Americans for Tax Reform applauds the Thomas Jefferson Institute for Public Policy’s friendly amendment to the Governor’s transportation plan, which addresses maintenance funding for Virginia’s transportation system. Although the plan has yet to be put into legislative form, as it has been outlined to Americans for Tax Reform, the plan appears revenue neutral and makes changes to the Virginia tax code that are pro-growth and pro-taxpayer. In short, the Thomas Jefferson Institute’s proposal is what a plan for serious tax reform in Virginia should look like.
The Thomas Jefferson Institute developed their plan by taking into consideration the economic consequences of tax policy in the areas of job creation, investment in the economy, and changes in disposable income and projected those consequences over a 5 year period.
The plan would raise the gas tax at the rate of inflation (using an inflation rate of 2.5-percent per year) after an initial increase from 17.5 cents to 20 whole cents. The Thomas Jefferson Institute notes that in five years, the Virginia state gas tax will only have risen to 23.19 cents per gallon.
In exchange for indexing the gas tax to inflation, the plan provides an offset by indexing the current state income tax brackets to inflation as well. The income ceiling or the tax brackets would increase by the same inflation factor as the gas tax (2.5-perent per year). The brackets would be adjusted so as to keep the balance between the income tax and gas tax “revenue neutral:
Current Bracket Inflation Adjusted Bracket
$ 0- $3,000 $0 - $ 6,056
$ 3,001 - $5,000 $ 6,056 - $10,093
$ 5,001 - $17,000 $ 10,094 - $34,315
$ 17,001 and up $ 34,316 and up
They note: “Under the Jefferson Institute’s transportation funding plan, in year five there would be $284.5 million dollars more generated by the gas tax and $284.5 million less paid by income taxes. This clearly is a revenue neutral plan.”
This plan appears to be revenue neutral and a step in the right direction for real tax reform in Virginia. The plan, as described, raises money for roads without raising taxes.