RALEIGH – Now, that’s more like it.
While some North Carolina conservatives have spent the past few months arguing vociferously for a major change in the state’s motor-fuels tax, I’ve remained unconvinced. There are other tax issues deserving of far more attention. The biggest problem with the gas tax is that some of the proceeds aren’t spent wisely. They are frittered away on transit schemes and low-priority roads. They are transferred to the General Fund.
Charging motorists according to how much gasoline they purchase is a rough approximation of a user fee, a means of connecting usage and financial responsibility. Even better would be to figure out a practical means of charging motorists according to how much they drive on the roads, since mileage more directly correlates with wear and tear than fuel consumption. But failing that, the gas tax is among the least-problematic levies in North Carolina. Even the variable component of the tax rate, which has drawn the ire of some activists, has a rationale.
Still, there is no doubt that the political valence of the gas-tax issue is potent. Consumers are understandably annoyed by the rising price of filling up. Federal and state taxes make up a significant share of that price (though a shrinking share, as underlying crude prices have skyrocketed), and thus represent a tool for politicians to use to push down prices at the pump. Assuming that no one truly relishes a return to 1970s-era price controls, it’s the only such tool available in the short run. I’ve just not been convinced that using that tool would benefit motorists more than it would hurt them (by giving some policymakers an excuse to delay needed highway projects).
So Bill Graham, the Salisbury lawyer and president of North Carolina Conservatives United, spends the past few weeks organizing a major rally on the gas-tax issue for the first day of the 2006 legislative session. Recognizing the political danger, Gov. Mike Easley responds preemptively by announcing plans to cap the gas tax, precluding any possibility that continued price hikes would force up the variable component of the rate in July.
And what does Graham do? Exactly the right thing, from a fiscal-policy perspective. He uses the opportunity of his well-attended rally Tuesday to advocate a broader agenda of tax relief. Given the massive budget surplus available to lawmakers this year, and the governor’s manifest desire to spend most of it on bigger government, Graham argued for more than $1 billion in tax relief, including the immediate elimination of that half-penny sales tax first imposed “temporarily” in 2001.
These are serious budgetary matters, but there is also an important political dynamic here. Graham is a potential Republican candidate for governor in 2008. One rival, U.S. Rep. Sue Myrick of Mecklenburg County, is spending a lot of her time talking about immigration, security, and similar issues that play to her strengths and position. Another rival, Sen. Fred Smith of Johnston County, is emphasizing his legislative and business credentials, while articulating an aggressive agenda on cultural and economic issues. Graham is talking taxes. These are all key voting issues for the Republican primary electorate. The candidates know it.
Meanwhile, the General Assembly did, in fact, convene for its session. Almost forgot to mention that.
Hood is president of the John Locke Foundation.