NC Senate Passing Gas Tax Raise As A Cut

Feb 11, 2015

Republican sponsors called it a tax cut, but a bill awaiting one final vote in the North Carolina Senate would ultimately raise the tax. And, those same sponsors are counting on the revenue it will bring in.

Republican Senator Bill Rabon described the bill to his colleagues as doing three things:

“It cuts, it freezes, and it stabilizes a very volatile tax,” said Rabon.

The “cut” and “freeze” parts would lower the state gas tax to an even 35 cents a gallon for the rest of the year, down 2.5 cents.

That will cost the Department of Transportation a projected $33 million this year. The bill directs the department to layoff 500 employees and eliminate 50 open positions.

But starting next year, the bill raises both the minimum gas tax and the amount it increases with fuel prices. By 2019, it could be 41 cents a gallon, according to a state appropriations document.  

A chart of changes the bill will cause to gas tax revenue (higher revenue also means a higher gas tax) this fiscal year, and over the next four, based on data from the North Carolina General Assembly's Fiscal Research Division. All numbers in millions.
Credit Ben Bradford / WFAE

“I think most citizens in the state of North Carolina would consider that a motor fuels tax increase,” said Senator Ben Clark, a Cumberland County Democrat. “I certainly do.”

On this bill, the parties find themselves on unusual sides. The North Carolina chapter of the conservative Americans for Prosperity blasted senators this week, calling the bill a “bait-and-switch.” Meanwhile, the liberal N.C. Policy Watch called it a “welcome effort.”

While the bill’s supporters haven’t acknowledged the projected tax increase, the extra revenue it will generate was part of the pitch.

“If you don’t want your road money in your district, please vote against this bill,” said Senator Tom Apodaca, a seven-term Republican from Henderson County. “But if you want a way for the people to get to work or families to go on vacation, vote for this bill.”

The legislature’s fiscal staff projects the increased gas tax will add over a billion dollars to the transportation department by the end of the decade. That aligns with one of Governor Pat McCrory’s priorities this year—finding funding to improve transportation infrastructure.

Democrats opposed the bill, arguing the tax increase should be considered in the budget process, rather than in a bill designed to contain “clarifications.”

The Senate tentatively passed the bill mostly along party lines. A final vote to move the bill to the House is expected Thursday.