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Purchasing Power of Gas Tax Decreases in Virginia

Purchasing Power of Gas Tax Decreases in Virginia

The statewide gas tax is one of the primary methods of funding transportation construction and maintenance, both in Virginia and throughout the country.  At 17.5 cents per gallon, Virginia’s tax on unleaded fuel is lower than the tax charged in 40 other states, including all six neighboring states and districts.  The Institute on Taxation and Economic Policy (ITEP) recently released a report detailing the impacts of the gas tax titled Building a Better Gas Tax: How to Fix One of State Government’s Least Sustainable Revenue Sources.  Among the facts included in the report:

• Many states, including Virginia, have not raised their gas tax in years — and in many cases — decades.  Virginia last raised its gasoline tax in 1986.  This tied Virginia for the second longest period without raising the gas tax among the 50 states and District of Columbia.
• This has, in turn, decreased the impact of the gas tax, as inflation reduces the purchasing power of the tax.  In Virginia, the purchasing power of the gas tax, per gallon, has decreased 45% since the last time the tax was increased.
• In Virginia, the gas tax would need to be increased by 14.5 cents per gallon to have the same purchasing power, per gallon, as the tax did the last time it was increased.
• Only fourteen states have provisions in their laws that automatically adjust the tax rate based on increases in fuel prices or the inflation rate.
• Each penny added to the gas tax would be expected to produce an additional $40 million in annual revenue in Virginia.

More information is available in the Building a Better Gas Tax report, which is available on ITEP’s website at http://www.itepnet.org/bettergastax.

Years Since Last Gasoline Tax Increase (as of 2011)

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