State Del. Tim Hugo, R-Centreville, has come up with a novel way to fund needed transportation improvements in Virginia without raising taxes. He wants to completely eliminate the current 17.5-cent state gas tax and replace it with an 0.9-cent increase in the commonwealth's 5 percent sales and use tax.
Hugo's revenue-neutral proposal would prevent Virginia from completely running out of highway construction funds over the next four years without raising taxes on recession-battered taxpayers. It would also stabilize the Transportation Trust Fund and assure a half-billion-dollar-a-year revenue stream to operate the nation's third largest state highway system.
Gas tax revenue has been steadily declining nationwide due to the proliferation of hybrid vehicles and the conversion of corporate fleets to cheaper natural gas. New federal CAFE standards requiring all cars to get 54.5 miles per gallon by 2025 will exacerbate this decline, if they succeed. So even if the gas tax were doubled, it wouldn't make a dent in the Transportation Trust Fund's maintenance backlog. And a steadily decreasing volume of gas sales means that indexing the gas tax would only be a temporary solution.
"I came up with this idea because I knew we had to get something done, but I kept tripping over the numbers," says Hugo, who once served as chief of staff to House Transportation chairman Bud Shuster.
Because sales tax revenue is tied to economic activity, more money will be available to spend on transportation needs when a growing economy increases demand. And since Virginia already has a lower state sales tax than two-thirds of the other states, a slight increase would not put the state at a competitive disadvantage. In fact, elimination of the gas tax would lure at least as many motorists across state lines to fill up their tanks.
The second part of Hugo's proposal allocates about a half billion dollars in undesignated surplus revenue each year to the Commonwealth Transportation Fund. Prioritizing surplus dollars for transportation would not affect education or public safety, but it would plug the gaping road maintenance hole that threatens to suck up all available funding within a few years.
"The construction and maintenance of Virginia's roads and bridges are core functions of government that must -- finally -- be treated as such," Hugo says. He's right. Virginia's refusal to treat them as such sooner is the main reason for its current transportation predicament.