Posted on Sat, Jan. 29, 2005


Law sparks N.C. gasoline tax rise
Increase in wholesale fuel price allows for biggest boost in 15 years

Knight Ridder

North Carolina's gasoline tax quietly increased 2 cents a gallon this month because of a longtime state law that allows an increase if wholesale fuel prices go up.

The tax changes usually are a fraction of a penny, and the 2-cent raise is the largest increase in about 15 years.

The higher tax rate, which took effect Jan. 1, follows higher wholesale prices last year. On Oct. 30, N.C. drivers paid a record average of $1.97 a gallon for regular gasoline. The current Charlotte, N.C., average is $1.82, according to AAA Carolinas.

Gasoline prices are up 11 cents since Jan. 1. Cold winter weather has driven up the price of crude oil and with it the price of gasoline, industry analysts say.

Drivers such as Stuart Andersen of east Charlotte say they are sorry to see bigger numbers at the pump. He was pumping $1.83-a-gallon gasoline Friday.

"I was just liking the lower prices, and now they're heading up again," Andersen said.

The N.C. gasoline tax now is 26.6 cents a gallon, about a penny more than the national average. South Carolina's state gasoline tax is 16 cents a gallon.

Drivers also pay a federal tax of 18.4 cents a gallon.

North Carolina, Wisconsin and Kentucky are the only states with a variable gasoline tax. About two-thirds of the N.C. tax is fixed; the other third goes up and down with the wholesale price. Wholesalers supply fuel to retail stations.

The wholesale portion of the gasoline tax is calculated every six months. It has risen 16 times and dropped 13 times since the law was amended in 1989, according to the N.C. Department of Revenue.

If wholesale prices hold steady, a year's collection from the extra 2 cents will provide the state $110 million in a full year, said Mark Foster, chief financial officer for the N.C. Department of Transportation.

The state collects $1.4 billion in gasoline tax annually.

The gasoline tax is used mostly to build and maintain state roads, but a portion goes to the general fund, including money for the N.C. Highway Patrol, high school driver's training and transit.

"It won't make a dent in how much construction costs have gone up in the past few years," Foster said.

Road construction prices are up more than 7 percent annually, largely because of the hot global market for steel and cement. The higher taxes will bring in less than 4 percent more money, Foster said.

North Carolina is responsible for more than 78,000 miles of roads, the nation's second largest state-maintained network, after Texas. Most states rely on counties to build and maintain secondary roads, but North Carolina takes care of those lesser traveled roads as well as primary roads, highways and freeways.

Drivers probably would be more accepting of the higher gasoline tax if all of it went to improving roads, said John Hood, president of the John Locke Foundation, a public-policy think tank based in Raleigh, N.C.

Drivers are taxed by the gallon, not by the miles they drive.

"We are driving more miles on the same tank of gas," Hood said. "In the world of increasing fuel efficiency, it is difficult to keep up with road needs."

The American Petroleum Institute says the price of gasoline has risen about 44 percent in the past 20 years, and the Consumer Price Index has risen 86 percent.





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