When Gov. Robert F. McDonnell won approval earlier this year for his far-reaching transportation plan that would eliminate the 17.5 cent per gallon gas tax to provide $4.3 billion for roads and public transit, a big question was what it might mean to consumers at the pump.
In exchange for eliminating the tax, which had not been changed since 1987, McDonnell added a wholesale sales tax of 3.5 percent on gasoline and 6 percent on diesel fuel. Overall retail sales taxes for most products would go up 0.3 percentage points.
As the governor was pushing for the major reform package, a report by Chmura Economics & Analytics, a forecasting firm in Richmond with close ties to the McDonnell administration, predicted that consumers would be blessed at the gas pump by lower prices. The Chmura report stated that “the retail price for gasoline could be reduced by 16.6 cents, or 95% of the 17.5 cents per gallon eliminated gasoline tax.”
In reality, gasoline prices are higher overall than they were before the tax changes took effect July 1 and much higher than a year ago. As of July 26, average gasoline prices were $3.506 a gallon. They were $3.392 a gallon on this date in June and $3.344 a gallon on this date in July 2012. Today, they are even higher in Northern Virginia — running about $4 a gallon — due to higher local taxes.
Roy Page, owner of Cooper-Page, an outlet that sells non-branded gasoline in Springfield, told me that gas retailers did see a price drop of about 6 cents per gallon around July 1, when the transportation plan took effect. “Obviously, prices have gone up more than 6 cents since then,” he says.
Page isn’t sure why. It could be an increase in demand due to summer driving or refinery shutdowns. The curve in Virginia also closely tracks the change in overall U.S. prices. But the Chmura report had suggested we’d see the two graphs start to diverge a month ago.
It all does beg a question: What was the point of eliminating the 17.5 cent per gallon gasoline tax for retail sales and then going through a series of convoluted tax increases for the sales tax and a wholesale fuel tax? Why couldn’t McDonnell and the General Assembly have simply backed raising the gasoline tax?
My guess is because doing so would have contradicted ironclad Virginia dogma against raising taxes, or at least, some taxes and not others. Go figure. I don’t understand it.