Road Worrier Blog

NC House budget offers lower gas tax, higher diesel tax and DMV fees

With a proposed budget that raises motor vehicle fees while cutting the gas tax, House Republicans have backed away from earlier talk about a $1 billion boost for state transportation funding.

The Division of Motor Vehicles would collect an additional $289 million a year with the 50 percent increase for driver licenses, vehicle titles and other fees recommended Thursday in the House budget. The annual car registration renewal fee – not including county property taxes – would rise from $28 to $42.

The gas tax, now 36 cents a gallon and scheduled to drop in January to 35 cents, would be cut instead to 33 cents in January. While truckers and other drivers who use diesel fuel have always been taxed at the same rate in the past, the diesel tax would be set 3 cents higher than the gas tax – starting in January at 36 cents.

The state Department of Transportation’s fuel tax collections would be reduced by $29 million a year.

The higher diesel tax recognizes that heavy trucks cause a disproportionate share of damage to state highways, a House budget writer said.

“They put more weight on the roads,” said Rep. John Torbett, a Gaston County Republican and co-chairman of the House Transportation Appropriations Subcommittee, said Thursday. “On more of your rural roads they might lead to more deterioration than, say, a normal four-wheel vehicle would do.”

$75 million for ports

The House budget also would steer $75 million to the State Ports Authority over the next two years for channel dredging, modernization of cranes and berths and other improvements at the Wilmington and Morehead City ports. Transportation Secretary Tony Tata would decide how that money is spent.

The budget incorporates some proposals from a transportation funding package Torbett introduced in April, but it drops other recommendations that would generate hundreds of millions of dollars for the state Department of Transportation.

Torbett had proposed a one-point increase in the 3 percent highway use tax on car sales (worth $214 million a year for DOT), a new 6.5 percent tax on auto insurance premiums ($158 million) and a four-year phaseout for $200 million transferred annually from the Highway Fund, which pays for road maintenance, to the non-transportation General Fund.

Rep. Frank Iler, a Brunswick County Republican who also co-chairs the transportation budget panel, said there was little political appetite for an increase in the automobile sales tax, which is lower in North Carolina than in neighboring states.

“It was not going to be a popular thing among members,” Iler said. “It probably would not pass.”

Rep. Grier Martin, a Wake County Democrat, praised House Republicans for finding more transportation money, and for budget proposals that would focus some of it on road maintenance and repaving. But he said higher DMV fees will hurt low- and middle-income North Carolinians, and he said the budget failed to provide needed funds for public transportation.

“I would like to see more funding for transit in its various forms, including bus and light rail,” Martin said.

No one is predicting what the House and Senate will do about gas and diesel taxes. The new House budget marks the fourth or fifth attempt this year by leaders of the two chambers to decide how to ease North Carolina away from its inordinate reliance on the fuel taxes – which pay for more than two-thirds of state transportation costs but are starting to decline while state needs grow.

One of the first bills signed this spring by Gov. Pat McCrory cut the gas and diesel tax by 1.5 cents to 36 cents on April 1. Under that law, the tax would fall to 34 cents in July 2016 and then start rising slowly in 2017. Before the House came out with its new proposal Thursday, there had been no public discussion about having North Carolina join other states that tax diesel fuel more heavily than gasoline.

Other House budget provisions would:

▪ Send ferry toll receipts to the DOT bridge program, and begin paying for ferry vessel replacement and repair with bridge program funds.

▪ Take away the Board of Transportation’s authority to review DOT staff decisions about spending priorities in the Strategic Transportation Investment program for highway, bridge and other transportation construction.

▪ Ignore McCrory’s budget request for $4 million to design and build new DMV headquarters.

▪ Set aside one-half percent of fuel tax collections to pay for dredging shallow draft navigation channels.

▪ Require city and county governments to pay for any additions or improvements they request for DOT projects.

▪ Require continued sharp cuts in the work done by DOT employees for roadway design, environmental permits and right-of-way acquisition – and outsourcing this work to private contractors.

▪ Establish a new “DOT Report” program to increase DOT’s response to citizen concerns. DOT would have to repair potholes within two working days after they were reported.

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