McDonnell Plan Cuts Gas Tax, Raises Sales Tax

Virginia governor's proposed $3.1 billion transportation overhaul gives higher percentage of sales tax to projects, leaves tax on diesel in tact.

By Mark Robinson, Capital News Service 

RICHMOND – With the General Assembly set to convene, Gov. Bob McDonnell proposed Tuesday increasing Virginia’s sales tax and abolishing its nearly 27-year-old gas tax, making Virginia the first state in the country to do so.

The measures are a part of the governor’s proposed $3.1 billion plan to fund improvements to Virginia’s transportation system over the next five years. The funds would supplement $14 billion in transportation projects already under way in the commonwealth, the most in Virginia’s history.

“Declining funds for infrastructure maintenance, stagnant motor fuels tax revenues, increased demand for transit and passenger rail and the growing cost of major infrastructure projects necessitate enhancing and restructuring the commonwealth’s transportation program and the way it’s funded,” McDonnell said at a press conference.

McDonnell described the state’s gas tax as “outdated” because of inflation and better fuel economy since it was last changed in 1986. He said boosting funding for transportation was the only way to ensure Virginia could continue its economic growth.

Among his proposed changes:

  • The current 17.5 cents per gallon gas tax, which accounts for more than 30 percent of the state’s transportation revenues, would be eliminated; instead, the sales tax would increase from 5 percent to 5.8 percent. McDonnell predicted this would generate more than $600 million in additional transportation funds. The 17.5 cent tax on diesel would remain intact.
  • To supplement the increase in sales tax, a higher percent of the state’s sales tax would go directly to transportation funds – from .5 cents to .75 cents over the five years.
  • The plan would impose an increase of $15 for each vehicle registration, resulting in an average vehicle registration cost of $56 per vehicle, McDonnell said. 
  • The state would impose an annual $100 alternative fuel vehicle fee. The governor dismissed the idea that the fee would deter people from buying alternative fuel vehicles. More than 91,000 are currently registered in Virginia.

McDonnell’s plan would use new revenues and more money from the general fund – an approach he said would appease lawmakers on both sides of the aisle. In the past, Republicans have supported using money from the general fund for roads as a core function of government. Democrats, on the other hand, have rejected previous attempts to use general fund dollars for transportation.
The General Assembly will consider the governor’s proposals during the 45-day legislative session that begins Wednesday.

If passed, the measures would take effect July 1. The Republicans hold a majority in the House of Delegates and a tie-breaking vote in the Senate. Lt. Gov. Bill Bolling, who presides over the Senate, expressed support for McDonnell’s plan.

Additional details on Gov. Bob McDonnell’s transportation plan are available at http://tinyurl.com/va-gov-roads

The Convict January 10, 2013 at 03:24 PM
True electrics recharge their batteries from the grid. Hybrids use different technologies for recharging their batteries, including excess electricity generated by the gas motor and by capturing energy during the braking process. Plug-in hybrids also can get their batteries recharged from the grid as well.
Alan Stevens January 10, 2013 at 04:49 PM
Why not leave the gas tax where it is and go after a tax increase in taxes on tobacco. We have not touched that tax for years and years. I am certain that the reason we do not go after tobacco is that they are a strong lobby group. But we need to stand up to them. Nala
Tammi Petrine January 10, 2013 at 06:01 PM
Wow! What a bizarre plan! We’re trying to fund massive transportation projects yet we’re going to ELIMINATE gas taxes??? This is beyond comprehension: • Every other state taxes gas. Why would VA give up any conventional funding source??? • Most vehicles use gas products. Therefore, shouldn’t the users of the roads pay for their upkeep/improvement? • VA gas tax has not been increased in years so an increase is LONG overdue. • Congrats to folks wise and responsible enough to own hybrid / efficient vehicles! The last thing we should consider is punishing them by taxing them with a special tax. • Owning a vehicle is a luxury that poor people can not afford. Increasing the sales tax for transportation projects is regressive. IF the sales tax is increased it should be for human services and education, services which do benefit the poor. Sales tax increases should consider the sales taxes imposed by DC and MD and be less or equal to them. • To curtail massive cigarette smuggling, tobacco taxes in VA should equal NYC’s taxes. Smoking is harmful, causes disease/death and should be discouraged. In addition, a high tax on tobacco would save funding of law enforcement and court services made necessary by illegal activities by organized crime. These taxes could go to transportation where it is desperately needed.
Tammi Petrine January 10, 2013 at 06:02 PM
Governor McDonnell needs to reexamine his rationale for his latest transportation funding plan. the good news is that it is now on his agenda! Better late that never? Maybe...
The Analyst January 10, 2013 at 07:16 PM
It's all about special interest politics victimizing everyone else. The massive need for a fair number of infrastructure improvements (improvements, not maintenance) stems from over development. Yet another one of those little things that developers fail to tell anyone about when they're pitching their "money will start falling from the skies if you let us put up a 19 story building in Reston" schemes. More schools, more roads, more police, more everything. It all costs money. This is simply the masses indirectly lining the coffers of billionaire developers, and you can thank Hudgins for it. Ah, but the Republicans can't let the Democrats be the only special interest driven party. The writing on the wall for oil, gas, and coal is simple: THEY'RE DEAD. Germany and several other European nations may very well be running with over 70% energy from renewables in the future, and the Koch brothers and big oil see the threat. That's a 70% loss in sales to oil, gas, and coal, people. Bob McDonnell to the rescue!! Penalize people for using energy efficient vehicles. Cut taxes on gas to make it easier to buy gas and re-distribute the taxes for gas even to those that don't drive (SOCIALISM FOR BIG OIL!). Encourage off shore drilling. None of this has anything to do with "by the people and for the people." It has to do with politicians catering to their special interests and the costs being "redistributed" to the rest of us.


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