@NCCapitol

NC Senate gives final OK to gas tax changes; House next stop

Posted February 12, 2015

— A bill that lowers North Carolina's gasoline tax immediately but opens the door to higher tax rates in the years ahead cleared the Senate on Thursday, but not before there was more sniping from Republicans and Democrats.

The measure given final chamber approval by a 35-15 vote reduces the rate by 2.5 cents per gallon to 35 cents March 1 through the rest of the year. The tax formula would be changed after that.

On the second day of floor debate — the bill received initial approval Wednesday— Republicans continued to portray the measure as a tax cut that also provides stability for road-building revenues so projects in the pipeline are completed.

But Democratic speakers point out the tax would actually fall further come July 1 — possibly to 30 cents — if the current formula based partially on wholesale gas prices remained in place. Projections show the tax rate under the proposal also could be 7 cents higher in 2019 compared with the current rules, creating another $352 million annually by then.

"If this is a tax increase, just say it for what it is," said Sen. Erica Smith-Ingram, D-Northampton. Other Democrats said they'd be willing to consider more taxes for infrastructure but that a more thoughtful, bipartisan approach was needed.

Gov. Pat McCrory also was critical of the decision to offset the initial cut in the gas tax by laying off 500 state Department of Transportation workers.

“The current Senate proposal would help protect and stabilize transportation revenue that is used for our roads and bridges across North Carolina. However, we need to fully evaluate the impact that workforce decisions will have on the safety and maintenance of our transportation network," McCrory said in a statement. "I look forward to continued dialog with both the House and Senate leadership as we work toward a solution that's in the best interest of our future transportation needs and taxpayers.”

Transportation Secretary Tony Tata said he wants to assess the impact of the potential loss of positions on public safety and DOT operations.

"We value all of our NCDOT employees and appreciate the hard work they do every day to serve the citizens of our state," Tata said in a statement. "Having eliminated more than 2,100 positions in the last five years, we must be careful to scale any further decisions commensurate with the mission, with an emphasis on safety."

The bill's next stop is the House, where changes are expected in the gasoline tax provision.

Democrats also complained about an unrelated portion of the bill that would prevent several federal tax changes from applying to state tax filers when determining their income.

One federal rule exempting the value of canceled debt from income during certain home sales would cost the state $14 million if it applied to state income, too. State tax rules don't match that provision in the Senate legislation. It would take $71 million to comply with all of the Internal Revenue Service provisions avoided in the bill, requiring cuts elsewhere, a key Republican said.

"Where are you going to take the money from?" Senate Majority Leader Harry Brown, R-Onslow, asked a Democratic colleague.

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