Fuel tax freeze sought by North Carolina governor

| 5/10/2006

North Carolina Gov. Mike Easley said he will ask state lawmakers to cap the state’s per-gallon tax on diesel and gasoline so that the rate will not increase from the current level. House Democrats soon are expected to unveil their own idea.

The state’s fuel tax can change every six months because a portion is set on recent average wholesale prices. The tax increased 2.8 cents per gallon in January to 29.9 cents, which ranks among the highest in the nation.

The tax could change slightly in July, but is likely to increase to 31.1 cents by January 2007 after a season of near-record pump prices, The Charlotte Observer reported.

“Nobody ever anticipated that Washington would let (fuel) prices get this high,” Easley said in a written statement. “I believe it is appropriate to put a freeze in place. Even if (fuel) prices continue to rise, the state tax will not.”

Easley’s backing of a cap on the tax is in contrast to his statements at the end of 2005. At that time, he said tinkering with the tax, which raises $1.4 billion annually, would further delay transportation projects.

To help ensure that road and bridge work continues in North Carolina, the governor said that his budget would make available an additional $200 million for construction and $18 million for repairs. That amount currently goes to the state general fund.

The proposed tax cap also is included in his budget. It would remain in place at least through mid-2007, costing the state $135 million in lost transportation dollars, the Winston-Salem Journal reported.

In addition to the governor’s proposal, Democrats in the state’s House are expected to introduce their own legislation that would keep the fuel tax from increasing this year.

Republican legislators who called on Easley to freeze the tax last fall said it should have been done much sooner. They also want to find other ways to provide transportation funding.

– By Keith Goble, state legislative editor