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McDonnell described the state’s gas tax as “outdated” because of inflation and better fuel economy since it was last changed in 1986.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

eli hendricks January 09, 2013 at 03:29 AM
STRAIGHT FROM GOV MCDONNELL'S CAMPAIGN WEBSITE: "Rather than raising new revenue, McDonnell said, his administration would slash state government expenditures." However, today McDonnell introduced a "transportation plan" that would "raise $607 million over five years" (source: Fox 5 DC). Let's be clear: Raising revenue that comes from the pockets of Virginia's taxpayers is a tax increase. OPPOSE McDonnell's Tax Increase NOW. 'Like' the page below and contact your reps, urging a 'NO' vote. https://www.facebook.com/AgainstBobMcdonnellsTaxIncrease
kathy brown January 09, 2013 at 04:12 PM
I think the sales tax increase is a good idea but I would like to see more money going towards education, esp High Schools. Our area is growing very quickly and students are loosing more and more activities each year. With more effecient cars now, it makes sense to elimate the gas tax, which will definately help the lower income families. As for transportation, it would make sense to completely resurface a road with many repairs as by the end of a season, the roads are cracked, potholes are back, so you are repairing over and over. Do it once, do it right, and you won;t have to do so many repairs. Its fustrating to drive on Old Bridge Road, see them do patch jobs only to have the patch repair with holes and cracks a few months later. I lived in Germany for 11 yrs, and I have to tell you, you didn't see their roads in the condition ours are in. Don;t know what material they use, but it sure does outlast anything we use. Maybe you should look into it. Thank you for listening and the oportunity to voice my say.
J. Griffin Crump January 10, 2013 at 01:17 AM
McDonnell's plan makes very good sense. The tax on gasoline is a tax on what is, in today's economy, a necessity for almost everyone. Almost all of us need a car to get to work or even to the store to buy groceries. This tax, which all must pay, falls most heavily on the lowest income earners, whereas a sales tax, applied to all goods and (presumably) services, ranging from necessities to luxuries, leaves it to the discretion of the consumer to decide upon which commodities to spend one's money.
Laura January 10, 2013 at 02:38 PM
the plan to increase sales tax to make up for dropping the gas tax is regressive. People still have to buy food & clothing, and our lower-income families are going to be hit harder. Let the people who use the roads pay for the roads - that is what the gas tax does.


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