RALEIGH – A plan to change the way North Carolina calculates its fuel tax could tamp down price fluctuations, says a legislator behind the effort.
State Rep. Mitch Gillespie, a Republican from Marion, says he and others want to do away with a variable component of the formula used to calculate the fuel tax. Under that formula, North Carolina taxes gasoline and diesel fuel at 17.5 cents a gallon, plus 7 percent of the average wholesale price during a recent six-month period. The rate is adjusted each January and July.
Gillespie last year was a chief proponent of a House bill that would have temporarily capped the state’s total tax at 35 cents a gallon. That bill died upon reaching the Senate, and the tax rose to 38.9 cents on Jan. 1, from 35 cents.
Senate Leader Phil Berger, an Eden Republican, says his chamber didn’t act on the measure because doing so would have forced the N.C. Department of Transportation to delay several road projects, triggering job losses. Berger pledged to revisit the issue in 2012, possibly with an unspecified cut.
Gillespie says a goal is to separate the tax from semi-annual fluctuations in fuel prices to make them more predictable. He characterizes the idea as putting a “cap” on the per-gallon tax.
Compared to many other states, North Carolina handles more roadwork at the state rather than at the local level. The fuel tax varies with wholesale prices because motor fuels and asphalt, a key component in road building, both tend to rise and fall with crude oil prices.
NCDOT spokeswoman Greer Beaty says the agency frequently discusses tax and budget matters with legislators, but could not comment specifically on Gillespie’s plan.
A more stable tax rate could help businesses with large fleets to budget their fuel expenses. While most of those expenses would continue to vary with world oil prices, the variable portion of the tax often accounts for 5 cents a gallon of the annual fluctuations. The tax’s 6.4-cent increase since the first half of 2011 has been its largest annual increase in state history, according to the N.C. Department of Revenue.
The diesel tax cuts both ways for Martin Marietta Materials Inc., a Raleigh company and the nation’s second largest producer of aggregates for road building. CFO Anne Lloyd says sustained increases in prices force the company to analyze and adjust the paths its trucks take at quarry sites.
At the same time, the company depends on federal and state fuel taxes to fund road building – a core feeder of Martin Marietta’s sales. “There’s going to have to be increased funding for the state to fund the infrastructure it needs,” she says.
by Chris Bagley, Staff Writer
(Triangle Business Journal)
Date: Friday, March 16, 2012, 6:00am EDT
