transportation world. 

"It's a little bit off-the-wall," said Greg Cohen, president of the American Highway Users Alliance. "The best thing about it is, it does raise money." 

According to projections, the plan would raise $3.1 billion over five years. 

Ron Utt, a transportation writer formerly with the conservative Heritage Foundation, pointed out that under the plan, out-of-state drivers passing through Virginia wouldn't have to pay the state to use its roads, while elderly residents who don't drive would. 

"Unless they stop and buy a new suit or some lawn furniture or something like that, they will henceforth escape the responsibility of paying for the roads that they use," he said.

Environmentalists, meanwhile, said the plan would remove an important incentive for people to drive less and purchase fuel-efficient vehicles. 

"When you go to a sales tax, you completely ignore the impact that consumers of gasoline have on the environment and also the transportation system," said Glen Besa, director of the Virginia Chapter of the Sierra Club. (HAMPTON ROADS.COM)

CA DEFICIT-FREE BUT NOT DEBT-FREE: California Gov. Jerry Brown (D) declared this month that for the first time since the start of the recession, the Golden State doesn't face a budget deficit. But the state's fiscal troubles are far from over. It still faces billions of dollars in debt it has racked up in recent years. 
When Brown unveiled his 2013-14 budget proposal a couple of weeks ago, he presented a timeline for knocking down that "wall of debt" and repaying the $28 billion the state owes to government programs it raided or denied funding during the recession and the bonds it sold to balance the budget. 
But some budget experts, state agencies and think tanks say the state's wall of debt is far higher than $28 billion. The governor's repayment plan, they say, fails to fully address what the state owes to Wall Street and current and future public retirees. 
"If we just ignore these longer-term pressures, we're going to be back in the soup soon," said Mike Genest, budget director for former Gov. Arnold Schwarzenegger. 
The state treasurer's office has estimated that to pay back the money the state borrowed from Wall Street each resident would have to chip in $2,559. By contrast, Texas' per-resident debt burden is just $588. 
Closing the state's unfunded pension gap would cost each Californian even more, $3,635 apiece, according to the State Budget Crisis Task Force, a New York-based bipartisan think tank. And covering the cost of retiree healthcare might add another couple of thousand dollars to that bill. 
Consequently, although Genest thinks the state's fiscal health has certainly improved from the darkest days of the recession, he said, "We can't jump for joy." (LOS ANGELES TIMES) 
BUDGETS IN BRIEF: The administration of CALIFORNIA Gov. Jerry Brown (D) lowered its estimate of how much revenue the state would receive from Facebook's IPO in the three years ending in June 2014 by nearly a third, from $1.9 billion to $1.3 billion. The company's share price has fallen 21 percent from its initial price of $38 per share (WALL STREET JOURNAL). • PENNSYLVANIA governments may have collected $303 million less in gas well impact fees in 2012 than they were entitled to because state regulators undercounted the number of wells subject to the fees by 15,000 to 25,000. The miscount was reportedly due to database errors and the failure to include unconventional wells (MCALL.COM). • In his State of the Commonwealth speech last week, MASSACHUSETTS Gov. Deval Patrick (D) proposed hiking the state income tax and slashing the sales tax to provide funding for a major expansion of the state's transportation system (BOSTON GLOBE, STATE NET). • The Miami Dolphins have drafted legislation (HB 165 and SB 306) that would give FLORIDA sports teams $3 million in state money each year to improve older stadiums, as long as the team covers at least half the cost of major renovations (MIAMI HERALD, SOUTH FLORIDA BUSINESS JOURNAL, STATE NET).

- Compiled by KOREY CLARK

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