RALEIGH — Our state has a fuel tax of 40.65 cents per gallon. That’s one of the highest rates in the country — but don’t jump to conclusions. North Carolina doesn’t spend any more on highways than the average state. And drivers aren’t overpaying.
With so much data available online, it’s easy to compare taxes, spending, public services, and amenities across states. My email inbox is regularly filled with such publications from special interest groups, PR firms, and clickbait “media.”
What’s difficult to compare is that you have to make useful comparisons. The most common mistake is to ignore structural differences between states. In North Carolina, for example, the majority of public schools are funded by state income and sales taxes, not property taxes. The latter actually accounts for 26 percent of per-pupil spending in our state. The national average is 44 percent.
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Likewise, in North Carolina we do not have our own road system. This sets us apart from most other states. Our municipalities do own and maintain their own road system, but even in this case, many of the busiest roads within cities and towns are actually state roads that the municipalities maintain and repair as contractors to the state.
These aren’t just technical regulations. Most state highway spending is funded by taxes on fuel, car registration, and driver’s licenses. Most local spending is funded by property and sales taxes. Yes, North Carolinians pay higher taxes at the gas pump. At the same time, for the same reason, we pay lower taxes on the value of our property and other goods and services we buy.
The difference is significant. According to a recent analysis by the Tax Foundation, just over half (51 percent) of state and local road spending in the United States is covered by direct taxes on motorists – fuel taxes, driver’s licenses, tolls and other user fees. In North Carolina, 65 percent of spending is financed by direct taxes on motorists. Only in five other states is the proportion higher.
On the other hand, North Carolina’s state and local governments collect an average of $1,284 in sales tax per capita, 10 percent less than the national average. As for property taxes, North Carolina counties collect an average of $1,116 per capita, a staggering 41 percent below the national average.
With that in mind, I hope you agree that focusing only on gas taxes can be misleading. It ignores the higher taxes people in other states pay to fund their roads. I would go further, though. I think North Carolina should be commended for relying so heavily on the cost-sharing principle for highways. If anything, we should be moving more in that direction, rather than plundering general state revenues to fund highways (or plundering highway revenues to fund other programs).
So, no, North Carolinians don’t pay more for roads than anyone else. In fact, I have even better news: We get more for our money.
For many years, the Reason Foundation, based in California, has published a report on the performance of state highways. In its most recent study, North Carolina ranked second in the country in cost-effectiveness. We have relatively low administrative costs and fare well in comparisons of traffic congestion, road conditions and fatality rates on our major urban and rural roads.
North Carolina actually scores worse than average in the condition of its bridges. The fatality rate of motorists and pedestrians on secondary and city streets is also concerning – it is significantly higher than in neighboring states Virginia and Georgia. “Neither ranking is abysmal,” wrote Baruch Feigenbaum, lead author of the Reason report, “but these are the only categories in which the state ranks outside the top 25.”
We can and should improve these measures. And the North Carolina Department of Transportation has not been free of administrative challenges in recent years. But overall, the results suggest that our state is using the money it needs to build roads effectively.
There are many problems that deserve our attention, but the fact that we are being ripped off at the gas pump by our own government is not one of them.
John Hood is a board member of the John Locke Foundation. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).
