MEDIA RELEASE: Capping gas tax would delay repairs, weaken North Carolina’s transportation budget

Lawmakers expected to place gap on gas tax, which accounts for more than half of all revenue for transportation projects

RALEIGH (May 23, 2012) – Capping North Carolina’s gas tax would delay needed repairs and severely weaken North Carolina’s transportation budget, according to a new report. Maintaining a gas tax that generates revenue is critical for building and maintaining a reliable transportation system that is efficient and safe for motorists.

The state’s transportation budget already faces a funding gap, said a report released this morning by the Budget & Tax Center, a project of the NC Justice Center, and its system is under pressure due to aging infrastructure, increasing demand, and declining revenue. Despite these challenges, lawmakers are soon expected to place a cap on the state’s gas tax, which accounts for more than half of state revenue dedicated for transportation projects such as repairing bridges, repaving roadways, and providing public transit.

The gas tax rate is currently 38.9 cents per gallon, the report said, with each penny of the gas tax yielding approximately $50 million each year. Capping the gas tax would prevent revenues from adjusting to rising construction costs, and a permanent or long-term cap on the gas tax would only delay much-needed upgrades at a time when bridges and roads across the state are in dire need of repair. According to the report, North Carolina currently ranks 48th in the country in spending per lane-mile of paved road, and poor road conditions cost North Carolina drivers $1.7 billion in additional repairs and operating costs.

Since the Great Recession, North Carolina has not experienced gradual increases in revenue collections from the gas tax as generally experienced in pre-recession years. However, during this time the price-based component of North Carolina’s gas tax has helped the state sustain revenue to keep pace with transportation needs, the report said. As the price-based component of the gas tax is variable and therefore results in great volatility, placing a cap on this component rather than the overall gas tax would smooth volatility and lead to a more stable rate.

“It’s important for lawmakers to maintain a gas tax that generates sufficient revenue to address growing demand and the current backlog of stressed roads, bridges, and railroads,” said Tazra Mitchell, fellow at the Budget & Tax Center and author of the report. “If lawmakers fail to finance transportation investments responsibly, North Carolina may face a dramatic decline in its transportation system and experience more congested roadways that translate into significant costs to motorists.”

FOR MORE INFORMATION CONTACT: Tazra Mitchell, Budget & Tax Center Fellow, Tazra@ncjustice.org, 919.861.1451; Jeff Shaw, Director of Communications, NC Justice Center, jeff@ncjustice.org, 503.551.3615 (cell).