John Hood John Locke Foundation
February 28, 2014
When politicians admit they don’t know something, that makes me respect them more.
Admitted ignorance is a sign of maturity, of a willingness to learn. It can be remedied with facts. What really does grave damage is when politicians think they know something and act on it — even when what they “know” is false, misleading, or incomplete. That’s how tax money is squandered, government power is abused, and problems are allowed to fester.
A common example in state politics involves transportation finance. Here are two undeniable facts: North Carolina has one of the nation’s highest excise taxes on motor fuels and many North Carolina roads are congested, inadequate, and in poor repair. From these facts, politicians, commentators, and activists across the spectrum have formed a variety of spurious conclusions about the funding, management, and oversight of the Department of Transportation.
The conclusions are spurious because they are based on incomplete information. You see, states differ widely in how they finance and manage transportation programs. You have to take these differences into account when making apples-to-apples comparisons of tax rates. You also have to consider that gas taxes aren’t the only way governments collect money from taxpayers to pay for transportation.
For starters, most states tax not just fuel but also vehicles. If you combine the revenue from both sources, the average motorist in North Carolina paid $240 in gas and car taxes in 2010, the most-recent year for which all data are available. That puts the state almost exactly at the national average of $238. If you then add in federal taxes as well as direct charges to motorists, including road and bridge tolls, North Carolina’s total per-capita revenue from highway users was $351, lower than the national average of $390.
Next, you need to know that while many states have extensive road systems paid for by local property taxes, North Carolina doesn’t. We don’t have county road systems at all. And even many roads within municipal boundaries are state-maintained, an artifact of a decision in the early 1930s to transfer funding responsibility from bankrupt local governments to the state. Similarly, an increasing number of jurisdictions compel residents to pay higher retail sales taxes to finance roads and other infrastructure, a practice that is limited to only a few counties in North Carolina right now (although some politicians and activists would like to change that).
Finally, although North Carolina has had a history of transferring gas and car taxes to non-highway uses, including mass transit and general state operations, other states have diverted funds at far higher rates. As of 2010, North Carolina spent about 12 percent of highway-user revenues for non-highway purposes, compared to a national average of 20 percent.
So, to create a true apples-to-apples comparison of how much each state’s residents pay in transportation taxes, you have to include gas taxes, car taxes, tolls, other direct charges, and the transportation share of property and sales taxes. For North Carolina, that number was $510 in 2010. The national average was $657. States with higher transportation-tax burdens than North Carolina included Virginia, Florida, and Texas. Also, the quality of North Carolina’s roads has improved substantially in recent years, and is now at or above the national average according to some studies.
These are facts. By themselves, they don’t establish any conclusions. For example, if you want to argue that North Carolina should build more toll roads or raise sales taxes to finance new transportation bonds, you’ll have to make that argument on the merits — that the additional cost to motorists or taxpayers as a whole will be more than offset by the benefits of increased mobility, lower vehicle-repair costs, or shortened travel times.
My point is simply that if you thought North Carolinians paid more for transportation and got less value for it than the residents of other states do, you were mistaken, but understandably so. If you persist in making that claim now, however, you will be making a less-forgivable error.
Hood is president of the John Locke Foundation. For more information, visit www.johnlocke.org.