Politics

Va. governor considers doing away with state gas tax

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Michael Bastasch Energy Editor

Virginia could become the first state to eliminate its gasoline tax if the state legislature votes to adopt Gov. Bob McDonnell’s alternative plan, which calls for raising the state sales tax and imposing additional vehicle registration fees in order to pay for roads throughout the state.

“We simply cannot continue to do what we have always done and expect this problem to go away,” McDonnell told the press. “The gas tax is a stagnant revenue source, and no changes to it will provide a reliable growth mechanism for transportation in the state.”

Under the plan, Virginia’s 17.5 cents-per-gallon gas tax — one of the lowest in the United States — would be eliminated, and the sales tax would be raised by 0.8 percent, with more sales tax revenue going towards transportation.

Additionally, drivers would pay an additional $15 annually in vehicle registration fees, while alternative fuel vehicle drivers would pay additional $100 fee that would go to transit system improvements.

McDonnell’s proposal is estimated to generate $884 million annually — $3.1 billion in funding for transportation over five years. The governor also estimates that $1.8 billion would go to highway construction over five years.

As cars become more fuel efficient and more drivers switch to electric or plug-in hybrid vehicles, revenues from gasoline purchases have fallen, and it has become harder for some states to pay for roads and highways.

Other states have also been debating new policies to replace lost gas-tax revenues. For example, Oregon is considering imposing a charge on high-mileage vehicles that get 55 miles per gallon or more, as a way to recover gas-tax revenue. (RELATED: Read more about the Oregon proposal)

And Washington state will begin charging electric cars owners an $100 annual fee to recover gas-tax revenues.

However, taxpayer advocates worry that the plan could become hijacked in the legislative process and turned against the interests of taxpayers.

“The plan as it stands now fails in its goal to prioritize transportation spending while avoiding tax increases,” said a statement from the conservative group Americans for Tax Reform. “At the same time, there is the danger that this plan could become an even worse deal for Virginia taxpayers as it moves through the legislative process.”

The groups worries that some Republicans within the Virginia legislature could side with Democrats to turn these tax reforms into tax hikes to fund “pet projects.”

“In the past, particularly in the Senate, anti-taxpayer Republicans like Senate Majority Leader Tommy Norment, Sen. Frank Wagner, and Sen. John Watkins have worked with Democrats to hijack sound, tax-neutral, pro-growth transportation funding proposals to turn them into tax hikes to fund their pet projects,” reads the statement.

“By funding everything else the government does first, leaving no room left for basic transportation needs, these members’ actions reveal what their rhetoric obscures,” ATR adds. “They will only meet this core function of government after every spending interest in Richmond is served.”

The News Leader reports that in the past Democrats have been opposed to proposals that dedicate more sales tax revenue for transportation, arguing that it’s a “raid on public education and other priorities that are financed by the state’s general fund.”

McDonnell’s plan is also largely contingent on congressional actions, as Congress is expected to pass legislation that gives states the authority to collect out-of-state sales taxes. The governor wants to earmark some of this potential revenue for transportation, which could raise $1.1 million over five years.

“The fact is Virginia does not have a revenue problem; it has a problem prioritizing spending,” concludes the ATR statement.

NBC 12 reports that $364 million must be moved from Virginia’s construction account to pay for road maintenance this year, because of funding shortfalls.

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