Senate studying increase in state gas tax

abeam@thestate.comMay 1, 2013 

  • 16 cents

    South Carolina’s state gas tax now, per gallon

    20 cents

    The amount the S.C. gas tax would rise to in 2023 if it were tied to inflation, according to state economists

    28.5 cents

    Georgia’s state gas tax

    37.8 cents

    North Carolina’s state gas tax

    SOURCES: State officials, Tax Foundation

  • $1.3 billion for S.C. roads? What is the problem?

    State officials say they will need $48.3 billion to repair S.C. roads and bridges over the next 20 years, but the state expects revenues of only $19 billion to do that work, leaving a $29 billion deficit.

    Who is working on the problem?

    A bipartisan group of six state senators is on a special subcommittee exploring ideas on how to raise more money to pay for roads. They are: Sens. Ray Cleary, R-Georgetown; Yancey McGill, D-Williamsburg; Thomas Alexander, R-Oconee; Darrell Jackson, D-Richland; Paul Campbell, R-Berkeley; and Joel Lourie, D-Richland.

    What have they come up with?

    A plan that would borrow up to $1.3 billion to spend on repairing and replacing roads and bridges. The proposal also would generate about $75 million a year through higher fees to help maintain those roads. The fee increases would include tying the state gas tax to inflation, which would increase that tax to 20 cents a gallon by 2023.

    What is the status?

    The senators hope to have a bill ready to introduce by May 7. They plan to meet again Thursday.

A bipartisan group of six state senators is working on a proposal that would borrow $1.3 billion to repair and replace the state’s crumbling network of interstates and bridges – a proposal that also would increase the state’s gas tax, currently third lowest in the nation.

If the state is to spend $1.3 billion to rebuild roads, those lawmakers say the Department of Transportation also will need more money in the future to maintain the repaired roads. That is why, the senators say, their proposal includes tying the state’s gas tax to inflation, a move that state economists project would increase the state gas tax to 20 cents a gallon by 2023 and bring in millions more to maintain state roads. That tax is now 16 cents.

“You can’t do one without the other. You can’t have all this cash up front but not have another revenue stream to have ongoing maintenance and repair,” said state Sen. Joel Lourie, D-Richland, who added he does not consider the proposal a tax increase because it would tie the gas tax, sometimes referred to as a “motor vehicle user fee,” to inflation.

While some Republican lawmakers are coming around to the idea of borrowing money while interest rates are at historic lows to repair state roads, a gas tax increase still is a nonstarter for most Republicans, who control the state Legislature.

Consumers and businesses can’t afford higher taxes, they say. Gas prices are at record highs, and the state’s unemployment rate still is higher than the national average.

“Lawmakers don’t have an appetite to raise taxes in any form,” said Senate Majority Leader Harvey Peeler, R-Cherokee.

House, Haley oppose idea

That’s why the group of senators is trying to carefully craft its message.

A vote for their bill, they say, would not increase gas taxes. It simply would tie the state gas tax to inflation. The tax would increase by less than a penny each year, according to estimates from the state Board of Economic Advisors.

That argument will have a tough time in the House of Representatives and the governor’s office.

A House budget subcommittee considered a bill last month, sponsored by state Rep. Tommy Stringer, R-Greenville, that would have tied the gas tax to inflation. It died in subcommittee.

Gov. Nikki Haley also opposes the idea, a spokesman said. “If the tax goes up, it’s a tax increase, and the governor is not going to support it.”

But coming up with a plan to repair the state’s roads is a top-priority item for some groups that traditionally support Republicans, including many big S.C. businesses and business groups, such as the state Chamber of Commerce.

Spending money to repair the state’s roads and bridges also could boost S.C. employment.

If the state’s gas tax is tied to inflation, state economists estimate it would bring in an extra $131 million by 2023, an average of $12.6 million a year.

Lawmakers also are considering a range of other fee increases to help maintain roads, including increases in driver’s license fees – currently $12.50 for a five-year license and $25 for a 10-year license; vehicle registration – currently $24 every other year for passenger vehicles; and rental cars, which currently pay no fees.

“I think there should be a fee component,” said state Sen. Ray Cleary, R-Georgetown, chairman of the special Senate subcommittee. “We could possibly raise $75 million through those fees. Not taxes, but fees.”

Band-Aid or a fix?

Borrowing $1.3 billion wouldn’t be easy, requiring a series of complex financial and legal moves.

First, the state would convert the sales tax that it collects on car sales to a “vehicle registration fee.” The fee then would be placed into a restricted account to be used by the State Infrastructure Bank. By doing that, the state could borrow up to 10 times the amount of the annual fee that it collects, which economists predict would be about $80 million. That would give the state $800 million.

Second, the state is scheduled to pay off a $750 million loan for school construction in 2015. That will free up an extra $70 million a year in state spending, which state officials say would allow them to comfortably borrow $500 million.

Haley and House Speaker Bobby Harrell, R-Charleston, have said they do not want to borrow money for road repairs. Instead, they favor shifting existing state money, about $80 million a year, to pay for road repairs.

But other lawmakers call that idea a “Band-Aid,” noting the state has an estimated $29 billion shortfall in the amount of money that it will need for road repairs over the next 20 years.

“There will be as much pain in a Band-Aid as there is in a fix,” said state Sen. Paul Campbell, R-Berkeley, a member of the Senate subcommittee. “(We need to) bear the pain one time and move forward with it.”

Reach Beam at (803) 386-7038

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