Uncategorized

Capping the Gas Tax Could Put North Carolina in the Slow Lane

There aren’t many in North Carolina who would argue that the state suffers from too little congestion, too few potholes, not enough crumbling bridges, or too many construction jobs.

More than 5,000 of the state’s 13,000 bridges (almost 4 in 10) are structurally deficient or functionally obsolete.  The American Society of Civil Engineers (ASCE) recently down-graded North Carolina’s roads from D to D-, and also estimates that poor road conditions cost North Carolina motorists $1.7 billion annually in additional repairs and operating costs.  At the same time, unemployment in the construction industry continues to remain above 13 percent.

Thus, it’s strange that recent statements by some North Carolina lawmakers suggest they may take up a measure after Thanksgiving that would reduce funding for vital transportation projects aimed at reducing congestion and improving the condition of the state’s roadways and bridges.

The measure in question is a seemingly perennial (and typically bipartisan) effort to cap the  state’s gas tax, a revenue source that accounts for more than half of state revenues dedicated for transportation projects.  Despite the impact a gas tax cap could have on transportation revenues, there’s been little discussion of replacing any lost revenue from capping the gas tax.

Unlike in most states, a portion of North Carolina’s gas tax varies every six months in response to changes in the wholesale price of gasoline.  The “variable portion” of the state’s gas tax is equal to 7 percent of the average wholesale price of gasoline, which is levied on top of a flat rate of 17.5 cents-per-gallon.  The rationale for allowing part of the gas tax rate to rise and fall with the price of fuel is that much of the cost of maintenance and construction is linked to the cost of petroleum-based materials, especially asphalt.

For the six months ending January 1, the two parts of the state gas tax add to 35 cents per gallon, putting North Carolina’s gas taxes at ninth-highest in the nation.  The primary reason for North Carolina’s relatively high gas taxes is not higher-than-average spending on public roads.  Data from the North Carolina Department of Transportation (NC DOT) indicate the opposite:  North Carolina ranks 48th in the country in spending per lane-mile of paved road.

The reason North Carolina’s gas tax ranks high when spending is relatively low is that, more so than in almost any other state, road construction and maintenance is primarily a state — as opposed to a local — responsibility.  On average, states own about one-fifth of all roads within their borders.  In comparison, NC DOT owns and maintains more than three-quarters of the state’s roadways.  Thus, while North Carolinians (and out-of-state motorists passing through the state) may pay higher-than-average state gas taxes, the higher gas taxes are more than offset by lower property taxes and vehicle sales taxes (i.e. “highway use taxes”).

And what’s often left out in discussions of North Carolina’s relatively high gas tax rate is that it doesn’t translate directly into high gas prices.  In fact, according to the most recent AAA survey, North Carolina’s average gas price is exactly in line with the US average, suggesting that capping the gas tax might not have much impact at the pump.

Although there are long-term trends, particularly the shift toward more fuel-efficient and hybrid-electric vehicles, that will necessitate a move toward alternative means of financing transportation projects, capping the gas tax would only worsen the large-and-growing gap North Carolina faces between the need for investments in transportation and the available funding to meet those needs.

One Comment


  1. […] gas tax has merely kept pace with rising construction costs (see chart below).  As mentioned in this space yesterday, a portion of North Carolina’s gas tax rate rises and falls with the price of gas […]

Check Also

Some of Obama Administration’s Proposed Tax Changes Lay Groundwork for Federal, State Reform

This blog post is one in a series ...

Top Stories from NCPW

  • News
  • Commentary

The controversy over “Silent Sam,” the Confederate monument on UNC’s Chapel Hill campus, has been ra [...]

North Carolina tries to mine its swine and deal with a poop problem that keeps piling up A blanket o [...]

This story is part of "Peak Pig," an examination of the hog industry co-published with Env [...]

Few issues in the North Carolina’s contentious policy wars have been more consistently front and cen [...]

Five years ago, the U.S. Department of Justice (DOJ) filed a jaw-dropping civil rights lawsuit again [...]

Will Burr and Tillis really vote for this? For much of the 20th Century, one of the labels that Amer [...]

President Trump and Congressional Republicans aim to rebrand enormous tax cuts for the wealthiest ho [...]

20—number of years since a bipartisan coalition in Congress passed the Children’s Health Insurance P [...]

Spotlight on Journalism

We invite you to join a special celebration of investigative journalism! The evening will feature Mike Rezendes, a member of the Pulitzer Prize-winning Boston Globe Spotlight Team known for their coverage of the cover-up of sexual abuse in the Catholic Church.

Tickets available NOW!

Spotlight On Journalism

This event will benefit NC Policy Watch, a project of the North Carolina Justice Center. Sponsorship opportunities available now!

Featured | Special Projects

NC Budget 2017
The maze of the NC Budget is complex. Follow the stories to follow the money.
Read more


NC Redistricting 2017
New map, new districts, new lawmakers. Here’s what you need to know about gerrymandering in NC.
Read more