North Carolina lawmakers consider capping fuel tax

| 6/27/2006

With an eye on the fall elections, the North Carolina statehouse is filled with legislators calling for a cap to the state’s per-gallon tax on diesel and gasoline so that the rate will not increase from the current level. Gov. Mike Easley is also calling for a cap.

The state’s fuel tax is based on a flat tax and a variable tax that is adjusted twice annually based on the 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 in his proposed budget is in contrast to his thoughts at the end of 2005. At the 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, the Democratic governor said that his budget would make available an additional $200 million for construction and $18 million for repairs. That amount now goes for the state general fund.

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

The governor’s proposal recently won approval from the Senate and is in the House. However, it isn’t the only one drawing consideration in the General Assembly.

Senators added the same tax cap to their proposed state budget. Despite the decision to leave out the proposed tax cap in the House budget bill its members approved June 15, Republican members in the chamber have proposed bills to lower the fuels tax to its December level.

House Democrats have their own plan to keep the fuel tax from increasing this year.

Their effort would allow the fuels tax to decrease but would prohibit rising above current levels. It also would give the state’s Attorney General more leeway to investigate alleged price gouging at the fuel pump.

North Carolina law allows enforcement of price gouging protections whenever an emergency or disaster has been declared in the state. The measure would include when a person’s economic well-being is affected.

– By Keith Goble, state legislative editor