Virginia House Passes Bill Eliminating State Gas Tax

House, Senate still disagree on transportation funding plan

The Virginia House on Monday approved a transportation proposal that largely sticks to the plan that Gov. Bob McDonnell (R) introduced last month, which includes eliminating the state’s 17.5 cents-per-gallon gasoline tax and raising the statewide sales tax.

Meanwhile, in the Senate, a key Republican lawmaker has proposed a different solution: a 5.5 percent sales tax on the wholesale price of gasoline tied to inflation. The proposal, which is sponsored by Sen. Steve Newman (R-Lynchburg), is expected to come to a vote on the Senate floor today. The, members of a conference committee will likely have to reconcile their differences over the two bills.

One reason why Virginia Gov. Bob McDonnell is trying to eliminate the gas tax is because gasoline consumption is expected to fall as more people drive hybrid and electric cars. The growing popularity of such vehicles raises questions about the future of transportation funding in a region crushed by incessant congestion.

The McDonnell administration argues higher fuel efficiencies continue to eat into gas tax revenues. While electric cars represent less than 1 percent of all vehicles on the road now, that figure is expected to rise, further diminishing those returns, McDonnell adds. The governor's proposal also included a $100 registration fee on alternative fuel vehicles, but the House version passed Monday eliminates that provision. 

Mahi Reddy is the founder of SemaConnect, a manufacturer of electric vehicle charging stations based in Bowie, Md. He says electric vehicles — or EVs — are becoming a more sensible choice for consumers.

"Previous generations of electric cars struggled because they used lead-acid batteries. They used nickel-metal hydride batteries, other technologies," Reddy says. "The new generation all use lithium batteries, the same lithium technology that is in your cell phone, that is in your laptop. And so that means these batteries are much lighter, they have much more range, and these cars are much better engineered, so they are practical cars you can use to commute to the office."

In his view, the biggest obstacle facing EVs is the lack of charging stations. A report by the Metropolitan Washington Council of Governments (pdf) found the region has strong protential for EV growth, but an "under-developed charging network" is one of several problems.

While the governor views improving fuel efficiency as a reason to eliminate the gas tax and charge hybrids and electrics a $100 registration fee, the Council of Governments executive director Chuck Bean takes the opposite position.

"In terms of transportation funding, all of the options need to be on the table: gas tax, sales tax," Bean says. "We are really in a crisis of transportation funding and need to be very creative. I would hesitate to reverse or eliminate any taxes because there is simply a great need for more funding."

Even if Virginia keeps its gas tax, Virginia will need other sources of revenue to maintain and build roads and rails, whether from higher sales taxes, tolls or more borrowing.