9/9/10-A special panel has recommended the state’s fuel tax rate be increased by a nickel per gallon to generate $150 million a year for roads.
The Taxation Realignment Commission has spent the past year studying the state’s tax system. Early this month the commission voted unanimously to recommend to state lawmakers major changes to the state’s fuel tax and sales tax.
The draft report and recommendations detailed by the tax reform commissioners states that adequate funding for roads in the state “is of paramount importance for both the mobility and safety” of truckers and other drivers and “is an important aspect of the state’s long-term economic development.”
The Legislature, which appointed the commissioners to overhaul the state’s tax system, must approve any changes to become law. The tax issues can be considered during the session that begins in January 2011.
South Carolina’s 16.75 cents per gallon tax on diesel and gas is unchanged since 1987. It is the lowest tax in the southeast and the nation’s third-lowest, and raises about $500 million annually for roads.
Officials are concerned about the long-term prospects of revenue through the fuel tax. They cite collections that have been trending flat or downward. More fuel efficient vehicles available for consumers are also blamed for the decline in revenue.
To help stem the tide, tax reform commissioners voted to recommend changes to the state fuel tax. If implemented, lawmakers would have two options: lower the fuel tax rate nearly 10 cents per gallon to 7.75 cents and include a floating rate that would change every six months based on the wholesale price of fuel; or add 5 cents to the current 16.75-cent-per-gallon tax rate.
Critics say they are worried that as soon as fuel prices shoot up, state lawmakers would cave to pressure about rising fuel costs and cancel the next adjustment – and likely future adjustments. In effect, nothing would change.