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 Virginia Gov. Bob McDonnell gestures as he talks at a news conference in Richmond on Tuesday about his proposal to eliminate the state gasoline tax in return for an increase in the state sales tax to fund transportation needs.
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Date published: 1/9/2013



--Gov. Bob McDonnell is proposing a sweeping reform of how Virginia raises money to pay for roads, offering to entirely eliminate the state tax on gas in exchange for a higher statewide sales tax and higher registration fees.

McDonnell's proposal could generate up to $3 billion over five years in new money for roads and transit, he said, calling it a "game-changing investment."

At a press conference in Richmond, McDonnell said his plan is "politically viable," although it remains to be seen whether he can win over both anti-tax conservatives and Democrats who oppose using more general fund money for transportation.

McDonnell would eliminate the state's 17.5-cents-per-gallon gas tax, although it retains that tax on diesel fuel. He would replace the revenue by raising the state's sales and use tax an additional 0.8 percent, to 5.8 percent from the current 5.0 percent, and dedicating that money to transportation. Food would remain exempt from the sales tax, as would gasoline, which in Virginia is not subject to the sales tax.

According to the governor's staff, Virginia would be the first state to abandon a state gas tax.

For weeks McDonnell has been promising a comprehensive transportation funding reform proposal. He says the state has "a math problem," noting that the buying power of the gas tax--which has been unchanged at 17.5 cents per gallon since 1986--is now half of what it originally was. Cars now get better mileage--or don't rely on gasoline at all--and McDonnell expects that will continue, making the gas tax an ever-decreasing source of revenue while the costs to maintain and build roads increase.

Virginia law requires transportation money to first go toward maintenance of existing roads, and that will soon eat up all the money that could go to new construction. McDonnell has made it a priority in this, his last General Assembly session, to reform transportation funding. His proposal would generate enough money to eliminate the crossover between maintenance and construction, he said.

While he wants to eliminate the gas tax, McDonnell's plan keeps the 17.5-cent tax on diesel fuel. Staffers said that interstate trucking traffic accounts for 68 percent of the diesel fuel tax revenues in Virginia, and that trucks create 80 percent of the deterioration of state roads.

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Eliminate the current 17.5-cents-per-gallon motor fuels tax on gasoline; retain it on diesel fuel. State motorists will still pay the 18.4-cent-per-gallon federal gasoline tax.

Replace the current gas tax with a 0.8 cent increase to the sales and use tax dedicated to transportation: Under the governor's plan, 85 percent of the increased sales tax will go to the Highway Maintenance and Operations Fund and 15 percent will go to the Transportation Trust Fund.

Combined with cutting the gas tax, that's projected to generate $24.6 million in 2014, $607 million over five years.

Dedicate an additional 0.25 cent of the state's portion of the existing sales tax to transportation maintenance.

Transportation currently receives 0.5 cent of the sales tax, and the governor proposes to phase in this share to 0.75 cent over five years. During the first three years up to $300 million will be committed to the Dulles Metrorail Extension Project.

That's projected to generate $49 million in 2014, $811.5 million over five years.

Increase vehicle registration fees by $15 (currently $40.75 per year on the average passenger vehicle) and dedicate the revenue to intercity passenger rail and transit. That's a 37 percent increase in the registration fee.

Projected to generate $109.4 million in 2014, $547 million over five years.

Impose a $100 annual fee on alternative fuel vehicles, dedicate the revenues to transit.

Projected to generate $10.2 million in 2014, $66.6 million over five years.

Expected revenue from passage of federal law on collecting sales tax on Internet sales:

Projected at $175.7 million in 2014, more than $1 billion for the state over five years, to be devoted to transportation and public education.