Time To Pump Up Taxes?

McDonnell, Hanger Discuss Pegging Gas Levy To Rising Prices

Posted: November 24, 2012

Joe Tacy of Staunton fills up Tuesday at the Liberty station on Port Republic Road in Harrisonburg. If state lawmakers decide to index the gasoline tax to inflation, more dollars could be flowing through the gas pumps into state coffers. (Photo by Michael Reilly)
HARRISONBURG — Sen. Emmett Hanger spent Tuesday using different modes of travel with Gov. Bob McDonnell, from helicopter to golf cart.

Along the way, they discussed one of the state’s more pressing transportation topics: whether the General Assembly should bring in much-needed revenue by indexing the gas tax to the rate of inflation.

On Monday, McDonnell told reporters in Richmond that he is open to indexing the tax as part of a larger funding package he’ll introduce in the 2013 session. Hanger, R-Mount Solon, has long supported the idea.

Indexing the tax to inflation would create a percentage-based tax that adjusts over time as gas prices change. The Virginia rate has stayed at 17.5 cents per gallon since 1986.

But since the rate has not changed, the state has not capitalized on higher gas prices. In that time, vehicles also have become more fuel-efficient. That leads to less gas purchased and less revenue for the state.

“The biggest problem with the fuel tax is the increased efficiencies,” Hanger said. “Our monies that support the program [are] diminishing compared to the amount of travel.”

He flew with McDonnell from Richmond on Tuesday to meet with legislators dealing with congestion around Newport News. They then went to Tangier Island — where golf carts are used to get around — to announce the construction of a new sea wall.

State officials have said transportation funding for new construction will run out in 2017. That makes indexing the gas tax a popular proposal for a solution: Hanger said each penny of the tax leads to about $50 million in revenue.

And that means the state earns more than $800 million for transportation projects through the tax, the largest revenue stream for transportation.

“It doesn’t take that many pennies to make something that can be meaningful,” said Hanger, a member of the Senate Finance Committee.

One bill filed in the last General Assembly session stated that as much as $123 million in new revenue could be generated by 2018 if the gas tax were indexed.

Hanger said he is not sure if he will draft legislation for 2013 to index the tax, but he added that McDonnell will follow up with him from their conversations on Tuesday.

The Senate passed a bill not sponsored by Hanger to index the tax earlier this year with bipartisan support, but it failed in the House of Delegates.

Sen. Creigh Deeds, D-Hot Springs, said it may be easier to approve gas tax indexing in 2014, when all seats in the House are not up for re-election, as they are in 2013.

He said the state cannot match federal dollars for new construction starting in 2017, which would cost Virginia more than $1 billion.

“I think we have to do something,” Deeds said. “There’s lots of ways to skin the cat.”

Del. Tony Wilt, R-Broadway, considers transportation the third leg of government, joining education and public safety. The state must “get serious” about finding a permanent revenue source for it, particularly for maintenance, he said.

“We have sorely neglected that over the years,” Wilt said. “I tell people now, whenever you go under a bridge, look up.”

Raising the gas tax should at least be discussed, he said.

“It’s not a popular thing to talk about,” Wilt said, “but you can’t just keep burying your head in the sand.”

Contact Preston Knight at 574-6272 or pknight@dnronline.com

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