Per this N&O article, some NC lawmakers are considering once again placing a cap on the state’s gas tax.
Because a portion of the gas tax is based upon the average wholesale price of gas, the tax rises as the price rises. HB 399 would set a limit to how high that variable portion can rise, thus preventing the gas tax from rising above 32.5 cents per gallon – which is where the tax currently stands.
Taylor Holgate of the Civitas Institute recently wrote about NC’s gas tax and some of its recent changes.
The gas tax in North Carolina is partially tied to the price of gas. The tax consists of a flat rate of 17.5 cents per gallon, plus 7 percent of the wholesale price of fuel. So when gas prices go up, taxpayers pay more at the pump.
Several years ago, with gas prices on the rise, the state legislature implemented a tax ceiling, ensuring that the gas tax would not go above 29.9 cents a gallon, no matter the price of gas.
In 2009, the price of fuel fell, meaning less revenue for state government. Rather than let the tax fall with the price of gas, lawmakers turned the ceiling into a floor; ensuring that the state would make at least 29.9 cents on every gallon of gas sold in North Carolina. This move might have made sense if the money was going to meet the demand for more roads in high traffic areas, but in reality the opposite is true.
NC’s gas tax is signifcantly higher than our neighboring states, which sends consumers near state borders to other states for their business, and encourages travelers to hold out until they cross state lines to fill up. This negatively impacts our economy and hurts small businesses that lose customers. HB 399 would be a good step, but it would still signify a 3 cents per gallon increase over the previous gas tax cap.
However, in neighboring SC they have the ability to use local option sales tax to fund many road improvements. NC is entirely tied to the gas tax to fund virtually all road improvements. One way or another the government will get what they need. A gas tax is the most equitable (actually a VMT tax is which accounts for the rise in hybrids).