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North Carolina GOP Markets Hike in Gas Tax as Tax Cut

North Carolina’s gas tax will drop by a few pennies over the next 15 months – starting Wednesday with a reduction of 1.5 cents a gallon – under a law enacted Tuesday to ward off a larger tax cut that was expected to cost the state $800 million in transportation money over the next four years.

North Carolina’s gas tax will drop by a few pennies over the next 15 months – starting Wednesday with a reduction of 1.5 cents a gallon – under a law enacted Tuesday to ward off a larger tax cut that was expected to cost the state $800 million in transportation money over the next four years.

 

House Democrats protested that the measure will put an unfair tax burden on working families, but both chambers gave final approval by comfortable margins Tuesday afternoon. Gov. Pat McCrory quickly signed it into law.

 

The old tax rate, 37.5 cents a gallon, will be reduced to 36 cents Wednesday and stay there through December. Then the tax will fall to 35 cents in January and 34 cents in July 2016.

 

Starting in 2017, the gas tax will be adjusted once a year according to a new statutory formula based on population growth and energy cost inflation. It is expected to rise slowly in future years to about 36 cents in 2019. The law gets rid of a volatile formula that produced wide swings in the tax rate, moving with the ups and downs of global fuel prices.

 

“This bill will allow us to build roads, strengthen bridges and fix potholes so people can get to their jobs, go to school, see their doctors and drive to the mountains or the beach,” McCrory said in a statement. “We now have a gas tax that is based on North Carolina’s transportation needs instead of the unpredictability of the world oil market.”

 

6.4 cents higher

 

It’s a clear tax cut for the remaining three months of this fiscal year, whch ends June 30. But the new 36-cent rate is 6.4 cents higher than the tax would have been starting in July if the law had not been changed.

 

Fiscal researchers for the legislature estimated that the new law will boost DOT revenues by $266 million during the fiscal year that starts in July, and an average $181 million annually for the three years after that.

 

“This bill is important,” Rep. David Lewis, a Republican from Dunn, said during House debate. “We need to provide the stability that this bill provides to make sure that we can meet our obligations to keep safe roads and safe bridges, and our communities can have the funding they need for the infrastructure projects they have.”

 

Rep. Paul Luebke, a Democrat from Durham, chided Republicans for avoiding mention that the bill will increase the gas tax.

 

Caroline Cournoyer is GOVERNING's senior web editor.
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