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.