McDonnell transportation plan eliminates gas tax in favor of higher sales tax

Gov. Bob McDonnell has issued his transportation plan and it marks a fundamental change in the way we conceive of funding road construction and maintenance. The major points, from the press release:

* Eliminate the current 17.5 cents per gallon motor fuels tax on gasoline

* Replace the current gas tax with a 0.8 cent increase to the Sales and Use Tax (SUT) dedicated to transportation

* Dedicate an additional .25 cent of the state’s portion of the existing SUT to transportation: Transportation currently receives 0.5 cent of the SUT, and the governor proposes to phase in this share to 0.75 cent over five years.

* Increase vehicle registration fees by $15 and dedicate the revenue to intercity passenger rail and transit

* Impose a $100 annual Alternative Fuel Vehicle Fee and dedicate the revenues to transit

And a last point that asks for the feds to lend a helping hand:

The 113th Congress will consider the Marketplace Equity Act, which would grant states the legal authority to collect out-of-state sales taxes. This is a tax that is already imposed and required by law to be paid as a use tax on the taxpayer’s income tax return. Unfortunately, compliance is very low and these are dollars we should be collecting. This proposal would conform the Code of Virginia to any changes in federal law, contingent upon the Marketplace Equity Act being adopted by Congress. Potential revenues will be dedicated to transportation, public education and localities. Governor McDonnell’s 2013 Transportation Funding Plan will allocate a portion of these revenues not only to transportation, but also to other critical areas of need. First, 1.125 cents of the 5.8 percent sales tax will be dedicated to public education ($310 million over 5 years). Second, 0.5 cents of the 5.8 percent sales tax will be given back to the localities to use at their discretion ($138 million over 5 years). Third, 0.5 cents of the 5.8 percent sales tax will be given back to the localities for local transportation priorities ($138 million over 5 years). Finally, 3.675 cents of the 5.8 percent sales tax will be provided to the Transportation Trust Fund ($1.02 billion over 5 years).

This is just the Governor’s opening bid. It has elements of the Hugo plan that would eliminate the gas tax and replace it with a higher sales tax as well as the Watkins plan that would impose a yearly fee on alternative energy cars. Plus, it offers sops to rail and transit.

One gas tax that will remain in place, though, is the levy on diesel. The reasoning behind that decision is here:

The majority of diesel fuel is consumed by truckers. Approximately 68 percent of diesel fuel tax revenues are paid by interstate trucking companies.

And as such:

Retaining the diesel fuel tax will ensure that the trucking community contributes financially to address the impact they have on Virginia’s highway networks.

So for those of you who decided to buy diesel cars because they offer great mileage and reliability (including Mrs. Leahy), Happy New Year and pay up.

The floor is now open for comments.

  • Replacing the gas tax with the higher ad valorem tax (sales) in the long term is a tax increase. Top that with the $15 increase for vehicle registrations and this can’t be called anything other than that when looking solely at the revenue component of the suggestion.

    • So what? This is the first real long term solution to our infrastructure revenue problems anyone has had in ages. If it means more money for our crumbling infrastructure, that’s a good thing.

      • I disagree. “More money for something” is not a good justification for higher taxes. If Republicans really cared so much about transportation projects, they’d fund them first instead of last out of existing general fund revenues.

        • We don’t have that ability, because the Democrats consistently block any attempts to spend general fund money on transportation. They demand increases in the gax tax, which Republicans don’t support, instead. It’s a gordian knot, and this proposal is one of the few attempts I’ve seen to cut it that might be possible.

          • The solution to Democrats refusing to prioritize spending is not to abandon conservative principles. That argument is a slippery slope where no, the end does not justify the means.

  • Chris

    I approve for the most part. I’m not worried about calling it a “tax hike” when you consider that the entire process is broken. McD is essentially hitting the reset button on how transportation is funded. He’s not raising taxes within the status quo, which we know would be a pointless exercise. So I approve for now.

  • Anyone who thinks the 17.5 cents from an eliminated gas tax would go to consumers pockets is crazy. North Carolina charges much higher gas taxes than Virginia, but the price at the pump is virtually the same.

  • This is absolutely the most stupid, stupid, stupid idea I have ever heard of. Charging sales taxes on groceries instead of on gasoline to pay for roads. This puts the F in WTF. I can’t believe this is even being proposed. This is worse than the “repeal the car tax”….unless the point is to just make taxes more regressive. I hope this is accompanied by a repeal of all those stupid “tax holidays.” Good God, just when I thought things in Virginia could not get any worse, our own Republican Governor who ought to know better, trots this out. Just how is VDOT supposed to budget anything if they do not have a dedicated gas tax to pay for it?. Wow. This is beyond stupid and awful. All I can think of is Egads to the third power or maybe just “ZOOT ALORS!” AWFUL IDEA.

  • Further, no. You will not see your gas prices go down at the pump. Gasoline is sold on a regional basis, all taxes figured in. This is the dumbest idea I have ever, ever, ever heard of. Anyone supporting this needs to take a second look at reality. THIS IS A HUGE TAX INCREASE HIDING BEHIND A SMOKE SCREEN CALLED GENERAL REVENUE i.e SLUSH FUND.

  • The more I read about this absolutely stupid idea, the worse it gets. It’s awful.

    • Except for one reason. McDonnell and Howell know this will fail, and democrats will help it fail. So now republicans can run in November saying they tried to fix transportation but were thwarted by democrats.

  • Wouldn’t it be more conservative to do away with the gas tax and cut/prioritize spending? Are we, as conservatives, ready to say that Richmond doesn’t have any more wasteful spending to cut, therefore, if we propose cutting taxes one place we have to raise them elsewhere?

  • This points out better that anything the dysfunction of the legislature and
    the Governor. Just a few short weeks ago the Speaker of the House, Bill Howell,
    was expressing his opinion that no significant transportation legislation was
    welcome nor feasible in this upcoming election year, and he did not think any
    would survive the session. Now we hear he is to carry McDonnell’s “hail mary” in
    the House. Let me ask one question; are there any adults left in the Governor’s
    office? We see no coherent sense of purpose nor direction. Never mind that the
    Legislation is a pale shadow of what is needed. Would not you think the Governor
    would actually create some consensus first on what is supposed to be his legacy?
    Disappoint reigns.

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