MEDIA RELEASE: Lawmakers may move to cap NC gas tax

State’s gas tax serves as a revenue source for funding vital transportation projects

RALEIGH (Nov. 26, 2011) – Recent statements by North Carolina lawmakers suggest they may take up a measure early next week that would cap the state’s gas tax, a revenue source that provides funding for vital transportation projects. Putting in place a gas tax cap could have major consequences on much-needed transportation investments, especially if construction costs continue to rise.

Capping the state’s gas tax would constrain a funding source that accounts for more than half of state revenues dedicated for transportation projects, including repairing bridges, repaving roads, and filling potholes. The American Society of Civil Engineers recently estimated that poor road conditions cost North Carolina motorists $1.7 billion annually in additional repairs and operating costs.

“Construction workers need jobs, and there is much needed work to fill in potholes and improve roadways to help relieve traffic congestion,” said Edwin McLenaghan, a public policy advocate with the NC Budget & Tax Center. “Yet lawmakers are suggesting a course of action that could hamstring funding for such work at a time when thousands of jobless construction workers are ready and able to get back to work.”

The state gas tax changes every six months to correspond to changes in the wholesale price of gasoline. The “variable portion” of the state’s gas tax is equal to 7 percent of the average wholesale price of gasoline, on top of a flat rate of 17.5 cents-per-gallon. The rate is set to go up by nearly 4 cents per gallon in January, unless lawmakers intervene to prevent the scheduled increase from taking place.

The reason for North Carolina’s relatively high gas taxes is not higher spending on fixing public roads – in fact, data from the North Carolina Department of Transportation shows that the state currently ranks 48th in the country in spending per lane-mile of paved road. North Carolina’s gas tax ranks high because road construction and maintenance is primarily a state — as opposed to a local — responsibility. On average, states own about one-fifth of all roads within their borders, while the NC DOT owns and maintains more than three-quarters of the state’s roadways. North Carolinians may pay higher-than-average state gas taxes, but those taxes are offset by lower property taxes and vehicle sales taxes.

The N.C. General Assembly’s next session will begin at 8 p.m. on Sunday, November 27. Without a clear plan to replace lost revenues resulting from putting in place a gas tax cap, the Department of Transportation will have nearly $100 million less in the second half of the fiscal year to invest in transportation projects.

“Capping the gas tax would increase the gap between the need for investments in transportation and the funding available to meet those needs,” McLenaghan said.

FOR MORE INFORMATION CONTACT: Edwin McLenaghan, Policy Analyst, NC Budget & Tax Center, edwin@ncjustice.org, 919. 856.3192; Jeff Shaw, Director of Communications, NC Justice Center, jeff@ncjustice.org, 503.551.3615 (cell).

The N.C. Budget and Tax Center—a project of the N.C. Justice Center—seeks to create economic opportunity and shared prosperity for all North Carolinians through non-partisan research, education and advocacy on budget, tax and economic issues.