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McDonnell described the state’s gas tax as “outdated” because of inflation and better fuel economy since it was last changed in 1986.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

Michael January 09, 2013 at 09:59 PM
I thought Republicans don't raise taxes. Where is Grover when you need him?
Bill Sweet January 10, 2013 at 05:08 PM
I would prefer that the gas tax be increased rather then the general sales tax. This is a "user" tax. Everyone has to pay sales taxes. Maybe we need to look at all of these transportation projects and cut back on them.
Jacqueline Hasselhoff February 25, 2013 at 05:11 AM
I think that the state of Virginia does not care what the citizens think and they will never cut back on anything.Look at the amount of land held for each school and the money needed to maintain them.Schools are outdated now,they are only a babysitting service and social outlet as new ways of schooling are now available.Churches have malls inside and huge amounts of land,but do they pay anything? How about having t,he larger ones pay some taxes as they are buying up huge amounts of land and houses to rent out? When are the taxpayers going to ever be able to keep some of their own money?When will freeloaders ever be kicked off welfare and made to support their own babies?Then they couldn't buy their bottled water,potato chips, candy,etc. with our money.No,they always want more taxpayer money- I say let's put Governor Bob McDonnell out of office and try to find some republican who wants to do right by hardworking Virginians!


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