The state House and Senate gave tentative approval on Monday to a bill that would drop the state’s gas tax by 1.5 cents per gallon, with leaders in both chambers saying they needed to ensure the short-term stability of North Carolina’s primary source of state funds for road construction.
Both chambers need to take a final vote on Tuesday before the measure heads to Gov. Pat McCrory, who has said he will sign the bill.
North Carolina’s current gas tax is 37.5 cents per gallon, meaning Senate Bill 20 will save drivers about 23 cents on a 15-gallon fill up starting Wednesday and running through the remainder of the calendar year. The current gas tax rate is derived from a formula based largely on the wholesale price of gasoline. When wholesale prices go up, the tax has gone up. When they drop, the price goes down.
North Carolina and the rest of the nation have seen months of relatively low gas prices, which meant that, if lawmakers had done nothing, the gas tax would have dropped to 30 cents per gallon this summer. While drivers may have been happy to see that fall off at the pump, lawmakers said they would have been less than pleased with the fall off in road repairs and expansions.
Under Senate Bill 20, the gas tax would fall to 35 cents per gallon on Jan. 1, 2016, and then to 34 cents per gallon on July 1, 2016. By the end of 2016, lawmakers say, they hope to reach a grand bargain on replacing the gas tax as the primary source of revenue for funding road construction. If they don’t reach an agreement, a fail-safe in the bill would begin driving up the gas tax rate again, basing the increases on a formula involving population growth and the consumer price index.
The bottom line: NC motorists will be denied a gas tax cut come July 1 – and there will be a gas tax floor established with built-in automatic annual increases going forward unless there is a “grand bargain” reached to replace the gas tax with another form of revenue to fund transportation.