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by Scott Mooneyham
As legislators approved major changes to the state’s tax code this summer, some spoke about the legislation being only the first step to rework North Carolina’s tax structure.
In political circles, the talk elicited plenty of skepticism.
Lawmakers had already expended plenty of political capital in pushing through the changes that were approved.
The Republican majority was pilloried by the left for deciding on changes that looked more like a tax cut than significant, structural reform; business and interest groups had pushed back and fought off some proposals for more substantial, foundational changes; within their own party, Republicans were left with bruised egos and scars.
That left plenty of political observers concluding that legislators would want no part of another round of tax overhaul anytime soon.
They may have no choice.
While characterizing the larger tax structure in the state as broken, legislators did not address the part of the state’s taxing framework that is really threatening to breakdown — the gas tax.
North Carolina’s gas tax is a dedicated tax. It goes toward road construction and maintenance, and not into the general operating budget. The gas tax funds 70 percent of all road building and maintenance.
So, for the state to have the necessary money to build and repair roads, it needs an ever expanding pool of revenue to deal with a growing population traveling the state’s roads and to keep up with inflation.
The problem is exacerbated by the population shift to urban centers, meaning that those areas’ transportation needs grow even faster than the general population increase.
The move by Gov. Pat McCrory and state lawmakers to rework the state’s formula for allocating road-building dollars should help and was sorely needed.
[But as one local journalist reported], those changes will not be enough because of declining fuel consumption as cars become more fuel efficient or don’t use gas at all.
A presentation to the state Board of Transportation showed that motor fuel use in North Carolina peaked in 2006-07 and has been declining since.
Rising gas prices have surely helped to mitigate the effects of that declining fuel consumption, as the rate of the gas tax resets every six months based on the average pump price.
According to the presentation, state lawmakers expect the slide in fuel consumption to be reversed as the economy improves and more trucks hauling goods hit the road.
But Mark Foster, the Department of Transportation’s chief financial officer, told board members that by 2018 the downward slide of less fuel consumption will have taken hold for good.
Obviously, that is good news for consumers and the environment.
It demands, though, that state leaders figure out a new path to raise revenue for roads and transportation.
With all the heavy lifting done to pass the larger tax overhaul, the looming question is whether they have the strength left to fix transportation taxes.
—Scott Mooneyham covers the state Legislature for the Capitol Press Association.