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RALEIGH — As North Carolina grows, so will the need for our governments to ensure adequate delivery of a basic service: mobility. While dealing with this problem, policy makers must keep two facts in mind.
First, while the state legislature has passed several necessary reforms to the way we fund highways and streets, the work is far from done. For a century, North Carolina has relied heavily on motor fuel taxation, even more so than the average state because we don’t have county road networks funded by property taxes.
Fuel taxation was a good idea for the market. The more drivers drove, the more fuel they bought and the more taxes they paid. It was the best available approximation of a user fee, the right way to pay for businesses that don’t have rights (like public safety or education) but that technically can’t be fully private because they’re too expensive and in many places impossible to collect tolls.
In recent decades, however, the system has been falling apart. Cars and trucks are getting more fuel efficient. That’s great for consumers, but it has the effect of reducing the revenue collected per mile traveled.
For a time, North Carolina compensated by raising the gas tax rate, either directly or indirectly. That strategy has run its course. The public’s willingness to accept higher prices at the pump has pretty much disappeared. At the same time, most people recognize the need to invest in roads.
In a recent survey by the University of North Carolina Transportation Research and Education Institute, 53% of respondents said North Carolina should increase spending on roads. But when presented with a host of revenue options, few chose a gas tax increase as their top choice. Instead, most chose either an increased reliance on sales taxes — exactly what the General Assembly began doing in last year’s state budget — or a new fee for drivers based on how many miles they drive.
Now for another reality check. While the increased efficiency of gas vehicles and the advent of electric vehicles both contribute to the gap between road use and income, the EV factor is much less significant. At least in the near term, electric drive is impractical for North Carolinians who use their vehicles for more than the daily commute from home to the office and back.
It’s not just about higher vehicle sticker prices. Today’s batteries don’t hold enough juice and take too long to charge. Filling the gas tank takes about five minutes. “Charging” the EV battery takes about half an hour. This is not only an inconvenience for many drivers, but for some it is a job killer. This makes it impossible for regular sized stations and stores to remain viable businesses. Using these estimates, a gas station with 14 pumps can serve an average of 10,080 vehicles over 12 hours. An EV station with equivalent infrastructure could only serve 1,680.
In other words, if policymakers in North Carolina decide to require mileage reimbursement, they’ll have to figure out a way to do it that assumes gas stations will continue to play a huge role in fueling our travel.
In a John Locke Foundation report released last year, transportation analyst Randall O’Toole argued that the state should start by inviting people to opt into a mileage-based fee program. In exchange for reporting and paying a fee when they renew their vehicle registration — or perhaps paying through some kind of transponder-based network installed at gas stations — these early adopters would become exempt from gas taxes. The next step would be to require EV users to use the system and then switch all other drivers to it. At that point, North Carolina would get rid of its gas tax entirely.
The only practical alternative to the mileage charge model would be for politicians to increase sales tax. I think it’s a bad idea based on politics. Still, it can clearly be sold to voters in a way that a gas tax increase is not.
John Hood is a board member of the John Locke Foundation. His latest books, Mountain Folk and Forrest Faulkcombine epic fantasy with early American history (FolkloreCicle.com).
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