Despite the growing popularity of hybrid vehicle taxes and electric vehicle taxes among state legislatures, Virginia has decided to repeal their hybrid vehicle tax.
The logic behind Virginia’s hybrid vehicle tax was similar to North Carolina’s electric vehicle tax. Hybrid vehicles and electric vehicles, as well as very fuel efficient vehicles, use much less gas (or none at all) than the average car. Repairs and maintenance for roadways and various projects, such as highway safety studies, are paid for with funds collected via the gas tax.
Virginia State Gas Tax
Virginia has been dealing with a shortfall in tax revenues for its transportation system. Many states are facing similar problems, since gas taxes in most places haven’t increased in many years.
In 2013, Virginia reformed the state gas tax. Instead of a flat per-gallon tax of $0.175, Virginia began charging a percentage tax. The tax rate is based on 3.5% of a statewide average cost for a gallon of gas, taken over a six-month period. The initial rate was set at $0.111 per gallon, based on a statewide average of $3.17 per gallon. That rate can increase if the price of gas goes up, but 11.1 cents per gallon is a minimum rate and the tax can never go below that.
Although in 2013, the new gas tax rate caused the price of gas to drop by six cents per gallon, legislators are optimistic that the tax will eventually begin to pay for repairs and maintenance to the road system, as it was originally intended.
Virginia Hybrid Vehicle Tax
Changing the state gas tax from a flat rate to a percentage affects those cars with lower gas mileage the most. Hybrid vehicles and fuel efficient cars still pay less to drive on the same roads. The Virginia legislature attempted to make it more fair by charging hybrid vehicle owners an annual fee of $64. This is the equivalent of driving 14,183 miles in a car getting the U.S. average of 24.6 miles per gallon – a bit more than the American average of 13,476 miles per year.
Hybrid vehicle owners argued that it wasn’t fair to single them out for this tax, since many non-hybrid vehicles have better gas mileage than hybrids. Those other vehicles weren’t being taxed separately. The legislature agreed that it wasn’t fair and repealed the hybrid vehicle tax earlier this week. Hybrid vehicle owners can apply for a refund.
The repeal of the hybrid vehicle tax will reduce Virginia’s tax revenues by about $11 million, a drop in the bucket of the $626 million the state gas tax is expected to bring in this year.