Gov. McDonnell's 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 of 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McDonnell described the state’s gas tax as “outdated” because of inflation and better fuel economy since it was last changed in 1986.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

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No Toll Increase January 10, 2013 at 05:32 PM
Forcing vehicle owners to pay an extra $15/vehicle/year and sending all that revenue to transit instead of road improvements is totally unfair. It's like forcing Dulles Toll Road users instead of Silver Line riders to pay for Dulles Rail.
Ana Ham January 10, 2013 at 11:46 PM
They are all the same. They all want to raise taxes.
Ann H Csonka January 17, 2013 at 10:13 AM
Typical nonsense. Gas tax is paid by users of highways. Sales taxes are paid by everyone, including those who can least afford higher taxes. Dear GUV: How about dropping your pet project of an UNNEEDED Rt. 460 that messes up wetlands and that Southside folks think is stupid? THAT would save money that could go to a highway in NoVa where it is NEEDED.
Bob Bruhns January 17, 2013 at 02:41 PM
Will people question the price estimates of the transportation projects, or will they once again be tricked into mindlessly accepting them, and fighting over who GETS what overpriced work, and who PAYS for what overpriced work? Interestingly, the estimates always start out low, and then skyrocket later, once the project is 'moving forward'. People go so far as to claim that this is normal and natural, it's just inflation, etc, and we better hurry or the price will REALLY go up. The prices then jump upwards, and jump upwards, like an auction (MUCH faster than inflation, by the way), until the price is about two times what such work should cost. Oddly, all of our so-called 'leaders', and all project oversight groups, and even the news media, somehow fail to notice or do anything about the double price, even if it is repeatedly brought to their attention. Lately, this game also includes ridiculously bad financing plans - which is not really surprising, because the bloated costs are unaffordable. And then, when the work is complete, we find out that the final number we were given didn't include financing costs or associated work that of course are also necessary. So, we pay even more! Ever notice that? I sure have. We can't afford this, but our credit hasn't been cut off yet - so get ready, here comes deja-vu all over again! Maybe our grandchildren will pay it off. If not, THEIR children can pay it down. Clearly, WE don't care. That's how it's done these days.


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