The Gas and Sales Taxes: A Look Under the Hood
Lynchburg, VA - In Governor McDonnell's transportation bill, he unveiled a plan that is estimated to bring $3.1 billion more into the state's transportation system over the next five years. It's a bold plan and, if passed, could have a big impact on your pocketbook.
The plan is complex, and even legislators admit there are a lot of moving parts to it, including overhauling the state's gas and sales tax.
The Governor hopes to get rid of the gas tax.
But don't get too excited; money has to come from somewhere. For years, the state's been dipping into other funds to keep up with roads. The new idea is to hike up the sales tax instead.
If McDonnell's transportation bill passes, you won't have to pay 17.5 cents per gallon on your gas receipt. But the real difference is going to be inside the store. Buy a pack of gum and sales tax is going to go from 5% to 5.8%.
For a couple financial advisors, including Jeff Myers, this idea is not a win-win for the consumer.
"You're stealing from Paul to pay Peter in this case," said Myers.
Myers crunched the numbers. Let's say you fill up your 20 gallon tank once a week, getting rid of the gas tax will save you $190 per year. But throw that higher sales tax into the mix, and many consumers come out worse under the new plan.
"If you spend $10,000 a year just on stuff, and you're going from 5%to 5.8%, that's obviously a lot more than what the gas tax is going to save you," said Myers.
Even tax-weary financial advisors admit the gas tax needs updating. Legislators haven't updated it since the 80s. That means, for decades, roads have not gotten the work they need.
Another idea to raise money is a $100 annual fee slapped on vehicles that run on natural gas and electric. For the Governor, it's just not fair. Fuel-efficient vehicles have gotten away scott free, using the roads and not paying the gas tax that keep them in shape.