When Virginia Governor Bob McDonnell proposed to pay for transportation by replacing the gas tax with a sales tax, many pundits predicted it would never happen. They were only half right. Last Friday, the Virginia Senate passed a bill, already approved by the Assembly, that replaced the retail gas tax with a sales tax plus a wholesale gas tax that is almost as much as the retail tax.
The wholesale gas tax is 3.5 percent, which means that it adjusts with changing oil prices. At current gas prices, it amounts to about 14 cents a gallon, slightly less than the 17.5 cent per gallon retail tax that is being eliminated. When added to the increased sales tax that is dedicated to transportation, the result will be a significant increase in transportation funding.
It is not likely, however, to result in any significant improvements for travelers. Instead, as the Wall Street Journal notes, it is a scam that mainly benefits “unions, real estate developers and the transit lobby.”
