A looming crisis demanding tax reform

By Scott Mooneyham | Nov 25, 2012

RALEIGH -- Legislative leaders and Gov.-elect Pat McCrory have made clear that they want to rework North Carolina's tax structure.

In the lead-up to the convening of the legislative session in January, the subject will likely receive more attention at policy meetings and forums of various sorts.

That doesn't mean the Republicans who now control the legislature will ultimately find sweeping changes to the state tax code any more palatable or politically doable than did their Democratic colleagues who took up same cause years ago.

One reason that past efforts at tax reform faded, and efforts in other states -- including one most recently in Georgia -- were undone is because there is no great public outcry for change.

And politics often becomes the art of following the path of least resistance.

So, generating the political will to substantially rework a state's tax structure becomes a tough chore. It remains to be seen whether legislative leaders and a new governor can create that kind of political will to address the issue.

There is, though, a pending crisis facing part of the state's tax structure that cannot be avoided.

That looming crisis involves the dedicated taxes that go to build and maintain roads in North Carolina.

Right now, roughly 60 percent of state dollars that go toward road-building and maintenance come from the state's gas tax. Taxes on vehicle purchases and registration fees provide the majority of the remainder of state money.

The number of vehicles on the road is growing. In most years, the amount of miles traveled on those roads is rising.

The amount of money collected from the gas tax isn't, at least not when measured against inflation and road usage.

A 2009 study from the N.C. Budget and Tax Center noted that the number of taxable gallons of gasoline sold in the state between 2003-04 and 2006-07 rose by 2 percent, while the population increased by 6 percent during the same period.

That same study found that the average driver, in 1963, paid three times more in gas taxes on a per-mile basis than in 2009.

Without changes, the trend is going to accelerate dramatically as more electric vehicles and higher-mileage cars hit the roadways in coming years.

The solution isn't obvious.

The long-term answer likely involves something other than the current gas tax. That tax, which in North Carolina automatically adjusts every six months based on the wholesale price of gasoline, has already become a political football because it is higher than surrounding states.

Some people who have studied the issue want government to begin assessing taxes, not at the gas pump, but by measuring the miles driven by each car. That answer raises privacy concerns regarding car tracking technology, and questions of how mileage and taxes are apportioned based on out-of-state driving.

Tolls, along with increasing or changing car sales taxes, are other options.

Whatever the answer, a changing world means that the problem can't be avoided much longer.