Virginia Governor Proposes Eliminating State Gasoline Tax
Wednesday, January 09, 2013 - 11:13 AM
Virginia would become the first state in the country to eliminate its gasoline tax if a major transportation funding plan proposed by Governor Bob McDonnell (R) is approved by the General Assembly.
Revenue from the state gas tax of 17.5 cents per gallon, last raised by lawmakers in 1986, would be replaced by an increase in the state sales tax. That rate is currently 5 percent; the governor wants to raise it to 5.8 percent.
McDonnell’s proposal would also increase by half the portion of the sales tax already dedicated to road maintenance and operations. However, during the first three years, that tax would provide $300 million for the Silver Line rail project to Dulles International Airport -- a $5.5 billion project that Virginia has funded only $150 million to date.
“Transportation is a core function of government. Children can’t get to school; parents waste too much time in traffic; and businesses can’t move their goods without an adequate and efficient transportation system,” said McDonnell at an afternoon news conference, flanked by members of the General Assembly who will dissect his sweeping proposals during the 45-day legislative session.
If lawmakers pass the governor’s entire plan, which also includes higher vehicles registration fees and a $100 charge on electric and natural gas vehicles, Virginia would receive more than $3 billion over five years to fund road construction and transit development, including intercity passenger rail.
A primary aim of the funding package is to stop the yearly transfer of construction dollars from the Commonwealth Transportation Fund to required maintenance projects, a process that will leave the fund empty by the end of the decade.
“My transportation funding and reform package is intended to address the short and long-term transportation funding needs of the Commonwealth. 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,” McDonnell said.
The governor has indicated in recent weeks that the state gasoline tax’s diminishing returns minimizes its effectiveness in raising new revenues. Higher vehicle fuel efficiency standards, among other factors, have eaten into the tax’s buying power. The 17.5 cents per gallon tax currently accounts for about one-third of the state’s transportation funding, although the tax has lost 55 percent of its purchasing power when adjusted for inflation since 1986, the last time it was raised.
Instead of raising the tax or pegging it to annual inflation adjustments, the governor wants to eliminate it, although the state diesel tax would remain in place. Virginia would then abandon a fundamental premise of transportation funding: motorists who use the roads pay for the roads in the form of taxes.
“If this were adopted it would mean there would be no relationship to the extent to which people use the transportation network and what they actually pay for it," said Bob Chase, the president of the Northern Virginia Transportation Alliance, which favors road construction as a solution to traffic congestion.
"It's a dramatic proposal to shift funding from the gas tax to the sales tax, and we're going to have to look at what it means when you disconnect the tax from the actual use of the roadways,” said Stewart Schwartz, the executive director of the Coalition for Smarter Growth and frequent critic of the McDonnell administration’s funding priorities.
The General Assembly has for years evaded the responsiblity of injecting significant new tax revenue into transportation. While all observers agree the state’s needs total in the billions, there is no consensus on the best way forward. To Schwartz, prioritizing road construction amounts to squandering precious funds that could be used to develop public transit systems.
"Instead of addressing metropolitan area needs, the administration is spending $1.2 billion on Rt. 460, $200 to $400 million on the Charlottesville Bypass, and proposing to spend billions on the Coalfields Expressway and an estimated $2 billion on a Northern Virginia outer beltway,” he said.