Capital goods - January 2012

Fuming over the gas tax
By Scott Mooneyham

Over the last decade, the clamor and downright demagoguery surrounding North Carolina’s gasoline tax rival that of any topic in state politics. In 2006, a Republican lawyer used complaints about it as a launching pad to run for governor. Legislators have fussed and fought over the tax, capping it for three years and very nearly doing so again for the first six months of this year. How the revenue it raises is spent was behind a court decision affecting the governor’s power over the state budget.

The gas tax is an easy target. Each time a North Carolina motorist drives across the state line into South Carolina or Virginia, he notices lower prices at the pump. It’s not too difficult to recognize the reason for them— a lower gas tax. What those motorists may not realize is how the gas tax is tied to road building, commerce, jobs and even property-tax rates.

There is no disputing that North Carolina’s motor-fuels excise tax of 35 cents a gallon is among the highest in the nation. As of August, only California’s and Washington’s gas taxes were higher. A portion of North Carolina’s rate is variable, rising or falling every six months based on the wholesale price of gasoline. It was scheduled to rise again Jan. 1, probably reaching 39 cents a gallon.

That increase caused another fight in the reconvened session of the General Assembly in November. The House passed a measure that would have capped the tax for six more months, but the Senate left town without taking up the proposal. Supporters of the cap argued that the legislature needed to give consumers a break — that even saving a few dollars a week could add up for a working-class family facing these tough times.

When the proposal came to a vote, most House members pushed the “yes” button. After all, no politician likes to have voting against a tax cut on his record. One who didn’t go along was Bill Owens, a developer from Elizabeth City considered one of the most conservative Democrats in the legislature. “If we had a secret ballot right now, there’d be 100 of you voting with me,” he told his colleagues before the vote.

He was probably right. If politics and re-election prospects were not a part of the equation, scores of fellow House members might have opposed it. Most legislators understand how critical it is to the upkeep of the state’s roads. Each penny of the tax rate raises about $55 million a year. About half of the state’s total transportation budget comes from the tax, and most legislators are well versed on how critical the highway system is to economic development and recruitment of businesses.

Here’s the rub: North Carolina is second only to Texas in the size of its state-maintained road system. Our neighboring states slough road maintenance onto local government. We pay more at the pump, but the residents of those states typically pay higher local property taxes, a portion of which go to maintaining their roads. That’s why you notice that the ride often gets lousy when passing from North Carolina into Virginia on one of those rural, two-lane blacktops.

None of that is likely to change the squawking when legislators return to Raleigh this year. Leaders have already agreed to take a com- prehensive look at road building and Department of Transportation operations. The review will surely mean revisiting the always hot topic of how road money is divvied up regionally. Rest assured it will again lead to calls for a cap on the state gas tax. After all, it’s an election year, and candidates know this is one issue on which they’ll never end up running on empty.

Scott Mooneyham is the editor of The Insider, www.ncinsider.com.