Automobile dealers and insurance companies are worried about a wide-ranging House proposal to raise new money for transportation by collecting a few hundred million dollars more each year in taxes on car and truck sales and insurance premiums.
The House Transportation Committee next week will take up a bill sponsored by its chairman, Rep. John Torbett, that would levy new or increased fees and taxes to help the state Department of Transportation reduce its overwhelming dependence on gas taxes to pay for roads, bridges, transit and other transportation needs.
House Bill 927 would cut the gas tax by 6 cents a gallon to 30 cents in July, then allow it to rise slowly again starting in 2017. Motorists would save $300 million in gas taxes during the first year, according to a new analysis from the legislature’s fiscal research staff.
But Torbett’s proposal would cancel out most of that gas tax cut with a 50 percent increase in Division of Motor Vehicles fees, collecting an additional $280 million a year.
And after steep increases in other taxes and additional changes in state law, DOT would end up with a net revenue increase averaging $447 million a year over the next five years, the fiscal analysis said. Most of the new money would be set aside for repaving roads and improving state ports.
The highway use tax on car sales – lower now in North Carolina than in neighboring states – would rise from 3 percent to 4 percent to rake in an additional $214 million a year for DOT. Bob Glaser, president of the N.C. Automobile Dealers Association, said North Carolina should draw on a wider range of sources to generate more money for transportation.
“We were looking for a broader solution than just a 33 percent tax increase on the sale of new vehicles,” Glaser said Friday. “We see a clear need in the state, but we don’t want to be the only one that’s kicking in a solution.”
New insurance tax
North Carolinians also would be asked fork over new taxes when they pay their yearly car and truck insurance premiums.
The fiscal analysis said DOT would glean $158 million a year from a proposed 6.5 percent tax on yearly car and truck premiums in Torbett’s bill. But that estimate might be low, based on only a portion of the state’s total insurance volume, according to numbers provided by the state Department of Insurance and an insurance industry lobbyist.
Raleigh lawyer John McMillan, who represents insurance companies and trade groups, said Torbett’s insurance tax would generate almost $350 million a year for DOT. The 6.5 percent levy would be added to a 1.9 percent tax that now goes to the state’s General Fund for non-transportation needs.
McMillan said he has warned Torbett about punitive laws in other states that would respond by setting higher tax rates on policies sold by North Carolina-based insurance companies, in retaliation for this combined 8.4 percent tax rate.
“That was something I don’t think Rep. Torbett was familiar with,” McMillan said. “He said he had filed this bill to start a dialogue about highway revenues. ... There may be another approach to it as it goes forward. But I think this would put North Carolina way out of line with all the other states.”
Gas and diesel fuel taxes supply two-thirds of state DOT budget revenue now, and North Carolina’s fuel tax rate is one of the highest in the nation. But these tax collections are dwindling as more fuel-efficient cars use less gas and pay less in taxes per mile. Torbett, a Gaston County Republican who did not respond to a request for comment, has said he wants to draw on more stable revenue sources.
Glaser, the auto dealers association president, complained that the legislation would have the increased taxes “just being shouldered by the car dealers,” but he said Torbett “did a great job on the first pass at it.”
McMillan said he understands that Torbett is trying to find more reliable sources of money for the state’s transportation needs.
“His objective is to replace a portion of the gas tax with income that would grow instead of decline as the gas tax does,” McMillan said. “He doesn’t have it in for insurance companies.”
Other provisions in House bill
Rep. John Torbett’s House Bill 927 also would:
▪ Phase out, over four years, the transfer of $196 million from the Highway Fund to the General Fund, where it covers most of the State Highway Patrol budget. Legislators would have to find other money for the Highway Patrol.
▪ Adjust the gas tax rate, starting in 2017, according to changes in state population and a national energy price index.
▪ Make it easier for citizens to report potholes and other problems, and require DOT to repair potholes within 48 hours. DOT says that would cost $35 million a year.
▪ Direct new revenues – $300 million in fiscal year 2015-16 and $530 million a year afterward – to highway resurfacing, port modernization and dredging, municipal resurfacing, and repair of structurally deficient bridges. The municipal resurfacing increase would be partly offset by cuts in Powell Bill funds for city streets and sidewalks.