RALEIGH, N.C. (WNCN) – Amid concerns about the long-term reliability of the gas tax, North Carolina would use money from the state’s sales tax to help fund transportation under the new state budget the General Assembly recently passed.
The budget plan, which Gov. Roy Cooper (D) has not said yet if he’s going to sign, calls for allocating two percent of sales tax revenue this year for the Department of Transportation’s needs. That would increase to four percent next year and then six percent every year after that.
It’s estimated that would lead to more than $625 million being available for transportation annually without increasing the taxes people pay.
State lawmakers from both parties have supported the proposal, noting that as an increasing number of drivers switch to more fuel-efficient and electric vehicles, the state will need new sources of revenue to build and maintain roads.
“It’s not everything we need, but it’s a nice step in the right direction,” Marc Finlayson said, the chair of NC Go!, a coalition of groups that advocates for transportation. “We have to take into account all of these dynamic changes that are happening in transportation and factor all of that into our thinking.”
The North Carolina Department of Transportation has an annual operating budget of about $5 billion, and motor fuel taxes are the largest source of revenue. The state’s gas tax is 38.5 cents per gallon while the federal gas tax is about 18 cents per gallon.
The agency convened a group called the NC FIRST Commission, that released a report in 2021 calling for various changes to try to ensure the state would have the funding it needs going forward to meet demand.
North Carolina State economist Mike Walden served on that commission.
“We’re going to have funding problems with transportation in the future,” he said. “Everyone who pays the sales tax is benefiting in some way from the transportation network even if you don’t use a vehicle because obviously goods and services get delivered.”
Walden said in the long term, he thinks the state will need to move to fees drivers pay based on the miles they drive.
The Eastern Transportation Coalition is launching a pilot program in North Carolina to study that.
Walden said there are still issues to try to resolve with that approach, including having the technology installed in vehicles to track mileage and ensuring drivers are not tracked wherever they go.
“I think clearly by 2030, we would start to feel some of the impacts of not having enough money, that is to say that in growing areas like the Triangle we would see more congestion,” Walden said. “This is not an issue that is going to take a while to manifest itself. I think it will manifest itself very, very quickly.”