Correction: Proposed tax changes story

Published on NewsOK Modified: January 9, 2013 at 5:50 pm •  Published: January 9, 2013
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RICHMOND, Va. (AP) — In a story Jan. 8 about proposed tax changes in Virginia, The Associated Press erroneously described the state tax on diesel fuel. It is 17.5 cents per gallon, not 17.5 percent.

A corrected version of the story is below:

McDonnell: Replace gas tax for $3.1B roads plan

Va. governor proposes replacing gas tax with sales tax increase as part of $3.1B roads plan

By LARRY O'DELL

Associated Press

RICHMOND, Va. (AP) — Gov. Bob McDonnell on Tuesday proposed a five-year, $3.1 billion transportation funding package that includes replacing the state's gasoline tax with a sales tax increase of nearly a penny on the dollar.

The Republican governor unveiled his plan for roads and transit on the eve of the 2013 General Assembly. If lawmakers approve, Virginia would be the first state to drop its gasoline tax.

McDonnell said the gas tax is no longer a viable revenue source for maintaining and building highways because of inflation and more fuel-efficient vehicles. State 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. Also, fuel economy improved from an average of 10.3 miles per gallon in 1986 to 27.3 mpg in 2011.

"That's just an unsustainable trajectory," McDonnell told reporters and scores of business representatives and lobbyists who packed a news conference.

While the gas tax has been stagnant, sales tax revenues have continued to grow with the economy, McDonnell said. His plan to increase the state's 5 percent sales tax to 5.8 percent and dedicate all of the additional revenue to transportation would raise an additional $607 million over five years, he said. Eighty-five percent of the additional revenue would be spent on maintenance, the rest on construction.

The 17.5 cents-per-gallon tax on diesel fuel would remain unchanged because heavy trucks cause about 80 percent of the damage to Virginia's highways, the governor said, and most of those vehicles come from out of state.

The plan also includes McDonnell's previously announced proposal to increase the portion of the existing sales tax already earmarked for transportation. A half-cent already goes into the state's highway fund. The governor's proposal would increase that commitment to three-quarters of a cent over five years, generating an additional $811.5 million over that period.

When combined, the two sales tax changes would give transportation about one-quarter of sales tax proceeds.

Democrats have opposed proposals to allocate more of the sales tax for transportation, calling it a raid on public education and other priorities that are financed by the state's general fund. McDonnell said the state has been increasing education funding and ending each year with surpluses, so it can afford to shift a little more general fund money to transportation.