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April 11, 2013

Destination Unknown: Navigating Virginia’s New Transportation Funding Package – and Potential Potholes


Low-income Virginians will pay a greater share of their income in new taxes than wealthier Virginians under  the transportation funding legislation adopted by the General Assembly last week, according to a new, comprehensive analysis of the package from The Commonwealth Institute for Fiscal Analysis, a non-profit, independent fiscal and economic policy organization based in Richmond. 

Under the transportation funding package:

  • Low-income people pay more. People earning less than $21,000 will pay three to six times more of their income in new taxes than people with incomes that top $509,000.

             o  In Northern Virginia and Hampton Roads, low-income
                 households will pay between five and eight times more of
                 their income.

  • Responsibility moves away from drivers. Most of the new revenue would come from activities unrelated to driving, dramatically shifting the responsibility for funding transportation away from those who use the highways the most.

      o   Statewide, less than 10 percent of the new tax revenue is
           from driving-related sources, such as the gas tax.

            o   In Northern Virginia, the new regional taxes in the package
                 come entirely from sources unrelated to driving.

            o   In Hampton Roads, 64 percent of the new taxes come from
                 sources unrelated to driving.

  • Virginia schools may not receive much new help. While the prospect of dedicated education funding was used to help pass the plan, whether it will actually result in any meaningful new funding for Virginia’s schools is unclear. Furthermore, while the share of sales tax revenue dedicated to education gets a one-time bump, the share diverted to transportation grows over time.
  • The gas tax swap will bring in less money. The state will lose nearly $850 million by replacing the current 17.5-cents-per gallon gas tax paid by drivers at the pump with a 3.5 percent tax on the wholesale price of gasoline. 

The Commonwealth Institute

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