The average fuel economy of new vehicles rose 6% in 2012, and cars are expected to use less and less gas going forward. Isn’t that a good thing? Well, not if you’re a state hoping to bump up revenues collected on gasoline sales. Less gas sold means less gas taxes collected by states—and therefore, less money the states have to build highways, patch roads, and do all of the other things normally funded by gas taxes. To increase gas tax revenues, or at least maintain their current levels, one simple solution is to hike gas tax rates. As a New York Times magazine story recently detailed, many economists think higher gas taxes—at least $1.25 per gallon, more than double the current national average—are necessary for a wide range of reasons, including the reduction of traffic and offsetting the environmental impact of driving. Curiously, in Virginia, Governor Bob McDonnell is suggesting just the opposite as a solution. McDonnell is proposing that Virginia eliminate its gas tax, which is now 17.5¢ per gallon. Since gas tax revenues are bound to decline as drivers buy less fuel, McDonnell suggests that the state drop this tax entirely, while jacking up another tax—one that’s paid by everyone, not just drivers, and that’s never expected to decline. If the proposal passes (it’s quite a long shot), road projects in Virginia would no longer be funded by gas taxes, but by a 0.8% increase in state sales tax, which would rise from 5% to 5.8% (still lower than neighboring Maryland‘s 6% rate). (MORE: Not Your Grandpa’s Mercedes: Luxury Car Makers Aim for Younger, Less Rich Customers) The Richmond Times-Dispatch quoted McDonnell’s attempts at explaining the proposed “solution”: “We have a problem in Virginia and it’s a math problem,” McDonnell said in announcing his proposal. “When you look at what is happening with the primary sources of transportation funding, the fuels tax, that it is on a downward slope.” Perhaps even more curiously, McDonnell is also suggesting that the owners of alternative-fuel vehicles—who are accustomed to receiving bonuses … Continue reading Virginia Is Worried Cars Are Becoming Too Fuel-Efficient