Transportation funding bills that include a gas-tax increase have passed the Virginia House of Delegates and the Senate, but the implementation differs in each bill.
The Senate bill would increase the gas tax by 4 cents annually for two years, but the House’s version would increase the gas tax by 4 cents annually over three years. The Senate bill effectively would provide for an 8-cent increase, raising the minimum gas tax to 24.2 cents per gallon, while the House’s would provide for a 12-cent increase, raising it to 28.2 cents per gallon.
After the incremental increases, the tax will be adjusted annually based on the Consumer Price Index.
Some regions have higher gas taxes because of regional taxes. The average gas tax is 33.95 cents per gallon. The bills also would establish regional gas taxes in areas that do not already have them.
Earlier this year, Gov. Ralph Northam proposed a 12-cents-per-gallon increase to the gas tax to fund the Department of Transportation. The administration estimated this increase would lift revenue by about $491 million.
Stephen Haner, a senior fellow for state and local tax policy at the Thomas Jefferson Institute for Public Policy, told The Center Square in an email that a gas-tax increase to fund transportation makes sense, but that it must be done properly. The Thomas Jefferson Institute is a free-market think tank based in Virginia.
“The truth is the current statewide fuel tax in Virginia is lower than it has been in a long time,” Haner said. “Six years ago, the General Assembly set the tax as a percentage of the price, and the price of gas then started to drop. Returning to a fixed amount per gallon makes sense, and so does phasing in this statewide increase over a few years. Much of the increase just gets us back where we were, or would have been had gas prices risen. Where the state might go too far is if it does add another 6 cents per gallon as a regional tax in regions of the state which have not asked for the additional money, and have not set up a mechanism to spend the money in that region.”
Both versions will be sent to the other chamber, and committees will make changes to the bills to create a compromise bill.