John Hood and Carolina Journal have documented concerns about the long-term viability of North Carolina’s reliance on a state gas tax. The latest Bloomberg Businessweek explores how our neighbors to the north are tackling the issue.
Nine states already get by without income taxes, but all 50 tax gas. For decades, Democrats and even small-government Republicans have accepted gas taxes as the fairest way to build and maintain highways. Those who use the roads most end up paying the most. And because people keep driving in good times and bad, it’s a reliable stream of income.
Virginia’s 17.5 percent gas tax, the 10th lowest in the country, is expected to bring in about $684 million in the next fiscal year. But the governor will need an estimated $844 million a year to complete an ambitious five-year overhaul of the state’s crowded roads and bridges. To get there without a gas tax, he’d raise the sales tax from 5 percent to 5.8 percent and—irony alert—put a $100 registration fee on fuel-efficient alternative vehicles. State Secretary of Transportation Sean Connaughton says that by pegging transportation funding directly to the sales tax, revenue will keep pace with the state’s growing economy. Between 2014 and 2018, the governor’s office projects the new sales tax will boost transportation funding by $4.1 billion, vs. $3.5 billion from the gas tax.
