Va. Passes Huge Highway Bill; Republican Leaders Embrace Medicaid Expansion

Published February 25, 2013

Virginia’s Republican governor and Republican-controlled House of Delegates have led lawmakers in approving a $6 billion road building program, virtually twice the size of the highway spending plan the governor had announced barely six weeks earlier.

The spending will be paid for almost entirely through tax increases including higher taxes on retail sales and cars, a new tax on home sales, a new hotel tax, and replacement of the per-gallon fuel tax with a tax on the wholesale price of gasoline and diesel fuel.

So even persons who do not own or drive a car could end up paying for the increased highway spending. Also, some of the tax increases apply only in the Northern Virginia or Hampton Roads areas or hit those areas harder than the rest of the state. When he campaigned for the governorship in 2009, McDonnell pledged to oppose higher taxes for transportation.

The deal also includes a big Medicaid expansion, something the governor had pledged to oppose just days before embracing it.

“We have worked together across party lines to find common ground and pass the first sustainable long-term transportation funding plan in 27 years. There is a ‘Virginia Way’ of cooperation and problem solving, and we saw it work again today in Richmond,” Gov. Bob McDonnell said in a statement after the bill’s passage.

‘A Compromise Bill’

“This is a compromise bill. It had to be. Neither party controls Richmond outright. The House is Republican, the Senate is split 20-20, and the Lieutenant Governor cannot vote on transportation funding. On an issue like transportation funding, regional differences and needs are just as important as partisan affiliation. If we were ever going to fix this problem, and improve our citizens’ quality of life, a compromise had to be fashioned,” McDonnell said.

The compromise included expanding Medicaid under ObamaCare. Three days before final approval of the bill, McDonnell had issued a statement declaring, “I cannot and will not support consideration of an expansion of Medicaid in Virginia until major reforms are authorized and completed, and until we receive guarantees that the federal government’s promises to the states can be kept without increasing the immoral national debt.”

None of those reforms or guarantees has been made.

‘Enemies of Sound Policy’

“Today’s passage of the transportation compromise bill highlights the lack of seriousness and general dysfunction that is now plaguing the Virginia legislature under supposedly conservative leadership,” said Marc Scribner, a fellow in Land-Use and Transportation Studies at the Competitive Enterprise Institute. “Not only does today’s vote effectively destroy Virginia’s reputation as a transportation policy innovator—something that was well deserved thanks to the thoughtful work of legislators and administrations from the mid-1990s to the early 2000s—it shows quite clearly that Gov. McDonnell and Speaker [William J.] Howell are enemies of both sound public policy and fiscally conservative principles.”

He added, “It is worth noting that a slight majority of House Republicans opposed passage, but nearly 90 percent of Democrats voted in favor. It is clear to all—perhaps excluding Gov. McDonnell and Speaker Howell—this is a painfully left-wing piece of tax-and-spend legislation.”

Desperate for Legacy’

Virginia resident Ben Domenech, research fellow in health care for The Heartland Institute, said McDonnell “was so desperate for a legislative legacy and so unwilling to cut Virginia’s budget in any way that he decided to push for a large tax increase which the legislature turned into a massive tax increase — from a little less than $2 billion to start to close to $6 billion at the end of the day.

“McDonnell even bartered on Obamacare implementation, allowing Democrats a state commission to push the Medicaid expansion forward — an expansion which McDonnell had sued to prevent — which will result in even more of a tax burden in future years.”

Domenech also pointed out Republican governors in several other states have launched serious efforts to eliminate their states’ income taxes and control spending.

“McDonnell went in the opposite direction,” Domenech said. “McDonnell claimed to be a fiscal conservative throughout his career, but he ends his tenure in the governor’s office by proving all those claims false in a billion dollar kickback to developers and his corporate backers in Northern Virginia on the backs of working Virginians who will be hit by these new ‘transportation’ taxes whether or not they even drive a car.”

Economic Adviser’s Resignation

On March 4 economist Richard W. Rahn tendered his resignation from McDonnell’s Joint Advisory Board of Economists to protest the tax increases.

“The reason for my resignation is that I strongly disagree with the new tax/transportation bill that you supported,” Rahn wrote in his letter of resignation. “Unfortunately, I was not asked for my advice (which I assume was also true of the other Joint Advisory Board members) before you and the legislature embarked on passing the largest increase in taxes in the history of Virginia. This action will do damage to the people of the Commonwealth of Virginia.
“The business climate and economy in Virginia have been at or near the best in the nation because Virginia has maintained a relatively small state government. The new taxes and spending will grow the size of the Virginia government relative to state’s GDP – a large and unnecessary step backwards.”