South Carolina Ready to Become Latest State to Raise Gasoline Tax

By Valerie Bauerlein Features Dow Jones Newswires

South Carolina is poised to raise its gasoline tax for the first time in 30 years, joining Tennessee and other GOP-led states in touching what was formerly a third rail in politics.

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The South Carolina House voted Tuesday to approve a legislative compromise plan that would raise the state's 16.75-cent gasoline tax by 12 cents over 6 years. The vote came after years of filibusters and failed proposals, and included a handful of tax cuts in other areas, as many legislators said they could not support a tax increase without some offset.

House Democratic Leader Todd Rutherford said the gasoline tax increase was welcome but still meager. "For the first time in years, the leadership has come together to decide that our roads are important enough that we need to fund them," said Mr. Rutherford.

So far this year, California, Indiana and Tennessee also have voted to increase the gasoline tax and have the rate indexed for inflation, said Kevin Pula, a transportation policy analyst with the National Conference of State Legislatures. Alabama, Louisiana and Oklahoma legislators are also considering raising their gasoline tax, he said.

South Carolina has the second lowest gasoline tax in the U.S. after Alaska and, like many other states, the tax rate is not adjusted for inflation, said Jared Walczak, a policy analyst at the Tax Foundation, a Washington group that advocates for lower state and federal taxes.

South Carolina manufacturing heavyweights like French tire-maker Michelin SA had pushed hard for the tax increase. The S.C. Chamber of Commerce said a third of the state's interstate highways are congested and nearly half of the state's primary roads are in poor condition. Manufacturers are loath to invest in the state because of road-related delays and damage to their fleets, according to the S.C. Chamber.

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Gasoline taxes and tolls are a defensible way to pay for infrastructure needs, Mr. Walczak said, because they essentially serve as a "user-pay system." He said he's not surprised to see states moving in succession to raise the gasoline tax. "They provide cover for each other," he said.

Lower gasoline prices in recent years have provided an opportunity for the states to raise the tax without inflicting too much pain. The average cost of a gallon of gasoline in the U.S. is $2.48, including taxes, down from more than $4 a gallon in the summer of 2008, according to the U.S. Energy Information Administration. The federal gasoline tax hasn't increased since 1993.

The gasoline tax increase had the backing of the House and Senate GOP leadership, but was opposed by many conservatives, including Americans for Prosperity, the free-market political-advocacy group backed by billionaire brothers Charles and David Koch. Opponents said it would be useless to raise the gasoline tax without reforming the state Transportation Department by making its director a gubernatorial appointee.

House Majority Leader Gary Simrill, a Republican, said the vote had been three years in the making with buy-in from many industries in the state. As a Republican from a conservative district, he said, the gas tax was the fiscally responsible way to repair the state's roads, which he said are among the nation's most dangerous.

"A fee-based system is the best way to pay for roadways," he said.

Transportation officials have said it would cost $1 billion a year to bring the state's roads into acceptable condition. The new tax plan is expected to raise $630 million a year when fully implemented.

The tax increase is not a done deal. Republican Gov. Henry McMaster, who took over in January after Nikki Haley was named the U.S. ambassador to the United Nations, has pledged to veto the bill, so the House and Senate need to keep their bipartisan coalitions together to override an expected veto later this week.

Write to Valerie Bauerlein at valerie.bauerlein@wsj.com

(END) Dow Jones Newswires

May 09, 2017 17:51 ET (21:51 GMT)