Starting point on road funds
Published May 4, 2015
By John Hood
by John Hood, John Locke Foundation and NC SPIN panelist, May 4, 2015.
Republican lawmakers in Raleigh have spent the past several months grappling with two conflicting desires: 1) addressing the demonstrable need to repair and expand North Carolina’s system of roads and bridges, while 2) maintaining their commitments to fiscal restraint and North Carolina taxpayers.
In principle, all transportation systems should be as much as possible funded in proportion to use. Airports should derive their revenue from charges and fees on tickets, parking, concessions, and cargo operations. Railroads and seaports should derive their revenue similarly.
When it comes to automotive transportation — by far the largest and most important means of moving people and goods — the user-pay principle should remain our guide. Although this is often overlooked, motorists bear the vast majority of the cost of the system when they buy, fuel, service, and insure their private vehicles.
As far as the highway grid itself is concerned, the principle calls for tolls on suitable limited-access highways, charges per mile traveled on other roads (typically levied as a tax per gallon of fuel), and per-vehicle charges adjusted for weight (because heavy vehicles put more wear and tear on pavement) and perhaps value (because maintaining the roads to reduce wear and tear on vehicles is a service worth more to those who own more valuable vehicles). Compared to the average state, North Carolina relies more on gas taxes and less on per-vehicle charges such as sales taxes, property taxes, and Division of Motor Vehicles fees.
Technological progress has actually made the tolling component of the revenue mix easier. Electronic collection has eliminated traffic-snarling toll booths. But when it comes to the backbone of North Carolina’s system, taxing fuel, technology has subverted its ability to serve as a stable approximation of a user fee. Cars traverse more miles per gallon. And some cars are now partially or entirely fueled by other, non-taxed means.
Thus over time, actual revenue collections adjusted for inflation and miles traveled have gone down. Combine that with the routine under-pricing of heavy trucks and the diversion of gas taxes to non-highway uses, and you produce the conflict: unmet road needs coupled with (understandable) resistance to gas-tax hikes.
Decades ago, lawmakers partially adjusted the gas tax rate to changes in the wholesale price of gas. The idea was that because asphalt is itself a petroleum product, gas-price spikes also signify spikes in construction costs. However unpopular the variable-tax policy was among motorists during rising prices, it proved even more unpopular with highway boosters when gas prices fell.
Early in the 2015 session, the General Assembly took an initial stab at resolving the conflict. Lawmakers combined a short-run cut in the gas tax with a new floor under which the gas tax would not be allowed to fall, as well as a formula for increasing the rate in the future to keep up with inflation and population growth. During the inevitable political blowback, lawmakers promised to come up with a better solution.
House Transportation Committee Chairman John Torbett is trying to do that with House Bill 927. It’s a sprawling package that includes lower gas taxes, higher taxes on vehicle sales, higher DMV fees, a new tax on auto-insurance premiums, and a phase-out of the transfers of highway-tax revenue to the General Fund for operating the Highway Patrol, among other things. According to its fiscal note, House Bill 927 would allow for about $477 million in additional transportation expenditure in FY 2016-17, growing to $732 million by FY 2019-20.
I’m not crazy about the generalized tax hikes or devoting some $200 million of the annual revenue to the state ports, which ought to be financed by their users. But I think a clear case can be made that North Carolina should charge more for commercial vehicles and DMV services as well as end the Highway Fund diversions. If we also adopted Torbett’s gas-tax reduction, the net effect would be about $360 million a year when fully implemented, enough to fund much of the road and bridge work called for in the bill.
That’s a starting point, at least. Let the debate begin.
May 4, 2015 at 9:33 am
Norm Kelly says:
'the diversion of gas taxes to non-highway uses'. Remember when Gov Mike stole money from the E911 fund for non-E911 purposes? Remember when Gov Mike stole sales tax money from counties in order to help 'balance' the state budget? Then we have the issue mentioned by John: stealing gas tax money for non-highway uses. The trend of stealing money from gas tax income for other purposes may have continued into the current administration. However, I'm not quite sure about this, so I won't say it's improved. But the one common denominator with all the money being stolen from 1 fund to be used for a different purpose is quite easy to identify. The libs ruled Raleigh when all of these funds were stolen. Yes, I know. Libs are having a cow because I continue to refer to it as stealing money. But, since that is exactly what it is, that's how it must be described. Truth hurts sometimes, but yous guys are big people now, so it's time to start living in the real world instead of your made-up, make-believe socialist world! Get out of the greenie forest for a few minutes so someone can perhaps talk some common sense to you!
