Insurance tax, higher fees may pave NC highways

Posted April 17, 2015 5:48 p.m. EDT
Updated April 17, 2015 7:01 p.m. EDT

— Saying North Carolina's tax on gasoline is an unreliable source of revenue for the state's highway construction and maintenance program, lawmakers on Thursday rolled out a plan that would use higher vehicle fees and a tax on automobile insurance coverage to augment gas tax funds.

The growing number of electric vehicles and hybrids and overall increases in fuel efficiency have cut into the amount of revenue from the state gas tax in recent years, and lawmakers last month put a floor under the tax to prevent a projected loss of $400 million from an expected drop in the tax this summer because of lower gas prices. The formula to calculate the tax includes the wholesale price of gas.

Under House Bill 927, the gas tax would be allowed to drop from 36 to 30 cents per gallon on July 1, which is the level it would have fallen to if not for the changes the General Assembly adopted in March. In exchange, charges for various services performed by the state Division of Motor Vehicles would increase by 50 percent, such as registration going from $28 to $42 a year and the price of a learner's permit rising from $15 to $22.50.

The bill also calls for a 6.5 percent tax on automobile insurance premiums. Kerry Hall, a spokeswoman for the state Department of Insurance, said the average price of an auto policy in North Carolina was $1,628 in 2013, which would mean a tax of about $106.

The highway use tax paid when a vehicle is purchased and sales taxes on rental cars also would go up under the proposal.

"That's just not good, not at all," driver James Gray said Friday after calculating that the various changes would end up costing him about $43 a year.

Driver Miriam Mangum said she has no problem with sticking with the gas tax to fund road construction and repairs.

"Let us perfect what we already have instead of inventing or coming up with something else," Mangum said.

Insurance Commissioner Wayne Goodwin is opposed to the concept of an auto insurance tax, saying it would raise overall rates for North Carolina drivers. The state has the seventh-lowest rates in the U.S., according to the National Association of Insurance Commissioners.

The proposed insurance tax would raise about $305 million a year, Hall said.

The bill has the backing of House leaders, who say the instability of the gas tax makes long-term transportation planning difficult. The bill would earmark more than half of the money generated by the new taxes and fees to road resurfacing and repairs.

"I travel from Clayton to Cary. I'm always hitting pothole after pothole after pothole. So, the roads do need to be taken care of," Gray said. "It's kind of like a Catch-22."

Mangum's father, William Mangum, said he doesn't believe the state Department of Transportation needs that much extra revenue.

"They seem to be doing a fairly good job right now," William Mangum said. "Compared to other states, our roads are in fairly good condition."