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May 15, 2008

Gas taxes and property taxes

North Carolina has high gas taxes compared to other states but low property taxes. Is there a connection? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"There is, and you hear this from people newly arrived in North Carolina. On the one hand, they say, 'Gosh, I don't like it here because you have such high gas taxes,' but on the other hand they say, 'Oh whoa, we like these nice low property taxes.' And, indeed, there is a connection, and the connection is this: In North Carolina we have chosen to build most of our roads from state funds. And the state funds are generated primarily from the gas tax, the statewide gas tax. In fact, 86 percent of road building in the state is done from state sources, and the gas tax is the biggest part of those state sources. In contrast, the average for other states is that only 60 percent of road building is funded at the state level, and 40 percent at the local county level. Now when they fund roads in other states at the county level, what revenue source do they use? They don't use the gas tax, they don't use a sales tax, they use the property tax as their major funding source. So this is one reason why other states that have low gas taxes - because they are funding more of the roads with local sources - those states tend to have higher property taxes. It's also one reason why when you are looking at the tax burden - so called - in different states, it's very deceptive to just pick out one tax. You really need to look at all taxes combined. And, indeed, when we do this for North Carolina, we are really about in the middle of the pack of all states in terms of the percentage of income taken in state and local taxes."

Posted by Dave at May 15, 2008 08:00 AM