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McDonnell Proposes Higher Sales Tax, No Gas Tax for Transportation Funding

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    NEWSLETTERS

    Virginia Gov. Bob McDonnell wants to get rid of the state's gas tax and raise the sales tax. It's all part of a plan unveiled Tuesday afternoon to help bring in more money for roads and rail projects in the state. Northern Virginia Bureau Chief Julie Carey reports from Richmond on who would be most impacted by the changes.

    Out with the state gasoline tax, in with a higher state sales tax. That's the cornerstone of what Gov. Bob McDonnell is calling a bold, new plan to raise $3.1 billion in transportation funding over the next five years.

    His plan also dedicates $300 million of that money to phase two of the Silver Line Metro project, boosting the state's contribution to $450 million.

    The governor's plan represents a dramatic shift in the way Virginia has funded transportation maintenance and road construction for decades.

    Virginia faces a transportation funding dilemma: Because of more fuel efficient vehicles, the gas tax is flat. The state sales tax is climbing, and that's why the governor wants to rely on that tax to generate new transportation dollars.

    Under the plan rolled out Tuesday, Gov. McDonnell will ask lawmakers to scrap the state's 17.5 cent per gallon gas tax for vehicles and add eight-tenths of a cent to the state’s 5 cents on the dollar sales tax. His plan would also divert an increasing amount of the current sales tax to transportation, reaching .75 cents in five years. Trucks will continue to pay tax on diesel fuel.

    Under the plan, owners of the 91,000 hybrid and alternative fuel vehicles in Virginia would be hit with a new $100 per year fee. The governor reasons that because they fill up far less often, they pay less federal gas tax but their vehicles still have an impact on Virginia roads. The fee would be a way to get those alternative fuel vehicle owners to contribute to road needs.

    All drivers would feel the impact of the plan with a $15 hike in the vehicle registration fee.

    A final part of the governor's plan would count on the 113th Congress to approve the Market Equity Act, which would give states the ability to collect out-of-state taxes on purchases over the Internet. Money collected through that new tax revenue would be split between transportation and education.