Savings from axing Virginia gas tax won't all go to drivers, expert says

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Photo - Woman putting gas in the tank of her car, extreme close-up
Woman putting gas in the tank of her car, extreme close-up
Local,Virginia,Transportation,Steve Contorno,Taxes

Gov. Bob McDonnell's plan to abolish Virginia's 17.5-cent tax on a gallon of gasoline is meeting resistance from lawmakers who are uncertain that the bulk of those savings would be passed along to drivers.

"A lot of us are concerned that even though you cut gas tax by 17.5 cents, it doesn't mean oil companies will [not raise prices]," said Del. Dave Albo, R-Springfield.

A steep drop in the cost of gas at the pump has been a key selling point as McDonnell tries to win support for his proposal, which also includes a 0.8-cent hike in the sales tax to help raise $3.2 billion for roads. McDonnell has noted that Virginia already boasts some of the cheapest gas on the East Coast and eliminating the tax would make it the lowest this side of the Mississippi.

Though the cost of gas would surely drop, AAA Mid-Atlantic spokesperson John Townsend said it's likely that oil companies, wholesalers and gas stations would eat some of those profits. He expects gas would drop between 10 and 12 cents per gallon.

Virginia's gas tax is already 6 cents lower than in D.C. and Maryland, which both tax gasoline at a rate of 23.5 cents per gallon. On average, however, Virginia's gas costs 12 cents less than Maryland's, according to AAA.

Despite differences in the tax, gas prices around Northern Virginia are about the same as in the greater Washington area.

A gallon of regular gas in Arlington cost $3.52 on Friday. In Fairfax, it was $3.50, and in Alexandria, $3.49. That's about on par with Maryland, which averaged $3.52 for a gallon of gas in Silver Spring, $3.47 in Capitol Heights and $3.51 in Takoma Park. The District was at $3.56.

"Gas is a very complicated product, and a lot of factors determine what the price is," Townsend said.

And there's no precedent to study, because Virginia would be the first state to get rid of the gas tax.

"That's never happened before," said Mike O'Connor, president and CEO of the Virginia Petroleum, Convenience and Grocery Association. "The cost of crude oil is the only barometer we have. You will see that when crude oil goes up, gas street prices go up. Crude oil goes down, gas street prices go down."

One thing is certain, though. Once the gas prices fall, gas stations in Montgomery and Prince George's counties and D.C. will see a drop-off in business.

"People would feel it in their pocketbooks right away, and it would make Virginia one of the cheapest places to buy gas," Townsend said. "For a lot of drivers in Maryland and D.C., it's just a jump across the bridge."

scontorno@washingtonexaminer.com

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