Virginia Governor Seeks to Eliminate Gas Tax

Governor Bob McDonnell unveiled a plan that would eliminate the current 17.5-cents-per-gallon gasoline tax in the state of Virginia.

January 10, 2013

RICHMOND - Virginia Governor Bob McDonnell yesterday proposed eliminating the state??s 17.5-cents-per-gallon gas tax.

To compensate for the lost revenue, McDonnell has proposed replacing it with revenue it generates with an increased sales tax. If the measure passes, Virginia would become the first state to eliminate a state tax on gasoline.

According to the governor??s website, the plan would provide more than $3.1 billion in transportation funding for the state over the next 5 years, tying transportation funding to economic growth and replacing the state's outdated gas tax revenue model with a 0.8% increase in the state's sales tax dedicated to transportation.

"The proposal would make Virginia the first state in the nation to eliminate the state tax on gasoline, allocates additional general funds to transportation, capitalizes on revenues being lost on out-of-state sales, and creates a long-term revenue system to fund Virginia's highway, rail and transit needs," notes the website, adding:

"Virginia's current transportation maintenance funding shortfall means that in FY 2013 $364 million must be transferred from the state's construction account to pay for road maintenance. That transfer amount is anticipated to grow to $500 million by FY 2019 unless new funding is provided. In short, Virginia has to use money meant for construction for paving and potholes. The governor's plan fixes the problem by generating $844 million in new funding per year for transportation by FY 2018, eliminating the state maintenance crossover and contributing to construction, rail, transit and other priorities.

By eliminating crossover and with proposed revenue growth, this plan provides an additional $1.8 billion for highway construction over the next 5 years."

Virginia marketers reviewed the proposal with interest but are waiting until the bill is released before issuing a formal position. "We are pleased that the Governor does not support indexing or expanding the sales tax to motor fuels," said Michael O??Connor, president of the Virginia Petroleum Convenience and Grocery Association. He told NACS Daily that "no state has ever eliminated its tax on gasoline, therefore we will proceed methodically to examine the proposal in depth to determine its impact on Virginia marketers and consumers."

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