RICHMOND--
With the governor preparing to unveil his transportation proposal next week, a group yesterday warned that the two types of tax increases being debated by Democrats would both disproportionately hurt the poor.The Commonwealth Institute for Fiscal Analysis, an arm of the Virginia Interfaith Center for Public Policy, says that raising the gas tax or the sales tax would have a greater impact on low- and middle-income Virginians than on those with higher incomes.
Virginia's gas tax rate is 17.5 cents a gallon, one of the nation's lowest, and it has not been raised since 1986.
Democrats are discussing raising either the gas or sales tax to generate new money for statewide road maintenance. Most Republicans oppose raising either tax.
In a press conference yesterday, Michael Cassidy, the institute's director, said both of those taxes are "regressive." He demonstrated that with a chart showing that lower-income households pay a higher share of sales and property taxes--meaning it takes a bigger percentage of their income--while higher-income households pay a higher share of their taxes on income.
Cassidy's numbers showed that for people making less than $17,900 a year, a 10-cent increase in the gas tax would cost them $32 more a year.
A 1-cent increase in the sales tax would cost that group $67 more a year.
Both taxes would cost higher-income people more in dollars, but less, Cassidy said, in terms of percentages.
Cassidy said that works out to nine times more than the cost to upper-income people.
"As a share of their income, these numbers are quite significant," Cassidy said.
The institute is calling on lawmakers to provide a tax credit for lower-income Virginians to offset the costs if either tax is increased.
The group proposes making Virginia's Earned Income Tax Credit a rebate, instead of just a credit. Alternatively they propose creating a new refundable sales-tax credit, which could be set at a value depending on how much the gas or sales tax is increased, and given to families making under $40,000 a year or single people making under $20,000.
Either credit, Cassidy said, would take about $85 million a year out of the revenues created for transportation by a tax increase.
"We should not be funding a transportation fix on the backs of poor, working Virginians," he said.
Chelyen Davis: 804/782-9362
Email: cdavis@freelancestar.com