Earlier this month, Virginia Gov. Glenn Youngkin announced a new policy proposal to suspend the state’s 26-cents per gallon gas tax for three months and to cap gas tax rates in future years. If enacted, this policy is likely to miss the mark on helping families in Virginia who are struggling with higher costs, while preventing the state from catching up on its backlog of outstanding transportation needs and hurting the state’s ability to make critical investments in the future. Supporting families who are affected by rising costs is an important policy goal, but temporary gas tax changes will do little to achieve this aim. Lawmakers have other tools available that will more directly support Virginia families.
Based on new analysis from the Institute on Taxation and Economic Policy, 30% of the projected “savings” from this plan would likely flow to oil producers, rather than fully passed onto motorists. In addition, the trucking industry and out-of-state residents, including tourists, currently account for a large share of fuel consumption in Virginia and would stand to receive substantial benefits from this plan. Less than a third of the benefit from suspending the state gas tax would flow to Virginia residents with incomes below $136,000. The majority would be received by industry or people who don’t live in Virginia.