BACKGROUND

For more than 20 years, the General Assembly has been presented with various studies and recommendations to restructure and increase transportation funding in North Carolina. Often these recommendations, while also putting forward suggestions for further legislative studies, have simply relied upon proposals to increase the Highway Use Tax for the bulk of proposed immediate actions.

The current 3% Highway Use Tax is charged to North Carolinians who purchase vehicles and register those cars in North Carolina. It is not a sales tax, but rather a tax to register the vehicle in North Carolina (a significant tax given that a vehicle is the first or second largest purchase most people will ever make). In addition, consumers are permitted a trade-in credit when purchasing a vehicle from a dealer to prevent the residual value of the traded-in vehicle, which was subject to the tax when first purchased, from being unfairly taxed a second time.

Recently, the NC First Commission of the Department of Transportation released proposed recommendations for raising $20 billion in new transportation revenue over 10 years. The single most significant portion of the $20 billion recommendation relies upon (as similar studies have in the past) simply implementing a massive 66% increase in the Highway Use Tax (increase from 3% to 5%) on motor vehicle sales and leases and the elimination of the existing net-of-trade credit in the calculation of the tax.

NCADA’S POSITION

The North Carolina Automobile Dealers Association (NCADA) and North Carolina’s franchised new car, truck and RV dealers share in the commitment to supporting and improving our state’s economy, including its transportation infrastructure. Our industry has always supported participating in any comprehensive, multi-year, multi-stakeholder approach to addressing both the short-term and long-term challenges inherent in funding North Carolina’s transportation needs.

Fundamental to the industry’s position is the belief that transportation related taxes and fees should be tied as closely as possible to general vehicle operation and actual road usage. In this way, all North Carolinians who own or lease a vehicle and use the roadways pay their “fair share” of the transportation funding needs. Simply implementing a significant car tax increase would place an unfair burden on the 1 out of every 23 citizens in North Carolina who purchase a vehicle in a given year. For these reasons, NCADA is adamantly opposed to the recommendations to increase the Highway Use Tax and to eliminate the trade-in credit.

Consistent with NCADAs’ support for a “comprehensive, multi-stakeholder, multi-year” solution to funding North Carolina’s expanding transportation budget and with a focus on those mechanisms most directly related to actual motor vehicle operation and usage, NCADA and North Carolina’s franchised car, truck and RV dealers firmly support the following:

• A 1-2 cent increase in the NC Motor Fuels Tax. Raises $60M per penny, per year. (Most direct correlation to road usage!)
• A $50.00 per year, for 3 years, surcharge to vehicle registration earmarked specifically for transportation funding. Raises $1.35 B in 3 years. (A charge that would cover every North Carolinian that uses the roads.)
• An increase in the fee charged for a drivers license. (Charges everyone who can drive on the roads.)
• An increase in the registration fee charged on electric vehicles to fairly pay a road usage fee comparable to the gas tax.
• Explore and study cost reductions in highway construction and maintenance inflationary costs as well as revenue sources from other modes of transportation.
• Explore a possible temporary increase in the state sales tax dedicated to transportation.