Virginia Gov. Bob McDonnell signed legislation Monday raising billions of dollars for transportation that includes new taxes on fuel. They may go even higher depending on what happens to legislation on Capitol Hill.
Known as Virginia's Road to the Future, HB2313 eliminates the 17.5 cents per gallon excise tax on gasoline and diesel fuel, and replaces the motor fuels tax with a 3.5% sales tax on the wholesale price of gasoline and a 6% sales tax on the wholesale price of diesel fuel, among other tax increases. The change in the tax structure allows the state to collect more in fuel taxes if the price moves higher.
In a statement the governor’s office said the bipartisan legislation, described as the state’s first comprehensive transportation funding plan approved in more than 25 years, will raise nearly $3.5 billion in additional statewide transportation funding, more than $1.5 billion in additional funding for Northern Virginia, and more than $1 billion in additional funding for Hampton Roads, over the next five years alone.
"When we put forward our comprehensive transportation funding plan this year, we called for three fundamental changes to how Virginia funds transportation, all based on conservative fiscal policy,” said the Republican governor. “First, we called for a reduction or elimination of our dependence on an archaic, outdated gasoline tax in the decades ahead. Second, we called for tying future transportation funding to the far more sustainable sales tax. Third, we called for treating transportation like the true core function of government that it is, one essential to economic growth and job creation in our state. While the final bill was in some ways different than our original proposal, it met all three of the goals we established.”.
The new law also limits putting tolls along the state’s section of I-95.
More money could go into Virginia’s transportation coffers under the new law if Congress passes legislation allowing states to collect sales taxes on Internet purchases. The Virginia law would earmark about 57% of an estimated $253 million the state would collect in the form of an internet tax that would be used for transportation projects.
The congressional bill passed the Senate by a wide margin, but faces an uncertain future in the House. If the bill fails to be passed and signed into law by President Obama, who has indicated support for it, then the Virginia law would allow the wholesale tax on gasoline to rise even more from 3.5% to 5.1% to make up for the funding gap.
A summary of the bill that received final passage by Virginia lawmakers and was signed by the governor is available online.