South Carolina governor backs fuel tax increase, income tax cut, DOT changes

By Keith Goble, Land Line state legislative editor | 1/29/2015

South Carolina Gov. Nikki Haley has announced that she is willing to hike the state’s fuel tax rate to get road and bridge work done in exchange for an income tax cut and changes at the state Department of Transportation.

The Legislature and governor have about four months to work out a deal to address the $1.5 billion annually that the state DOT says is needed for the next 20 years to make road and bridge improvements.

An extra $400 million each year is necessary to simply maintain the current system – about the same amount Haley’s plan would raise once it is fully phased in.

Gov. Haley announced during her State of the State speech that she would support a fuel tax increase as long as other changes are made as well.

Until now, the governor has said she would veto any fuel tax increase. Instead, she has urged the state to do a better job prioritizing money already available.

During her speech last week Haley said she supports raising the fuel tax rate by 10 cents over three years to 26.75 cents per gallon. The 16.75-cent-per-gallon rate has remained unchanged since 1987.

The dime increase is expected to raise about $340 million annually.

Another part of the governor’s plan includes rerouting proceeds from state taxes on vehicle sales from the general fund to transportation – about $60 million each year.

In return for her backing the fuel tax increase, the governor said the Legislature must vote to trim the state’s income tax rate from 7 percent to 5 percent over 10 years and scrap the current highway commission.

Haley told lawmakers the 2 percent reduction in state income tax would be a “massive draw for jobs and investment to come to our state.”

Senate President Pro Tem Hugh Leatherman, R-Florence, addressed one concern with the plan. He said the income tax changes are estimated to reduce revenue for the state by $1.8 billion annually once fully implemented.

As a result, it would result in huge cuts to other state programs.

Haley is also calling for a change that would give the governor’s office more executive control over the South Carolina DOT. Commissioners with the agency now are elected by state lawmakers.

“Let’s change the way we spend our infrastructure dollars … so the condition of South Carolina’s roads is no longer driven by short-sighted regionalism and political horse trading, and we stop wasting our tax money,” she said.

A House infrastructure panel followed up the governor’s announcement by introducing their own plans to raise $400 million for road and bridge upkeep.

Rep. Gary Simrill, R-Rock Hill, said the plan would reduce the state’s fuel tax rate to 10.75 cents per gallon. To make up for the lost revenue, the state would add a 6 percent sales tax to fuel purchases.

The cap on the vehicle sales tax would also be increased from $300 to $500.

Counties would also be given the option to take control of state-owned roads. In exchange, counties would get $1 million and additional fuel tax revenue.

Sen. Joel Lourie, D-Columbia, said it’s time for the Legislature to get to work on a plan to fund transportation.

“The money is not going to fall from the sky,” Lourie stated. “If we want better roads, we are going to have to pay for them.”

He said that all options should be on the table.

If state lawmakers can reach agreement on a road funding plan, the governor must sign it for it to take effect.

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