Gas prices have dropped this fall to the lowest levels in more than four years, but North Carolina’s gas and diesel tax will remain at the highest level allowed by law — at least through next June.
If fuel prices stay relatively low for the next few months, the tax rate could make a substantial drop when it is adjusted again next July 1.
The tax rate fluctuates with changes in wholesale fuel prices, but legislators agreed last year not to let it rise above the current mark, 29.9 cents a gallon.
A formula in state law sets the tax at a flat rate of 17.5 cents per gallon, plus either 3.5 cents or 7 percent of average wholesale gas and diesel prices, whichever is higher. The January 2009 rate is based on an average wholesale price of $3.2165 from April through September, when pump prices broke through the $4 mark.
The legal cap limits this variable portion to 12.4 cents. If the cap were not in place, it would rise in January to 22.5 cents — for a combined tax rate of 40 cents per gallon. The N.C. Department of Revenue said this week that the tax will stay right were it is, 29.9 cents, in January.
The recent free-fall in fuel prices didn’t start until mid-September, so it was not reflected in the new rate calculations. Triangle motorists were paying an average $1.628 per gallon for regular gas — the lowest since February 2004 — and $2.584 for diesel Wednesday.
Reginald Little, assistant director of the revenue department’s motor fuels tax division, said it’s too early to predict what will happen when the tax rate is recalculated again. The July 1 rate will be based on wholesale prices for September through March.
“If you keep an eye on prices over the next six months, that will tell you whether it’s going to fall or not,” Little said.
Bruce Siceloff reports on traffic and transportation. A News & Observer reporter and editor since 1976, he took over the 
Comments
Whining
Thu, 12/18/2008 - 04:48 — phelpsgatesNobody likes to pay taxes, but roads don't build themselves. With gas likely to be in the $2 to $3 dollar range again, it's hard to have much sympathy for these guys whining about what's literally nickels and dimes per gallon in tax increases. The tax "cap" makes no sense at all. And as Tom Friedman has repeatedly pointed out, we need to increase, not decrease the gasoline tax, with the goal of getting us unaddicted to oil over the next decade. Otherwise things are going to be catastrophic rather than just really bad in a few years.
Are you kidding, taxes FALL
Wed, 12/17/2008 - 21:45 — Notsurewhere_NCThe lack of funds whining machine from the existing MIA Gov. and the Gov - elect has reached fever pitch. The PR describing road project delays, limited, to no maintenance, cutbacks , etc comes daily. Do not think for one minute that tax will be lowered, the new regime coming January to the Peoples Republic of NC will find a way to either keep the tax or increase it. The July adjustment date is a long way off.
We Never(Seem to) Learn
Wed, 12/17/2008 - 21:14 — cat250sOur state continues it maddening blue stance on state government. "Tax Hike Mike"is leaving additional room for "Bev" to squeeze the folks in this state. I now know why we are blue. It's called suffication
I do not hate much....
Wed, 12/17/2008 - 20:04 — UNC1998I voluntarily go to the dentist, but I hate the government in my beloved home state of NC
Typical. If there's any way
Wed, 12/17/2008 - 17:01 — culbreth56Typical. If there's any way for this state to rape its citizenry of their hard earned dollars, they'll do it.