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McDonnell proposes eliminating gas tax, increasing sale tax

Published 8:37am Wednesday, January 9, 2013



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McDonnell described the state’s gas tax as “outdated” because of inflation and better fuel economy since it was last changed in 1986.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




  • broman

    Thanks Ethan, I did the math too and stand to save even more at 2000 gallons a year. The diesel tax doesn’t make much sense because it will only drive up prices for everything delivered by truck. Mostly liberals own hybrids so ol’ Bob doesn’t care about them, and he’s going to blast the out of state traffic with a $4 toll on I-95. Our roads are deplorable so I agree with The Gov that we need the road money. I also agree with Max, we don’t have enough information to know if this is a good change or not. Sounds like we are going to find out.

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    • FromHere

      Apparently, the idea on the diesel fuel tax is to drive up the price of products so we pay more sales tax. Maybe? I don’t have enough information, but I feel certain somehow this isn’t going to work to our great advantage.

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    • Ethan

      Keep in mind that the tax on diesel is not an increase; it just remains in place. Therefore, it won’t cause any increase in shipping costs so it shouldn’t drive up prices. Sales tax is only applied at the final sale (paid by the consumer)so other than tax on office and operating supplies so the increase in sales tax would have a very minor affect on the overall costs of shipping, probably well less than 1%. My problem with keeping the tax on diesel is that it penalizes people with personal vehicles that use diesel. Yes, big trucks cause the most wear and tear on roads and new roads benefit business more than individuals so big trucks should be taxed more. But there should be a way to do this without penalizing individuals.

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  • Ethan

    Before you get too upset, maybe you should do some math. Sales tax only applies to a small portion of your expenditures. It doesn’t apply to rent, mortgage, car payments, most of your utilities, gas, services (such as medical, dental, repair services, etc), or prescriptions. Groceries (food portion) is taxed at a lower rate and is not being increased in this proposal. So the sales tax increase would only affect most items not mentioned here. How much do you spend each month on things that will be affected by a sales tax increase? Using liberal assumptions, I calculate that I spend $1500 per month on things that will see a tax increase. That means that I will pay $144 per year extra in sales tax. But between my wife and I, we burn about 1100 gallons of gas per year. Dropping the fuel tax will save me $192 per year. So I will save about $50 per year. Even if I were cut my fuel consumption in half, this proposal would cost me less than $1 per week.

    The point is, if you look at your numbers you will probably find out that this will either cost you less or only increase your cost by a very small amount. If this will raise more money for transportation, then I am all for it.

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    • Maxdoubt

      I looked at my own numbers today and you are correct Ethan. My savings would be over $400 per year. (based on my 2011 info.) I am still skeptical of this plan though. The only way it works is if we raid the general fund. Southampton has depleted it’s fund and now we see the results are expensive borrowing and increased fees. Will we find more local taxes and fees are needed to cover the loss or will we decide to let our local roads and bridges further deteriorate? This sounds an awful lot like a previous Governor’s plan to do away with our car tax. I’d like to see some predictions besides the Governor’s.

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  • Franklin Native

    Why would cars that use alternative fuels have a $100 fee? Nothing in his plan makes sense!

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  • spdrewry

    What about all the out of state traffic. Do we expect all of them to stop at Walmart or Exxon?

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  • hawkeye

    Just imagine what this does for the trucking industry. Keep paying the fuel tax PLUS a higher sales tax. It’s just not fair. This is not the answer.

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  • MyHometown

    So if you drive a diesel you get penalized?

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  • Second Opinion

    This is a joke ..correct

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