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New report: Gas tax cap is a bad idea

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.

6 Comments

  1. Alex

    May 23, 2012 at 6:52 pm

    We already have the highest gas tax in the Southeast !

  2. Frank Burns

    May 23, 2012 at 7:28 pm

    I do find it peculiar that anyone would be disappointed in a cap in taxes. What level of tax would satisfy the tax and spend proponents?

  3. Alex

    May 24, 2012 at 7:00 am

    I would imagine you could find plenty of fat over at the DOT ! That has been a Democratic slush find for years !

  4. Jeff S

    May 24, 2012 at 12:42 pm

    I find it peculiar, Frank, that anyone would ask for a cap in a variable rate tax.

    Price goes up, consumption goes down, tax revenues don’t increase but the cost of running the department does. Net loss.

    I can only assume that you’ve forgotten that roads spending is a business subsidy in the first place. Personally, I think we should stop building new roads entirely and only maintain what we have, but very few will agree there.

  5. Frank Burns

    May 24, 2012 at 2:59 pm

    Jeff,
    Indeed, as the price goes down (less taxes) consumption goes up and therefore tax revenues increase as well. Does it occur to you that increased taxes on gasoline dampens consumption and increases cost on everything to consumers?

    How much tax will you consider to be enough? At some point, (we should start now) we need to look at reducing costs. We cannot sustain increased taxes over and over again.

  6. Doug

    May 24, 2012 at 9:03 pm

    Would you want a variable sales tax on food that kept going up?