The Virginia Senate, declining to wait for a gubernatorial commission studying transportation needs, today passed a gasoline tax increase of 1 cent a gallon as part of a package that would raise $790 million over six years for badly needed highway construction.
The proposal, which includes other motor vehicle-related fees, was approved 34 to 4. It now goes to the House of Delegates, where it may encounter substantial opposition, particularly if Gov. Gerald L. Baliles comes out against it.
The sponsor of the package, Sen. Edward E. Willey (D-Richmond), is chairman of Baliles' Commission on Virginia's Transportation Needs in the 21st Century, which is charged with making recommendations to a special session of the legislature in September.
Baliles has ducked taking a stand on the Willey plan. Ten days ago he said he would announce his position "in a few days," but this afternoon, his press secretary, Chris Bridge, said that "there will be no announcement on it today."
Some legislators say Baliles tapped Willey as head of the commission in an effort to garner support from Willey, the powerful head of the Senate Finance Committee, for innovative methods of paying for transportation projects.
Willey contends that his tax package and the governor's goals are not in conflict.
The Willey package would:
*Increase the state gasoline tax from 11 cents a gallon to 12 cents.
*Establish a floor of $1 a gallon on which gasoline wholesalers pay an excise tax.
*Increase the titling tax on the sale of motor vehicles from 2 percent to 2 1/2 percent, and set a minimum tax of $25.
*Increase the added cost of a personalized license plate from $10 to $15.
*Increase the fee for a temporary license plate from $1 to $5.
*Increase the fee for transferring license plates to a new owner from $2 to $5.
*Phase out tax incentives for ethanol.
The latter is the most controversial aspect of the bill. Opponents said it constitutes "welshing" on a pledge the state made when it enticed farmers and others to produce the grain-based gasoline enhancer in response to the Arab oil embargo of the mid-1970s.
The 1981 legislature set a tax rate of 3 cents a gallon -- a savings of 8 cents a gallon -- on gasoline containing at least 10 percent ethanol, commonly called gasohol, as an incentive. The savings were divided among producer, blender/transporter, retailer and consumer.
But the credit cost the state far more than projected -- about $32.2 million this year, or 10 percent of total fuel tax collections -- and it did not work as expected.
Critics contend, for example, that while the idea was to encourage Virginia farmers to use their grain to produce ethanol, much of it is imported, either from other states or foreign countries, and is dried and distributed in the state to take advantage of the generous incentive.
Willey's original bill would have killed the incentive. A revision imposed by a subcommittee instead cuts it back gradually, from $17.5 million in the upcoming fiscal year, and reserves the incentive exclusively for Virginia producers until it is phased out in 1992.
Sen. William E. Fears (D-Accomac) offered unsuccessful amendments that would have retained the incentive, including one that would have raised the gas tax by 2 cents a gallon. Fears spoke for nearly half an hour in defense of the ethanol industry. But he admitted that taking on the powerful Willey was like "attempting to stop an express train by stretching rubber bands across the tracks."
Another supporter of ethanol, Sen. Madison R. Marye (D-Montgomery), suggested that it is easy to take away the subsidy at a time of declining gas prices, but he predicted that "gas prices will soar again, and the only benefactors will be the large oil companies and the Arabs."
Wllley responded during the one-hour debate that the "ethanol people aren't going to starve" with the $17.5 million set aside for them next year.