NOTE: This column should be read with the 1965 song “Do You Believe in Magic?” playing in the background for those over 60. It was recorded by The Lovin’ Spoonful group. For younger readers, let me suggest the Dire Straits mega hit “Money for Nothing [and your chicks for free]”, the Grammy winner in 1985.
by Paul Goldman
If Governor McDonnell had his own band, it would be entitled “My Way Or No Highway.” The country group “Highway 101” had some great hits in the 1980’s, although you really can’t beat Bob Dylan’s classic “Highway 61.”
But Governor McD has these legends of country and folk music beat badly where the rubber meets the road. They struggled to get 2 and one-half minutes of lyrics. He has a seemingly endless supply of magical words on the subject, “feel good” highway traveling music. No need to switch the CD if stuck in traffic: his band has an endless sheet of the same ole song.
His latest abracadabra: A plan that defines the 2013 General Assembly Session, indeed the 2013 race for governor.
After three years of claiming he could solve the state’s transportation issues of maintenance and new construction with free magic dust: privatization of the ABC stores, royalties from off-shore drilling, discounting future revenue streams by turning them into current debt, toll booths along the North Carolina border, and using tomorrow’s bond authority today – Governor McD appears to finally have conceded the self-evident to all who aren’t blind to reality. Yet behind the great album cover, there is the same beat to the same lyrics.
As usual, the usual suspects have had their usual reaction to McD’s latest fairy dust. Speaking for Democrats in the House, Delegate Vivian Watts says we need a billion dollars more: and so we need to raise taxes by another billion bucks. Speaking for Democrats in the Senate, Richard Saslaw says what he always says: we need to do a lot more, he wants to raise the sales tax by 1%, split it between transportation and education. Plus, they want to keep the gas tax and all the other fees and whatever.
It is the battle of the bands: and by now, it is just noise. They know this can’t happen in 2013 anymore than it could have happened in 2003 when a Democrat was in the Governor’s Mansion and 2008 when a Democrat was in the Governor’s Mansion.
At some point, is it not fair – indeed obligatory – to ask: What about the art of the possible, what about figuring out what can be done, on the theory that even the longest journey begins with the first step?
In that regard: Without realizing it quite yet, Governor McDonnell has basically handed the governorship to the Democrats if they have the courage of their convictions. Let me explain.
As Professor Sabato likes to say, Governor McD has been “too clever by half.” The guts of his plan, if properly understood, is simple: he wants to turn the monies collected from any internet sales tax into basically a funding source for transportation. He also wants to turn the existing sales tax from being primarily aimed at funding education at the state and local levels to a double purpose: funding transportation and also education.
All the other stuff – registration fees, fees on alternative vehicles, keeping the gas tax on diesel fuel, etc – is part of a magician’s misdirection, keeping the audience focused in a way so they miss the basis of the “trick.”
But getting his hands on the Internet Tax Money is the real meat and potatoes of his latest plan to fund transportation with “free” – as in no tax increase – cash money.
FACT: McD realizes he is going to have to negotiate down some of the parts of his “plan” to have any chance of passage. He wrote it that way. The key is this: Over time, more and more sales are going to be made over the Internet.
Look at how McD proposes to allocate those sales tax dollars: The bulk go to transportation, a small part to education!. A further truth: If you read the studies of the Internet Sales Tax, the experts are all over the place on how much it would actually raise TODAY in one state or another, how much it will raise IN FIVE YEARS in any particular jurisdiction, you get the drift.
McD’s plan assumes a rough five-year average of $300 million. That could be high, it could be low, it all depends on your assumptions. BUT WHATEVER THE REAL NUMBER RIGHT NOW, over time, more and more sales tax dollars are going to be generated by Internet Sales, whether from virtual stores, catalogs, etc. McD KNOWS THIS: The day when you could buy stuff over the Internet, and avoid paying the sales tax legally owed right now, is coming to an end.
That’s right: You owe the tax today, you owed it yesterday, because it is a Sales and Use Tax, the operative word being USE. If a Virginian buys a computer over the internet from anywhere, and he or she intends to use it in Virginia, the tax is owed right here, right now. That the seller doesn’t have to collect it is an entirely different legal matter.
Accordingly, the Internet Sales Tax legislation being championed by Governor’s around the country – and likely to be passed by Congress – is to collect taxes already owed.
That means it is tax money that should have been going to education and mental health, etc. all along. Why is this so important to McD? Because it is therefore NOT A TAX INCREASE. This is why so many Republican governors are backing it.
It is precisely the revenue stream he and his party have been looking at: Huge potential dollars that they can add to the pot WITHOUT BEING CALLED TAX RAISERS. Plus, they have their small business base all for it as a matter of leveling the playing field with Amazon, etc., the same for WalMart and the big business players.
THUS: The true political purpose of the McD plan is get the Democrats to let him use this new, and potentially very big pot of new, non-tax increase money for transportation as opposed to education. It is that basic.
But in going after this pot of money, McD has inadvertently given education reformers an opening like they have not had since Doug Wilder did the right thing and turned the lottery – originally planned by Governor Baliles as a special stream of cash to build new buildings – into a funding stream for education (that was the idea in putting the money into the general fund).
McD has now said: Republicans in Congress have told him they understand the need to create a level playing field, that it will create real problems if federal law continues to make it impossible to enforce collection of sales tax already owed.
So, McD wants this 2013 legislative session to turn the fastest growing part of the Sales and Use Tax into primarily a funding source for transportation, when this tax was conceived as the primary source for education funding.
That’s the real deal behind his magic dust of all that “free” new money headed our way.
Democrats have to appreciate the stakes here. McD has laid down the gauntlet: he has chosen Transportation over Education.
This is why I have been saying for several years now that what Virginia needs in 2013, and what it will vote for in 2013, is a pro-education governor, the first we have had since probably Chuck Robb in 1981 in terms of basic funding commitments.
Transportation vs education. Like it or not, transportation policy has to include user fees to some considerable degree. This is the right policy, although the precise mix needs to be discussed, the old equation may not work today given new realities.
However: Just throwing more money at education without real reforms isn’t what our children, our state and our country need right now. This internet stream of funding needs to be tied to real reforms in education, not just more money for more of the same.
Dedicating Internet Sales Tax revenue, the fastest growing part of the sales tax, to transportation with only a little toward education, is not a policy debate, but rather a wholesale surrender, basically a total change in state priorities.
With all due respect to the governor, the deal you propose essentially relegates education, in the future, to back seat status to transportation.
As Robert Frost would say, that is the road not taken — and for good reason.