First, the gas tax funds MUST be preserved specifically and solely for highway use. If the stealing hasn't stopped yet, then it's the responsibility of Republicans to make sure this happens. First and foremost.
Second, an additional revenue stream MUST be found. Libs will whine like babies (no surprise!) if/when a tax is put on vehicles that doesn't currently exist. Too bad; let them whine. They'll do it anyway, so ignore them! High efficiency vehicles must pay for the miles they travel. Hybrid or all electric vehicles must pay for the miles they travel. It matters not if libs and these vehicle drivers dislike the idea. It MUST be done and there is no way around it. Those of us who buy gas already pay for the opportunity to drive on roads & bridges. Everyone MUST be treated equally. If that means reducing the gas tax while increasing other fees, then that's what it means. Do we have another choice? Has ANY lib offered an alternative? Or are libs simply keeping with being the party of 'NO' that they've been for several years now? It's time for libs to step up with some sort of plan. We've heard their schemes. What we need from libs is a plan, instead of a scheme. It'll be hard for them to break from tradition, but it's something they MUST do. Any lib: it's time to step up and offer a plan other than the standard 'tax the rich' scheme you ALWAYS put forth!
Sometimes it's necessary to appease the opposing party. Sometimes it's just a waste of time and needs to be avoided. Let the chips fall where they may. For instance: 'a phase-out of the transfers of highway-tax revenue to the General Fund'. Don't care what the purpose of the transfer is, it's not correct and it sure ain't right! Why phase out the transfer? There should be a stand-alone bill that gets passed by every legislator in the state, without a single 'no' vote! The bill should call for an immediate 'truth in advertising' bill to support tax payers! The bill must call for an immediate termination of all transfers from the highway-tax revenue to ANY other fund! No ands-if-or-buts about it. There should not be a single vote against this measure! Accountability in government, trust in our elected officials is paramount. And grossly missing! It's time Republicans put the schemes of libs to bed and move our government at least one more step toward honesty with citizens. Transparency for real, instead of that fake, made-up, miserable form of transparency promoted by the current unqualified socialist community organizer occupant. Transparency for real that let's citizens of our once great state know for sure that our politicians are dealing honestly with us. Wouldn't a little honesty from our elected officials go a long way? Of course, but every time Republicans attempt to move us in the right direction, which is almost always also the RIGHT direction, some lib pol or lib media type rips them apart! Even if they have to make up stories to support their opposition, libs will do it, knowing the media won't catch them on it! Talk about bed fellows!
Also a good idea: state ports should be paid for by their users. Why aren't they already? What negative impact would it have on our ports if they did pay for themselves? Would we loose port users to other states because we charge a fair rate? If so, what would be the negatives and positives for this scenario? Do we spend MORE from the state budget to support ports than we receive? These are the types of questions our legislators are SUPPOSED to deal with. We citizens don't have sufficient information to make a reasonable decision or petition legislators about. They MUST make the intelligent, educated, informed decision for us. But they must be able to make the decision. Kinda like making a decision about state-owned ABC stores. Is it better to sell or maintain? And business bribes, what pols/libs typically call 'incentives'. Do they benefit the state more than they cost the state? What percentage of bribes are a positive for the state? Legislators are tasked with making these decisions. Are they? Sure does not seem like it! Which lib media type is holding their feet to the fire on the important issues? Which lib media type is whining about extending the abortion wait period, kinda like the mortgage refinance wait period. (life & death no wait or simple financial transaction with a forced waiting period. hmmmmm) Too much whining, too little pressure on real issues! And too much misinformation. But, then, they are libs!
May 5, 2015 at 11:44 am
Richard L Bunce says:
That sounds like a good start... hopefully technology will get us to the point where accurately charging for miles driven, weight of vehicle, even which roads were driven on with higher fees for more congested roads requiring large capital projects to expand capacity. Something like easy pass for every vehicle that could be adapted by all States with some interstate account settling to incentive States to join the program to get a little back from their vehicle owners even when they are driving out of State.
