By John Hood

RALEIGH — During the homestretch of the 2024 election, I complained repeatedly about the absence of serious engagement by presidential and congressional candidates with the critical issue of the national debt. Most said virtually nothing about the eye-popping federal deficits of the past few years, while others claimed that excising “waste, fraud, and abuse” or “making billionaires pay their fair share” would solve the problem — which is mathematically impossible.

Today I’ll discuss another glaring oversight: few candidates in North Carolina races, from governor and state legislature to county and municipal offices, have said anything of consequence about the gap between what we need to spend on roads and the revenue we’re collecting from the users of those roads.

Although our state enjoys many advantages, from pro-enterprise tax and regulatory policies to bountiful natural and human resources, inadequate transportation infrastructure will impose constraints on future growth and development.

And in a broad swath of western North Carolina, Hurricane Helene deepened the hole.

My colleague Joseph Harris serves as fiscal policy analyst at the John Locke Foundation. In a new analysis, Harris pointed out that most of the state’s $7.3 billion in revenue to the Highway Fund and Highway Trust Fund last year came from either state or federal taxes levied on motor fuels. Another 18% derived from the Highway Use Tax (essentially a sales tax on autos) and 15% from auto registrations and other fees collected by the Division of Motor Vehicles.

The remaining sliver comes from General Fund taxes — including a portion of the sales taxes applied to auto parts and other highway-related expenditures. When the state legislature began to phase in that transfer a couple of years ago, I said that it “comes closer to meeting our highway needs while respecting the user-pay principle than does any other solution that can be practically adopted at the moment.”

It was a good start. But even when fully implemented, the sales-tax transfer won’t close the gap. As the cars and trucks traversing North Carolina streets and highways become increasingly fuel-efficient, or powered by something other than motor fuel, the amount of tax collected per mile driven will continue to decline — and its purchasing power, due to rising prices for paving material and labor, will decline even faster.

One solution would be to raise the tax rate on motor fuels to offset the effects of inflation and fuel economy. The General Assembly has already done that, in a roundabout way, but I suspect attempting to do it again would provoke a political firestorm.

The more-sensible solution is to charge motorists for using roads not according to how much fuel they buy but to how much they drive. I’ve long supported the idea of a mileage-based user fee to replace the gas tax.

Harris made a similar recommendation, suggesting the version that presents the fewest administrative challenges: an annual charge when renewing a vehicle’s registration, computed by comparing odometer readings. Unlike a GPS-based system, this creates no privacy challenges. On the other hand, there’s no way to know what share of total mileage happened in North Carolina. (Of course, that’s also true for gas taxes, which are collected where you fill up, not necessarily where you drive most of your miles.)

According to his calculations, the state would need to charge $0.0178 per mile traveled to produce the same amount of revenue it currently receives from the motor-fuels tax. That would average about $266 per driver. The legislature would then regularly adjust the rate to account for inflation, which is how the new system would boost revenue over the current (steadily declining) baseline.

Most policymakers I know, Republicans and Democrats alike, recognize that North Carolina must make this change, or something comparable, in order to build and maintain the roads and bridges we need. But earning the trust of North Carolinians on this issue will require talking about it, a lot — which is why I see the just-completed campaign as a missed opportunity.

John Hood is a John Locke Foundation board member.

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