Wednesday, February 11, 2015

When is a tax cut a tax increase?

The General Assembly wants to cut gas taxes by 2.5-cents while placing a floor of 35-cents to the gas tax to come. Currently the tax is 37.5-cents per gallon but if nothing is done the tax could go to under 30-cents a gallon. Believe it or not, anyone who buys gas for cars, trucks, lawnmowers, etc., a tax cut will result in a tax increase, eventually, but not right away. And in future years as the price of gas rises, as predicted, the tax will increase to levels not seen in North Carolina.

Under the current law, the gas tax is projected to fall as much as six to eight cents a gallon in July; if it does the new floor will be a tax increase of what the price could have been. Saying this will be a tax increase is like saying a reduction of an increase in spending is a cut when actually more money is being spend but the amount is growing at a lower percentage of overall spending. However, if the General Assembly passes the law this tax cut will be a tax increase which will be good because if tax revenue from gasoline sales decreases funds in the state Department of Transportation kitty that will mean fewer highway improvements for what we all know is the “Good Roads” state.

While the last sentence may not, it makes sense to have the gasoline tax floor, but what makes better sense (and cents) will be to develop new income methods to fund repairs and improvements to roads and highways as well as new highways. With miles per gallon for cars and trucks increasing, sales of gasoline decrease. With more telecommuting, fewer workers are on the roads; therefore less gas is being consumed; therefore less tax income. In reality, more toll roads and a tax on mileage must be studied, discussed and implemented. Why should someone who drives a Prius 15,000 miles a year on North Carolina highways at an average of 50 miles per gallon pay less to use those miles than someone in a Honda CRV at 30 miles per gallon or a Ford F-150 truck at 15 miles per gallon? Use of 15,000 miles is the same for all three.

What the General Assembly is suggesting with the floor on the gasoline tax at the pump makes sense and needs to move ahead. What makes better sense is a comprehensive plan to increase overall revenue for the primary purpose of road and highway improvement. Here’s an idea to go along with use taxes: How about a Pick Two lottery where 50 percent of all revenue goes to the highway fund instead of the education fund which has already received more than $3.6 billion since the North Carolina Lottery started. The money for roads would serve a better purpose than sticking it in education funding. If we do not have a good transportation system of roads and highways all those benefiting from education will not be able to drive to work to pay those higher gasoline taxes.
-------------------- word of the day
sternutation (noun) [stur-nyuh-tey-shuh n]: the act of sneezing

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