Statewide Transit Sales Tax Recommendation
NC First was created in March 2019 by former Transportation Secretary Jim Trogdon. This 13-member commission researched and advised the transportation secretary of potential components of a sustainable long-range transportation investment strategy. The commission's final report and findings were released on Jan. 8, 2021.
The Commission composed a list of revenue recommendations including a new statewide sales tax.
State Sales Tax Recommendation
Raise the state Sales Tax rate and reduce the Motor Fuels Tax rate. By shifting a portion of the state’s investment needs to the Sales Tax, transportation revenues can both grow with the economy and ensure that all residents pay for using the transportation network. A Motor Fuels Tax reduction will make North Carolina more competitive with neighboring states. While both the Sales Tax and Motor Fuels Tax are regressive, the Sales Tax offers a broader base and is a reasonable and efficient revenue collection mechanism on untaxed mobility activities, such as Transportation Network Companies, micromobility companies, and e-commerce vehicle and drone deliveries.
A Sales Tax increase of 0.5 or 0.75 percentage points would have generated $941.6 million and $1.4 billion, respectively, in FY 2020.
Raising the state Sales Tax rate by 0.5 to 0.75 percentage points would enable the tax rates on gasoline and diesel fuel to be reduced by approximately 9 or 14 cents per gallon, respectively.
$4.2 billion in revenues over 10 years from a state Sales Tax increase of 0.5 percentage points and a $6.3 billion for a 0.75 percentage increase - assuming a reduction in fuel tax by 9 cents.