Virginia governor proposes eliminating state’s gas tax, hiking sales tax
(CNN) — Virginia Gov. Bob McDonnell said Wednesday during an annual address that his proposal to eliminate the commonwealth’s gas tax, increase its sales tax and enact a new fee on alternative fuel vehicles was an “innovative” plan that could shore up long-standing shortfalls in Virginia’s transportation budget.
Speaking to Virginia’s General Assembly during his State of the Commonwealth speech, McDonnell said that the plan wouldn’t suit all legislators, but it was a necessary compromise for new infrastructure to be developed.
“I know there are parts of this plan you will like and parts you won’t,” McDonnell said. “That’s true of any innovative and comprehensive transportation plan. But we cannot let another session be lost as each member holds out for their perfect plan. The more we sit and debate, the longer Virginians sit and wait.”
Some of the nation’s most congested roadways are found in the northern Virginia suburbs of Washington, according to the Texas A&M Transportation Institute. Arteries in the Hampton Roads region of southeastern Virginia also rank as some of the nation’s most clogged.
States have long relied on the gas tax to pay for transportation infrastructure projects, of which Virginia has several. An extension of Washington’s metro rail system to Dulles Airport in Virginia has been going on for several years, with the cost reaching into the billions.
However, as vehicles become more fuel-efficient and drivers rely on alternative fuels, revenues from the gas tax have decreased. McDonnell noted in his speech Wednesday that “the gas tax is worth 45% of its purchasing power from 1986” and has never been increased.
Climate change activists and some economists have suggested increasing the gas tax as a way to increase revenue for transportation. McDonnell, considered a potential candidate for the 2016 GOP presidential nomination, has gone in the opposite direction. If his measure to eliminate the gas tax succeeds, Virginia would be the first state to get rid of the tariff. A tax on diesel gas would remain in effect.
To fill the gap, McDonnell has proposed increasing the state sales tax by 0.8%, a move he said on Wednesday “will provide over $600 million more than our current gas tax revenues from organic economic growth, not tax increases.”
McDonnell’s plan also calls for a new annual $100 fee on alternative fuel vehicles. The governor;s office said that would provide $66 million over five years in additional revenue for transportation projects. On Wednesday, he also cast the new fee as a measure to inject fairness into how transportation funds are raised.
“I’m a strong supporter of alternative fuel vehicles, and I’ve directed that we convert the state vehicle fleet to natural gas, but these vehicles generate little federal gas tax revenue and therefore need to contribute their share to fund the roads they use,” McDonnell said.
Alternative vehicle drivers surveyed by CNN’s Richmond-area affiliate WTVR weren’t pleased with the plan, which they worried would discourage Virginians from purchasing the environmentally friendly cars.
“I’m hoping it remains a proposal, as opposed to a law,” Toyota Prius owner Aubrey Pettaway said.
And University of Richmond Transportation economist George Hoffer said the plan was penalizing drivers of alternative fuel vehicles “in a very funny way.”
“We’re penalizing them with a $100 per year fixed fee,” he told WTVR. “Now that would make sense if we were getting most of our revenues from the gas tax, but it’s now being switched to the sales tax.”