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Lawmakers bypass Medicaid on way to tax-laden transportation bill

By   /   February 22, 2013  /   3 Comments

SECRETIVE PLAN: The details of a transportation funding bill that could raise an estimated $6 billion in taxes on Virginians were released only minutes before the House of Delegates voted to approve it Friday.

By Kenric Ward and Kathryn Watson | Watchdog.org Virginia Bureau

ALEXANDRIA — In passing his “legacy” legislation on Saturday, Republican Gov. Bob McDonnell achieved what former Democratic Gov. Tim Kaine could not: Raise hundreds of millions of dollars in new taxes and fees for transportation.

The $3.5 billion package, purchased politically with the prospect of Medicaid expansion, outraged conservatives, who accused McDonnell of abandoning his principles.

“Gov. McDonnell is fast proving himself to be the Charlie Crist of the Mid-Atlantic,” Competitive Enterprise Institute transportation fellow Marc Scribner said in a disparaging reference to the former Florida governor who bolted the Republican Party.

A bare majority of House Republicans voted for the transportation plan (34-33). But with a tax load larger than McDonnell’s original proposal, nearly 80 percent of Democrats supported it, and the measure passed, 60-40, on Friday.

On Saturday, Democrats also provided the margin of victory in the Senate, whose 40 seats are evenly split between the parties. The vote there was 25-15.

Only three Senate Democrats — Chap Petersen, of Fairfax, Adam Ebbin, of Alexandria, and Henry Marsh, of Richmond — voted no.

Grover Norquist, head of Americans for Tax Reform, squarely blamed backsliding Republicans. Some derided them as “cave” men for giving in to minority Democrats.

“McDonnell took the lead on a $2.4 billion tax increase and oversaw its transformation into a $6 billion tax increase. When Virginians look at their thinner, lighter wallets, they have a handful of (GOP) lawmakers to blame: Speaker Bill Howell, Sen. Frank Wagner, Sen. John Watkins, Delegate Chris Jones, and now, Gov. Bob McDonnell,” Norquist said.

Though Medicaid was never mentioned in the Senate debate, the unspoken deal-maker for Democrats appeared to be Republicans’ new-found willingness to expand the indigent-care program.

Writing to lawmakers on Wednesday, McDonnell stated: “Please understand that 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.”

McDonnell’s office initially discounted reports that the Obama administration was ready to provide such assurances. But amid backroom wheeling and dealing over transportation funding, the way appeared to open for consideration of a larger Medicaid system in Virginia.

Senate Democrats — who earlier this month rejected every transportation plan proposed, and subsequently ramped up lobbying efforts for Medicaid expansion — carried the day Saturday.

A forthcoming publication from the conservative Heritage Foundation warned that Medicaid spending will increase dramatically as the federal match rate for the expansion population phases out and some 400,000 more Virginians enroll in the program.

Attempting a last-minute roadblock, Attorney General Ken Cuccinelli, the GOP’s presumptive gubernatorial candidate this year, issued an opinion Friday challenging the constitutionality of a proposed select commission to study Medicaid expansion.

“It is my opinion that the General Assembly may not delegate legislative authority regarding budget or other matters to a committee composed of a subset of members of the General Assembly,” Cuccinelli wrote.

Tucker Martin, McDonnell’s communications director, told Watchdog on Saturday: “Legislators and staff made changes they believe properly responded to the attorney general’s concerns.”

Previously, Martin said, “Medicaid and transportation are not connected, and are two completely different policy issues.”

In a statement, Speaker Howell said Saturday’s final budget amendment “guarantees that Medicaid reforms will be fully implemented in Virginia.” He did not elaborate.

While it was not immediately clear how, or if, Cuccinelli’s objections were addressed, lawmakers pressed ahead with a tax-and-spend agenda that was less than transparent.

The House of Delegates gave the public little time to review the 128-page conference report on a bill that will raise taxes by an estimated $6 billion over five years.

The bill, made available online to the public minutes before the House approved it Friday afternoon, eliminates the 17.5 cents-per-gallon gas tax and increases a long list of other taxes to yield $3.5 billion over the next five years for road maintenance, highway construction, light rail and trains.

