There’s been much ado in recent months about North Carolina’s “record high” gas tax levels, but that claim is missing some important historical and economic context. After adjusting for inflation, North Carolina’s gas tax is actually quite low by historical standards (see chart below). In fact, it’s only in comparison to a brief period of low gas taxes in the early 1980s that the state’s current gas tax rates appear abnormally high.
Even from the historical inflation-adjusted low in 1980, North Carolina’s 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 to account for the role of petroleum products in the price of road construction and maintenance. Although declining fuel consumption, driven largely by improvements in vehicle fuel economy, has gradually eroded gas tax revenues in recent years, the chart below does show that North Carolina’s hybrid gas tax rate has helped to sustain revenues for transportation projects to better keep pace with transportation needs.