The tax is always lower on the other side of the fence. Or is it?
Andy Shook expressed a familiar feeling when he returned to North Carolina recently. He believed he had moved into a higher tax bracket.
Bruce, after leaving NC in 1983, going to Atlanta, SC (Metro CLT) and returning to Apex, I am blown away by all the new, increased taxes in NC. In GA, it is written into the State constitution that all gas tax $ can only be spent on roads and bridges. They have the 2nd lowest gas tax and excellent roads. ...
SC, which has the lowest gas tax, also has it written that all gas tax only go to roads, bridges and heavy DOT equipment.
I prepared to commiserate with Andy. First, though, I did a little research.
Before I go further, this DISCLAIMER: State-by-state comparisons are tricky. I don't offer the following as a definitive comparison or a complete picture -- but only as part of the picture.
It turns out that North Carolina's gas tax no longer is higher than the national average. Hence my exclamatory headline.
The American Petroleum Institute adds state and federal per-gallon taxes (that's all we have in NC) plus a variety of state and local sales and other taxes collected on gasoline in other states, and it comes up with an average per-gallon tax for drivers in each state. Here are some of the new averages as of July 1 (each state figure includes the federal tax of 18.4 cents a gallon, which has not changed since 1992):
California 74.9 cents combined state and federal tax on each gallon (the highest)
Florida 51.6 cents (#8 nationwide, highest in the South)
U.S. average 49.4 cents
North Carolina 48.6 cents (#15 nationwide)
Georgia 46.4 cents
Virginia 38 cents
South Carolina 35.2 cents
Alaska 26.4 cents (the lowest)
North Carolina collects 29.9 cents tax plus 0.25 cent inspection fee or 30.2 cents total per gallon. (That was worth $1.558 billion in state fuel tax revenues for fiscal year 2007-08.)
It could be worse here. If North Carolina legislators had not set 29.9 cents as the cap last year, our tax would have risen last month to 34.8 cents a gallon -- because by law part of the tax rate is supposed to rise and fall as a percent of wholesale prices. (This higher 34.8-cent tax rate would be worth an estimated $239 million per year in additional revenues for state roads.)
It could be worse in other states, too. For example, Georgia's governor issued an order in June blocking a scheduled tax rate hike that would have added 2.9 cents a gallon in that state.
Meanwhile, the second biggest transportation tax IS worse in other states: the tax on car sales and leases.
North Carolina calls it a highway use tax. I don't have nationwide numbers, but here are the car sales tax rates charged by North Carolina and some of its neighbors, according to the legislature's fiscal research staff:
Georgia 4% to 7%
Texas 6.25 %
** South Carolina 5%, maximum tax $300
* Virginia 3%
North Carolina 3%
** South Carolina's $300 max means you pay tax only on the first $6,000 value of the sale. Its 5% car tax rate is effectively considered lower than North Carolina's 3% rate, for that reason.
* Virginia's 3% tax is charged on the entire purchase price, regardless of whether you traded your old car as part of the sale, so it is effectively a higher tax than North Carolina's 3% rate.
North Carolina and all these other states charge the tax only on "net of trade," which means you subtract the trade-in value before you calculate the tax on your new car.
(North Carolina's 3% highway use tax brought in $563 million last year, so a 1% point tax hike would be worth almost $200 million to the state. Dropping the "net of trade" approach to match Virginia's 3% method would produce an extra $115 million a year.)
There is some sentiment, but not much I think, for lifting the cap on our gas tax.
There seems to be a bit more sympathy for the idea of hiking the highway use tax to bring North Carolina in line with its neighbors -- and to bring the tax on car sales more in line with sales taxes collected on other big purchases.
But you can bet that if a highway use tax hike is proposed this fall, as I expect will happen, the opposition from auto dealers — who are having a lousy year already — will be long and thunderous. Remember how real estate interests squelched the land transfer tax?
I know, it's no fun to talk about this stuff.
I reported last week ("Frugal drivers put road funds in peril") that the higher cost of driving has led to a dip on tax revenues on gas and car sales -- at the same time DOT has seen road-buiding prices double since 2002.
My alter ego, the Road Worrier, pointed out this week ("Where do gas taxes really go?") that our governor and legislators haven't always spent our transportation taxes on transportation. And even when NCDOT does receive the money, it doesn't always make best use of it (there've been a few stories about this, too).
As I mentioned, state-by-state comparisons are tricky. Especially when you consider that North Carolina is one of the few states without county-owned roads, and without county tax money to help pay for them. (Watch out, counties: some legislators want to change this.)
Our state is unusual in that most roads and bridges -- 77 percent of the miles and 63 percent of the money -- are the responsibility of state rather than local government. (The state share by mileage is 15 percent in Georgia and 10 percent in South Carolina, and an average 19 percent nationwide.)
But for what it's worth, when you consider our taxes on gas and car sales, North Carolina appears to be comfortably below average.