Here’s the gist of the bill’s tax changes:

  • Nixes the 17.5-cents-per-gallon gas tax, replacing it with a 3.5 percent wholesale sales tax on regular gas and 6 percent wholesale sales tax on diesel.
  • Increases the state sales tax from 5 to 5.3 percent, diverting the difference to transportation.
  • Increases the personal property tax from 3.5 to 4.3 percent.
  • Increases the vending machine sales tax from 4.5 to 6 percent in Northern Virginia and Hampton Roads, 5.3 percent in other parts of the state.
  • Adds a 3-percent hotel tax in Northern Virginia.
  • Increases the heavy equipment tax from 3.5 to 4.3 percent.
  • Increases sales tax on purchasing vehicles like trucks and cars from the current 3 percent to 4.3 percent by 2016.
  • Charges a $100 annual fee on all alternative-fuel vehicles, hybrids included.
The gas-tax proceeds depend largely on Internet sales tax revenue that Virginia would receive if Congress passes the Marketplace Fairness Act. Under the deal, 57 percent of Internet sales tax revenue, or nearly $200 million a year, would be diverted to transportation in Virginia. But if Congress fails to pass the Internet tax bill, the wholesale gasoline tax will jump to 5.1 percent, instead of 3.5 percent. And if Congress does pass an Internet sales tax law after 2015, the transportation bill does not promise to revert back to 3.5 percent.

“It’s really unfortunate that all of us, all of us Virginia taxpayers, are going to be left holding this bill, this revenue increase I think of $6.1 billion, and we weren’t able to read it before it was passed,” said Audrey Jackson, Virginia director for the right-leaning Americans for Prosperity. “The Richmond legislators really took a lesson from the legislators in Washington, and starting to behave like they are. And that’s unfortunate.”

That’s exactly the message Republican Delegate Bob Marshall, one of two delegates to speak against the bill in Friday’s debate, shared as he disparaged his colleagues for ramming through a bill seen ahead of time only by a select few.

“All the citizens are flying blind, but if you’re a lobbyist, you’re fine,” the Prince William lawmaker said, calling the bill a bunch of “legal-eze.”

Republican and Democratic delegates alike justified the tax increases and imperfections in the bill by dubbing the state’s road maintenance and congestion-relief needs desperate and urgent.

“I do think this is our last shot for a long time,” said Delegate David Toscano of Charlottesville, the House Democratic leader.

All 100 delegates are up for re-election in November, and McDonnell has just months left in office.

Delegate Tag Greason, R-Landsdowne, who voted in favor of the bill, said that when he first came to Richmond in 2010, he planned to never raise taxes.

He changed his mind.

“But as I think about where we are today … I think to myself I was also sent here to solve problems,” said Greason, adding that the bill isn’t really about the “details.”

Delegate Onzlee Ware, a Roanoke Democrat who was one of the 10 members of the House and Senate transportation conference group that came up with the latest version of the bill, said compromise is painful for everyone involved.

“There are times in life that you have to look beyond yourself and look at the whole,” Ware told his colleagues before voting in favor of the bill. “And that’s what governing is.”

Jackson said taxpayers lost the battle, but the fight isn’t over yet.

“We’re going to do our best to put some pressure on Governor McDonnell to ask him to amend and see if we can get some additional reform added to the legislation, because this is a major tax increase,” Jackson said.

Even environmentalists were upset.

Beth Kemler, state director at the Chesapeake Climate Action Network, said, “It’s absurd that Virginia will now single out people trying to do their part to cut pollution with an extra $100 tax. The commonwealth should be rewarding climate solutions, not punishing them.”

If there was one silver lining for tax-and-fee foes, it was the inclusion of language requiring full legislative approval of any highway tolls on Interstate 95 south of Fredericksburg — an idea floated by McDonnell’s Department of Transportation.

“Tolling I-95 would have been devastating to businesses across Virginia,” said Rex Davis, owner of Davis Travel Centers. “It is nice to know that the General Assembly heard our concerns.”

Contact Kenric Ward at kenric@watchdogvirginia.org or at (571) 319-9824. @Kenricward

Email Kathryn Watson at katie@watchdogvirginia.org

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Kathryn Watson is an investigative reporter for Watchdog.org's Virginia Bureau. Her work has appeared in places like Drudge Report, Washington Examiner, Reason and Human Events, and she has made appearances on Fox News and NBC4. An alumna of the National Journalism Center, Katie is a member of Investigative Reporters Editors. She graduated with a journalism degree and highest honors from Biola University in L.A., where she ran the student newspaper. Her work has earned her "Best in Show" and two first-place awards from the Virginia Press Association.

  • Larsele

    I can’t wait to see Cuccinelli as Governor!

  • http://www.facebook.com/tfoutz Tim Foutz

    SO they are taxing Hybrids and EVs ha ha ha ha ha hahahaha fuck you commie tree huggers.

  • heidihoneighbor

    Bob isnt much of a republican.
    Hilarious that evo cars are being called out but bob hasnt done anything but raise taxes, hide debt, and go after womens rights.
    Bobs a boob.

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