Transportation Taxation Policies for Virginia

Improving the revenue base of the Virginia Division of Motor Vehicles by means of changes in the transportation tax system is explored. An econometric forecasting model was developed to project the potential revenues from Virginia's motor fuel sales tax, vehicle sales and use tax, and registration fee system. Among the options explored are: increases in the tax per gallon of motor fuel, a fuel sales tax indexed to gasoline prices, an ad valorum fuel tax, in addition to the current tax per gallon, increases in addition to the current tax per gallon, increases in the percent vehicle sales and use tax, and increases in registration fees. Although each scheme had its advantages and disadvantages, it was found that the most productive and least politically awkward way of stabilizing the Division of Motor Vehicle revenue base is probably an increase in the vehicle sales and use tax.