02/06/2011

The Road Ahead

There was a joint meeting of House and Senate Finance Committees last week to give all Committee members an overview of North Carolina’s current tax/revenue system. The agenda covered tax revenues for the General Fund. Future meetings are scheduled to complete the orientation of members.

Before the Fiscal staff could complete their presentation on the sales tax, Representative Edgar Starnes interrupted to ask questions about North Carolina’s gas tax. Committee Co-Chair Julia Howard explained that they had an agenda to follow and that the gas tax was not up for discussion today, and she assured him that all taxes and revenue sources would be covered in future meetings. Starnes thanked her but took the opportunity to say he wanted “an explanation of why we have the highest gas tax in the nation.”

North Carolina DOES NOT have the highest gas tax in the nation. North Carolina’s base rate for gas tax is 17.5 cents per gallon, plus a variable rate that moves up and down with the wholesale cost of gasoline. Currently, with the high gas prices, our gas tax is 32.5 cents a gallon. That puts us at number 13 among the 50 states. But consider this; North Carolina has the second highest number of state maintained roads in the nation. NC maintains 79,466 miles of paved roads, second only to Texas. That represents 75% of all paved roads in North Carolina. Georgia has a relatively low gas tax but the state maintains only 15% of all paved roads. The remaining 103,875 miles of roads in Georgia are maintained by the counties and cities. They add additional sales tax to gas at the local level and they use property taxes to fund those county roads.

The bottom line? Everybody pays for their roads in one way or another. You can do it at the pump or you can do it in higher property taxes or sales taxes. Or maybe we just make all our roads toll roads. That’s a true user pay method. How do you think the public will react to that?

We will face efforts to cut the gas tax this year. In 2007 the General Assembly set a “ceiling” of 29.9 cents, resulting in a loss of over $400 million over two years. In 2009 the Legislature reversed that and made 29.9 cents the “floor” so that the gas tax would not fall below that rate. There will no doubt be bills filed to remove that ceiling and other bills filed to reduce the overall rate. In the past we have been able to defeat efforts to do away with the variable rate altogether. This year that will be much harder. As you talk to your friends and associates, if you speak with your elected representatives – the message is clear. Roads aren’t free. We pay for them one way or the other. If we lower the gas tax our system will suffer unless we find another source of revenue.

Good roads cost money.

Bad roads cost more.