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Virginia gov. proposes nixing gas tax, raising sales tax, hitting hybrids with $100 fee

Gov. Bob McDonnell (R-VA), someone many think has an eye on 2016, made an announcement today that could have an impact on his future ambitions.

Virginia has a transportation problem in Northern Virginia. Congestion and tangled roads are the norm. McDonnell wants to try and fix it, but it all requires money. Lots of money.

Today, he proposed eliminating the gas tax, but raising the sales tax and increasing fees on things like hybrid cars and alternative-fuel vehicles.

The Virginian-Pilot:

Central to the governor's plan, whose component parts would raise an estimated $3.1 billion for transportation over 5 years, is elimination of Virginia's 17.5-cent per gallon gasoline tax for most passenger vehicles -- the levy would remain in place for diesel fuel. Virginia would be the first state to go that route if it dumps the fuel tax, according to state officials. ...

McDonnell would replace the state surcharge on gas by increasing the state's current 5-cent sales and use tax to 5.8 cents and dedicating all additional revenue generated from that to transportation. Even at that level, state officials say Virginia's sales tax would remain lower than rates in surrounding states.

The administration's argument for the swap is that the buying power of the gas tax, a key road revenue source, continues to dwindle as construction costs rise and vehicle fuel efficiency standards improve. ...

Aside from the tax swap proposal, other elements of McDonnell's plan include:

- A $15 increase in annual registration fees on motor vehicles.

- An annual $100 fee on alternative fuel vehicles, including hybrids.

- Another attempt to dedicate a greater slice of existing sales tax revenue -- from the current .5 percent to .75 percent over five years -- to roads.

- Receiving more sales tax revenue from online retailers, a plan contingent Congress' passage of a law giving states the authority to compel such merchants to collect taxes on sales made through their sites and remit them to Virginia.