Road Worrier

As taxes rise on gas, will legislators impose a ceiling?

Staff WriterJanuary 4, 2011 

Happy new tax increase, fellow motorists.

North Carolina's motor fuels tax registered a quiet increase of 0.6 cents per gallon on Saturday, the first day of 2011.

Our new state gas tax is 32.5 cents a gallon, and that's an all-time high for North Carolina.

Is this a big deal? That depends on how you look at it.

When you add a state inspection fee of 0.25 cents and the federal fuel tax (unchanged since 1992) of 18.4 cents, our government collects a total of 51.15 cents on every gallon we pump.

My solar-powered calculator tells me we're paying about $7.25 in state and federal taxes on every 15-gallon tankful, and that's 9 cents more than we paid in December.

Our legislators will want to know what we think about this. They'll have to decide this spring whether to let the gas tax keep climbing - or to put a lid on it, as they did in 2006.

Most of the stuff we buy comes with a sales tax that is figured as a simple percent of the retail price. When the price of a shirt rises, the sales tax rises, and nobody notices much.

Gas taxes and gas prices are different. They rise and fall, and we notice. Do we notice too much?

The gas tax is North Carolina's primary source of transportation money - followed by the highway use tax collected on car sales, and various vehicle fees. It's what we use to build new roads and maintain old ones, and to cover other transportation costs.

By state law, the tax is recalculated every six months, in two parts. It's a flat rate of 17.5 cents plus a variable that is the higher of two other numbers: either a second flat rate (currently 12.4 cents) or 7 percent of the wholesale fuel price.

Nobody cared about this until a few years ago, when fuel prices started climbing and that 7 percent calculation started pushing the tax rate higher, fast.

The tax reached 29.9 cents in 2006, and the legislature decided not to let it rise any more.

This made drivers feel a little better, although it didn't keep pump prices from climbing past $3 and $4. Over three years, the tax cap eliminated a few hundred million dollars of revenue the state Department of Transportation would have used for building and maintaining roads.

Then in 2009, fuel prices were down and the tax was about to drop by a couple of pennies. To keep DOT from falling into a deeper revenue hole, the legislature turned that tax ceiling into a tax floor: 29.9 cents became the minimum gas tax instead of the maximum, and it was allowed to rise higher.

Lately, as wholesale prices have climbed, the tax has reached 32.5 cents.

The law that determines the gas tax is scheduled to expire June 30. So the new Republican majority in the legislature must revisit the issue of gas tax ceilings and floors in time to determine the rate that will take effect in July.

Sen. Richard Stevens ofCary, one of a handful of Republicans who voted in 2009 to let the tax rise above 29.9 cents for two years, predicted his party would not want to see it go any higher in July.

"Republicans have generally said we're not in favor of any tax increase, and that would include continuing any temporary tax increase that would automatically expire otherwise," Stevens said. "You don't raise taxes in a recession, especially when the cost of gas is going up in general."

A few other states have changed their gas taxes for 2011 - up 6 cents a gallon in Oregon, down a fraction in Nebraska - according to the American Petroleum Institute.

North Carolina's tax appears to be the highest in the Southeast, except for Florida's, and 13th highest of all the states.

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