The good folks at the N.C. Budget and Tax Center released a new report today that explores the pitfalls of capping the state gas tax (an idea that both Governor Perdue and legislative leaders have proposed) and proposes a better way to make the tax more stable and predictable. Here are the main findings:
- North Carolina’s transportation budget faces a funding gap. Since the Great Recession, North Carolina has not experienced gradual increases in revenue collections from the gas tax as generally experienced in pre-recession years. The purchasing power of construction and maintenance dollars has also eroded.
- Despite revenue shortfalls for transportation projects, the price-based component of the state’s gas tax has helped North Carolina sustain revenues to better keep pace with transportation needs. Capping the gas tax would prevent revenues from adjusting to rising construction costs.
- The price-based component of the gas tax is variable and therefore results in great volatility. Placing a cap on this component of the gas tax—rather than the overall gas tax—would smooth volatility and lead to a more stable and predictable rate.
You can read the entire (4 pp.) report “Staying in the Fast Lane: Gas Tax Cap Would Delay Needed Repairs and Weaken North Carolina’s Transportation Budget” by clicking here.