Senate Republican leaders want to hike the maximum highway use tax the state can collect on vehicle sales from businesses that buy trucks, and from other North Carolinians who buy recreational vehicles.
Their budget proposal released Wednesday would not change the 3 percent tax rate set for vehicle sales since 1989, and there would be no change in the taxes collected on most car and truck sales.
But it would raise the cap – the maximum tax that can be charged for commercial vehicles (now $1,000) and recreational vehicles (now $1,500). Both caps would rise to $2,000 in January and $3,000 in July 2015. That would be enough to generate an additional $11 million in annual state revenues.
“We’re opposed to that,” said Bob Glaser, president of the N.C. Automobile Dealers Association.
Farmers and businesses would suffer when the highway use tax they pay when they buy heavy commercial trucks is tripled, from $1,000 to $3,000, he said. And he worried that North Carolina truck dealers will lose sales.
“It just drives the sale out of the state,” Glaser said. “You’re going to buy the truck where the lowest tax is.”
Taxes on vehicle sales actually will remain lower in North Carolina than in most neighboring states. Several study groups, looking for options to improve the state Department of Transportation’s flagging revenue prospects over the coming decade, have recommended a 1 point increase in the highway use tax rate.
Virginia recently approved a phased increase that will lift its vehicle sales tax rate from 3 percent to 4.15 percent by 2017. North Carolina’s highway use tax brings in nearly $600 million a year, so a proposed 1 point tax rate increase would be worth about $200 million.
North Carolina’s gas tax, higher than in neighboring states, would remain capped at 37.5 cents a gallon in the proposed Senate budget.
The Senate budget also would:
* Increase from $150 to $250 the highway use tax cap paid by people moving their cars to North Carolina from other states, generating an additional $3.2 million a year.
* Reflect improved projections for a 4 percent increase in gas and other transportation tax collections.
* Eliminate a motor fuel tax refund for taxi cabs starting Jan. 1, worth $185,121 per year.
* Add $350,000 to pay for Division of Motor Vehicles Medical Review Board hearings and case reviews conducted by private physicians under contract with DMV.
* Cut $6.7 million from DOT’s transit, rail, ferry, bike-pedestrian and aviation branches, and make more cuts in several administrative areas – to increase funding for construction, road maintenance and pavement preservation.
* Give the Division of Motor Vehicles more funds to produce a new-format driver’s license, to make other technology and customer service improvements, and to start allowing some drivers to renew their driver’s licenses online.