Virginia Replaces State Gas Tax, Boosts Transportation Funding

Virginia officials, led by Gov. Bob McDonnell, have approved a plan to eliminate and replace the state's gas tax with other sources of revenue that are expected to bring over $3.1 billion above existing revenues over the next five years for Virginia's highways, transit systems, rail networks, airports and port.

The Virginia General Assembly approved a transportation-funding package in February that restructures the state's fuel taxes, and is expected to raise more than $860 million for transportation.

Under the new law, that state gas tax will be replaced by a 3.5 percent wholesale tax on fuel and a 6 percent tax on diesel. The deal also includes an increase in the registration fee for electric cars (now up to $100), and makes that fee mandatory for alternative fuel and hybrid vehicles. The plan also increases the state sales tax to 5.3 percent (from 5 percent) on nonfood merchandise, and relies on some state general fund revenues.

Governor Bob McDonnell, who proposed a similar transportation package on January 8, hailed the passage of the bill.

"Virginia's economy depends upon a modern transportation system," McDonnell said in a statement. "Without good roads, rail, transit, and bridges we cannot attract the new businesses that will create the good-paying jobs our citizens need and deserve. A continued failure to improve transportation would leave the Commonwealth less competitive economically, shrink our tax base, and endanger our well-earned reputation as the best state in the nation in which to do business."

Virginia will see the state gas tax change to a sales tax in July. Additional information on the plan is available here.

h/t: AASHTO Journal