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Tom Miller: Freezing gas tax will yield more highway money
It won't be described as a tax increase, but rest assured the legislation enacted at this week's special session in Charleston to freeze the state gasoline tax rate at 32.2 cents per gallon means you and I will be paying higher taxes beginning Jan. 1, 2010. And it also means we won't get a planned five-cent per gallon tax cut in 2013.
West Virginia has a two-tier gasoline tax. The first component is a 20.5-cent per gallon flat rate motor fuel excise tax. The second component is a variable tax rate equal to 5 percent of the average wholesale price per gallon between July 1 and Oct. 1 of the previous year. It has been frozen at 11.7 cents for the past two years to keep the tax from automatically increasing during the period of soaring retail prices at the pump that motorists paid for each gallon of gasoline.
The governor's proposal enacted this past week guarantees that the variable component of the tax -- based on the wholesale price the past summer -- will "be no less than $2.34 per invoiced gallon." This will avoid an anticipated decline in the variable tax rate on Jan. 1, 2010, from 11.7 cents to at least 8.7 cents or perhaps even lower, which would have resulted in a savings to taxpayers of $70 million or more per year.
Manchin's proposal (House Bill 404 and Senate Bill 4004) also includes a provision to eliminate a scheduled five-cent per gallon decrease in the flat rate tax from 20.5 cents per gallon to 15.5 cents per gallon starting on Aug. 1, 2013. This would have resulted in a tax cut of perhaps $100 million or more for taxpayers.
In simple terms, this means the state's gasoline tax will continue to be 32.5 cents per gallon until the Legislature takes further action to change the rate. And it means the Division of Highways can count on $70 million more a year immediately in its budget -- money that would not have been available without the passage of this special session bill. There is even a provision in last week's bill to limit any future fluctuations in the state gasoline tax to no more than 10 percent.
The case for stabilizing gasoline tax revenues -- a major component of the state's road building and maintenance budget -- is a compelling one. Mark Muchow, the state's deputy secretary of revenue, estimates the state needs $27 billion for major highway construction and bridge replacements.
So there was only token opposition from Republican legislators to the gasoline tax legislation last week. Delegate Craig Blair, R-Berkeley, suggested the state do like families are doing in these difficult economic times and "tighten our belts." He said that instead of asking taxpayers for more money, the state road system should pay contractors less by cutting back on the prevailing wage rate.
But Delegate John Doyle, D-Jefferson, has the opposite view. He not only endorsed the legislation to keep the gasoline tax at 32.2 cents per gallon but suggested lawmakers consider an increase of 10 cents per gallon for the gasoline tax.
Neither of these two drastic approaches seems likely to get any traction at the upcoming 60-day regular 2010 legislative session that begins in January because the election for all 100 seats in the House of Delegates and 17 of the 34 seats in the state Senate will on the ballot a few months later.
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The good news in the October unemployment statistics for West Virginia is that the jobless rate dropped by three-tenths of a percent from 8.0 to 7.7 last month. The number of people out of work in this state now is 60,900, compared to nearly 75,000 jobless people when the unemployment rate peaked at 9.3 percent five months ago -- the highest rate in 15 years.
But the bad news is that 4,600 more government jobs is the reason for the decline as jobs in mining, manufacturing and leisure and hospitality dropped by 3,400. And another key factor is that the number of people in the workforce is down substantially during the past year as well.
According to the statistics maintained by Workforce West Virginia, there are 12,500 fewer people in the state's civilian labor force now than there were a year ago. So that means there are nearly 44,000 fewer people employed in West Virginia in October 2009 than were drawing a pay check in October 2008.
Even more revealing is the fact that 1,800 more people were working in this state when the unemployment rate was 9.3 percent in June of 2010 than the 728,600 working last month with an unemployment rate of 7.7 percent.
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The expected approval of a new pension plan for municipal policemen and fire departments in the state at last week's special session happened because efforts to include some of the state insurance tax money to help these city governments was removed from the bill.
With that move, former legislator Sam Love, who lobbies for the 400-plus volunteer fire departments in the state, withdrew his opposition that had been a key reason the rural legislators refused to enact the bill. And it has prompted speculation that the volunteer firefighters may get some kind of modest length-of-service pension program at the 2010 regular legislative session.
