OPEC (Organization of the Petroleum Exporting Countries) talks disintegrated last Wednesday, causing the price of oil to yet again rise over $100 a barrel, giving little hope of relief at the pump in the near future. While the price of oil rising is hardly recent news, the breakdown in efforts to reduce gas prices provides a perfect backdrop for discussion about the impending North Carolina gas tax increase and how the state has the real possibility of saving its citizens considerable amounts of money.
North Carolinians pay the second highest gas tax rate in the Southeast, and the thirteenth highest in the country. Currently resting at 32.8 cents per gallon, the gas tax will increase to 36 cents per gallon come July. Individuals and industries alike are feeling the squeeze compared to neighboring states’ rates of 16.8 cents (South Carolina), 21.4 (Tennessee), 20.8 (Georgia), or 19.7 cents (Virginia). Unless the legislature and governor act quickly it will become even more expensive to travel, forcing consumers (and possibly jobs) across state borders and stifling an already sagging economy. However, there is an option that could ensure that gas is available at a lower rate and save North Carolinians millions. (For more on the gas tax, see here)
In 2010, North Carolina’s gas tax ceiling was turned into a floor, increasing state revenues at the expense of taxpayers. Now the government has the option of returning the fiscally responsible cap, placing priority on citizens’ financial wellbeing over increased tax revenue. Recent polling shows that an overwhelming majority (80 percent) of citizens want the cap reinstated. Lawmakers, elected by these same people, should listen to this abundantly clear message and make the decision to limit taxes.
Tax cap opponents may assert that a decrease in tax revenue could possibly damage North Carolina’s transportation infrastructure. An in-depth examination of such a claim, however, quickly reveals how cutting gas taxes would not irreparably damage the state’s transportation systems.
Originally created in 1921, the gas tax was designed to support highway construction and maintenance statewide. Over the years, funds have been diverted for other projects within the Highway Trust Fund. Examples of such non-highway funding include everything from local bike paths to ferries along the coast to shuttles utilized in trade shows.
Moreover, there remains plenty of fat to trim from North Carolina’s transportation spending. For instance, the Secondary Road program within the Highway Fund has been recognized by state analysts as being in need of significant funding reductions. Originally created to pave and create local roads, the Secondary Road program has likely outlived its usefulness. Funded with gas tax revenue, the program continues to divert gas tax dollars away from highway creation and maintenance to serve local interests with statewide revenue. A Fiscal Research ‘Justification Review’ in March 2007 recommended “The General Assembly should reduce or eliminate funding for a specific secondary roads program and reconsider the State’s role in funding local roads and streets.” Yet despite this official government recommendation, the 2011-2012 biennium budget allocates over $54 million in spending for a program the government itself deemed unnecessary.
Additionally, the DOT’s antiquated “equity formula” to determine funding has wasted countless millions over the years building ‘roads to nowhere.’ A 2007 audit conducted by a leading management consultancy firm found that NCDOT wastes significant amounts of money due to poor management practices.
Addressing these issues will easily compensate for any dip in revenue resulting from re-instating a cap on the gas tax. Indeed, with the tax capped, consumers would purchase more gas in state, thus minimizing the decrease in tax revenue.
With the legislature wrapping up this week, it is more than likely too late to save North Carolinians from the July gas tax increase. Nonetheless, future hikes can be prevented; next session legislators can continue their efforts to remove excessive tax burdens on the people and implement a gas tax cap. Armed with the understanding of wasteful transportation spending, it is possible to effectively fund necessary road programs while, at the same time, eliminating superfluous spending and fulfill campaign promises.
Despite international oil providers being unable to reach an agreement to reduce the price of gas, North Carolina lawmakers can.