Business group urges NC gas tax holiday. Will it work? Would it provide much relief?
This winter’s spike in gas prices has politicians and some interest groups calling for governments to temporarily stop collecting fuel taxes.
Lawmakers in Georgia, for example, are poised to suspend their state’s gas tax through May 31, while Florida’s legislature approved a one-month reprieve from its pump tax in October, a low point for tourism.
This week, the National Federation of Independent Business called on Gov. Roy Cooper and leaders of the General Assembly to suspend North Carolina’s gas tax of 38.5 cents per gallon.
Russia’s invasion of Ukraine has driven gas prices to historic levels. The average price of regular unleaded in the state was $4.16 a gallon Wednesday, up about $1 since Feb. 1, according to AAA.
Knocking off the state gas tax for a while would be a big help to all North Carolinians but particularly the 7,000 small businesses that belong to NFIB, said Gregg Thompson, the group’s state director.
“Gas prices are soaring in North Carolina,” Thompson said. “That’s bad, because the cost of fuel affects the cost of everything, from raw materials to inventory to pickups and deliveries.”
Thompson noted that 20 states are looking at gas tax relief, by either delaying tax increases, suspending collection or providing some sort of rebate.
“We’re not the only ones who are encouraging politicians to look at this,” he said.
A Cooper spokesman acknowledged that high gas prices have been difficult for North Carolinians and said his administration would “carefully review” the question of suspending the gas tax. But in a written statement, Jordan Monaghan also noted two reasons for hesitating.
“The state gas tax provides critical revenue for building and maintaining roads and bridges,” Monaghan wrote. “And with any tax cut, we would need to make sure the savings were actually passed on to consumers at the pump and not just added to the bottom line of the oil and gas companies.”
House Speaker Tim Moore says he’s “open to all options that save consumers money on fuel costs, including reducing taxes.” But, Moore added, the best strategy would be to encourage more domestic oil and gas production in hopes that would “make us energy independent and not subject to price hikes thanks to foreign bad actors.”
Meanwhile, a spokeswoman for Senate leader Phil Berger said state lawmakers haven’t considered the issue.
“There have been no discussions about suspending the gas tax,” Lauren Horsch said in an email. “The General Assembly is not in session and is therefore unable to even consider waiving the gas tax.”
Including the 18.3-cent federal gas tax, North Carolina drivers pay 56.8 cents in taxes on each gallon of gas (the federal tax on diesel is 23.4 cents a gallon). That’s more than every state but California, Washington, Pennsylvania and Illinois and the same as in Ohio.
The N.C. Department of Transportation estimates the average North Carolina driver travels 12,000 miles a year in a vehicle that burns one gallon of fuel every 22 miles. That average driver would pay $4.04 a week in gas taxes.
The gas tax accounts for half of the state revenue for NCDOT; most of the rest comes from DMV fees and a tax on vehicle title transfers.
In the most recent fiscal year, the gas tax generated $2.1 billion for NCDOT, or about $175 million a month.
“A gas tax suspension would result in construction and maintenance project delays,” said NCDOT spokesman Jamie Kritzer. “Grass mowing, litter pickup, pothole patching and other operations that are less essential or not directly related to safety would also be impacted in ways similar to what we saw when COVID-19 impacted the motor fuel tax due to lower traffic volumes in 2020.”
But Thompson said his group doesn’t want to deprive NCDOT of any money. It wants the General Assembly to cover the missing gas tax revenue from the budget surplus or the state’s rainy day fund.
This story was originally published March 16, 2022 at 12:10 PM.
