In 1986, the last time Virginia changed its gas tax, a gallon of regular unleaded cost 89 cents. The Ford Escort with a 3-speed automatic transmission, one of year’s top-selling cars, averaged 26 mpg on the highway. Thousands of people already used the two-pound, $3,3995 cellphone Gordon Gekko would make famous in the movie Wall Street, but nobody had a website because there was no World Wide Web.
Twenty-seven years later, the state legislature has agreed on a new funding strategy that may not be revolutionary, but is at least no longer as retro as music videos on MTV.
In the waning hours of the legislature’s 2013 session, the State Senate agreed to a compromise plan that generates $880 million a year for road construction, maintenance, and transit via a mix of tax and fee increases and trade-offs.
The state’s 17.5 cents per gallon gas tax is replaced with a 3.5 percent tax on gasoline at the wholesale level, and a boost in the state sales tax from 5 percent to 5.3 percent. There’s also a 6 percent wholesale tax on diesel fuel, though clean diesel vehicle owners are eligible for a rebate.
In addition, Northern Virginia and Hampton Roads—Virginia’s most congested areas—will see an additional .7-cent sales tax increase to fund area-specific transportation projects, including the state’s promised $300 million contribution to Phase 2 of the Dulles Metrorail extension.
The plan is quite different from Republican Gov. Bob McDonnell’s original proposal, which would have done away with gas taxes entirely. Nevertheless, McDonnell praised the outcome as an “important moment” in the state’s economy, and indicative of the “‘Virginia Way’ of cooperation and problem solving.”
To be sure, that “Virginia Way” involved threats to hold any agreement hostage following Senate Republicans’ surreptitious attempt at legislative redistricting, and an insistence by Democrats that McDonnell first commit to ensure the budgetary mechanisms to expand Medicaid.
McDonnell and the compromise’s supporters were also immediately criticized by opponents of anything resembling a tax increase, and those who felt motorists should bear the brunt of the transportation funding burden.
Still, McDonnell and the 2013 General Assembly managed to do something that their predecessors had always talked about, but could never complete—bring Virginia’s transportation funding mechanisms into the 21st Century.