Changing the financing of roads

Date posted: March 26, 2013

When addressing economic issues, it can be helpful to keep an eye on what other states are doing. A few weeks ago the governor of Virginia proposed a new way for that state to pay for roads, and a version of that plan has been passed. N.C. State University economist Mike Walden explains the plan and its implications for North Carolina.

“… (T)his has the potential to be big, a big impact real in all states around the country. What this new plan in Virginia will do is totally eliminate the state retail gas tax in Virginia. Now, there’ll still be a federal tax, and there’s also going to be a wholesale tax on gas. But in terms of you and me going to the pump, if we lived in Virginia and (are) pumping gas, there will be no retail tax state gas tax at the pump.  “Now what that’s going to be replaced with are some additional fees. For example, people who are driving hybrid cars are going to have to pay an extra fee to do that. And also there’s going to be an increase in the general sales tax. That is, whenever you go and buy anything in Virginia that’s the subject of the state sales tax, that sales tax is going to be a little higher. And those monies are, those extra monies are, going to be directed toward transportation.

“So, the governor and those who supported this say this is going to make Virginia more competitive. They argue that it’s going to provide a more stable source of money for transportation.

“So … this is very interesting. This is something obviously, I think, we in North Carolina want to watch. We have the same issues here in North Carolina in terms of people not liking the gas tax, in terms of the gas tax actually dropping the revenues because of people driving more fuel-efficient vehicles.

“So this has the potential to be a game-changer certainly worthy of watching.”

 

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