Gas tax suspended as NC lawmakers make quick return to Raleigh

State lawmakers interrupted their planned legislative holiday Wednesday to grant North Carolinians a holiday of their own. They voted to suspend the state’s 41-cent gas tax until Nov. 30. 

The price per gallon of fuel depends on a number of factors, including global market issues. But the state does control one portion of it: the motor fuel excise tax. Starting Thursday, that 41 cents will be paused. 

Typically, gas tax proceeds go toward road and environmental funds, like the Highway Fund. During the 55-day tax suspension, those state programs will instead receive revenue from a different pot of money: the state’s Stabilization and Inflation reserve. It will cost an estimated $362 million. 

“So this isn’t the choice between helping families and farmers and maintaining our infrastructure and building roads and transportation for tomorrow,” said State Sen. Buck Newton, R-Wilson. “… We can do both because over the last decade and more, we’ve had a very, very responsible budget in this body and in this legislature.” 

While the vote was nearly unanimous, the spirit in Raleigh was far from bipartisan. Democrats didn’t find out about the special session until the public did, and they were suspicious about the timing, less than a month before Election Day. 

“I think it’s fair to say (Republicans) must be worried,” House Democratic Leader Robert Reives, D-Chatham, said. “Something must have come back in the polls.” 

Relief at the pump?

The bill makes it clear that lawmakers expect the 41-cent savings to be reflected in the price per gallon, but there’s no enforcement mechanism. 

In theory, retailers and oil companies could pocket the savings for themselves instead of passing them along to consumers. Berger is confident the competitive market will do the job. 

“I’m fairly certain that once one retailer starts reducing the price, the others will as well,” he said. 

House Speaker Destin Hall, R-Caldwell, also predicted that consumers will see a reduction around 30 to 35 cents, depending on what happens in the global market. 

He also noted that some consumers may notice a difference in a matter of days, while it could take a week or two for others. Retailers already bought gas from wholesalers before the gas tax suspension went into effect, and that gas is not subject to the suspension. 

But once that stock runs out, and retailers buy more gas, consumers should see those savings reflected in their fuel price. Urban areas will likely go through their stock faster than rural areas. 

The bill also includes a special carve-out for North Carolina farmers and others working in agriculture. It allows them to use red-dyed diesel fuel, normally only allowed for off-road use, for highway vehicles until the end of the year without any penalties. 

Dyed diesel is typically exempt from certain fuel taxes because it can only be used off-road. 

Democratic Gov. Josh Stein already paused penalties for using dyed diesel fuel in highway vehicles. On Sept. 30, he announced the move in order to “lessen financial pressure on farmers” by letting them take advantage of their non-taxed dyed diesel fuel stock during harvest season. 

The bill would not add or change anything to Stein’s move.

Why suspend gas tax now?

Gas prices are high. Wednesday, they averaged $4.12 per gallon in North Carolina.  A year ago, they averaged $2.86 per gallon. 

But they were also high earlier this year, and peaked in May at around $4.23 a gallon. At that time, Berger was asked about the potential of suspending the gas tax. 

“Strikes me that that’s more of a feel-good kind of thing than something that would actually make a whole lot of difference with reference to individuals,” he told the News & Observer. 

Wednesday, he said he didn’t want to pause any transportation projects at the time. Also, it’s a critical time for farmers now, as they are gathering their crops.

“That is something that really tipped the balance in many respects,” he said. 

By the time the legislative session ended in July, Hall said, gas prices had dipped, and lawmakers were hoping that trajectory would continue. 

Democrats, on the other hand, said the gas tax holiday was an election ploy, designed to give Republicans something to campaign on in the final weeks before Election Day. 

“Gas is up more than $1 a gallon from last year,” said Senate Democratic Leader Sydney Batch, D-Wake. “Diesel is over $6, and somehow it took them until the month before an election to figure that out. Our working families have noticed for months. Back in the spring, farmers noticed and started warning us.” 

She thinks voters will see through the move. 

“The reason why their groceries are more expensive, the reason why their healthcare is expensive, the reason why they continue to find themselves working two jobs instead of one, is because Republican failure over the last 16 years has made them worse off than they were beforehand,” she said.

Democrats also said the legislature should do more to address affordability issues, like taking on dynamic grocery store pricing and keeping utility companies in check. But their amendments were not allowed. 

Newton said that if Republicans had done the things Democrats wanted them to during their 16-year legislative reign, they wouldn’t have had enough reserve funds to offer this relief. 

After Nov. 30, Hall said he was open to extending the tax holiday. Berger said they will pay attention to what happens in the larger economy and how that changes the dynamic. But he cautioned that lawmakers could not risk delaying or abandoning road projects across the state. 

Stein is expected to sign the bill into law.

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