Virginia Gov. Lays Out Plan to Eliminate Gas Tax

RICHMOND, Va. -- Virginia Gov. Bob McDonnell announced Tuesday a plan to eliminate the tax on gasoline in the state. The proposal calls for a five-year, $3.1 billion transportation funding package that would replace the state's gasoline tax with a sales tax increase of nearly one cent on the dollar, the Associated Press reported.

"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 is funded," stated McDonnell, according to The Hill.

Virginia officials said the purchasing power of the gasoline tax has declined by more than half since it was last increased, to 17.5 cents per gallon in 1986, the AP reported.

"We simply cannot continue to do what we have always done and expect this problem to go away," said the governor. "The gas tax is a stagnant revenue source, and no changes to it will provide a reliable growth mechanism for transportation in the state."

In his statement, McDonnell said that if Virginia continues its old method of funding transportation, it will face the same revenue shortfalls "as inflation slowly eats away at the gas tax, cars get better mileage to meet CAFE (corporate average fuel economy) standards and more alternative fuel vehicles hit the streets." McDonnell added that the current revenue numbers are a math problem that doesn't add up to an efficient transportation system. The 0.8-percent increase in Virginia's sales tax, from 5 percent to 5.8 percent, would generate revenue dedicated to transportation.

McDonnell's argument has been echoed by House Transportation and Infrastructure Committee Chairman Bill Shuster (R-Pa.), The Hill reported. The federal gas tax currently stands at 18.4 cents per gallon and generates about $35 billion per year, which falls short of the $50 billion appropriated in a $105 billion transportation bill last year.

In what Shuster calls "the transportation fiscal cliff," lawmakers approved a package last year to increase fees and close tax loopholes to cover the almost $20 billion revenue shortfall.