Gov. Nikki Haley’s plan to fix the state’s crumbling infrastructure includes a 59.7 percent increase in the gas tax over three years, a marked shift from what she has said to media and in public addresses.
Haley proposed to increase the state gas tax by 10 cents to 26.75 cents per gallon over the next three years, in conjunction with lowering state income taxes from 7 percent to 5 percent and restructuring the state Department of Transportation.
“We have a very real problem with the way our transportation dollars are spent. Our system screams out for reform and restructuring,” she said in the State of the State address Wednesday night. “We have studied every option.”
South Carolina is facing a $42 billion shortfall in funding for state transportation needs through 2040, and 46 percent of the state’s primary road system is in poor condition, according to the Department of Transportation.
The three-part package – which Haley said would bring in $3.5 billion for roads over 10 years – is a significant shift from Haley’s previous position, which was that the state already had money to fix the roads.
“We don’t have to raise taxes to do it,” she said to the First Monday Club in Anderson last June. “The money is there.”
In her 2013 State of the State address, Haley said the roads and bridges were vital to the state’s economy, “But I will not – not now, not ever – support raising the gas tax,” she said. “The answer to our infrastructure problems is not to tax our people more, it’s to spend their money smarter.”
In her address this year, Haley said lower income taxes would offset the gas tax hike, representing “one of the largest tax cuts in history.” Haley’s proposed budget includes $61.4 million to the Department of Transportation from vehicle sales taxes, and noted her support for a $1 billion road-funding bill that passed in 2013.
S.C. Chamber of Commerce President and CEO Ted Pitts said in a statement the move supported the interests of the business community, saying “We appreciate the governor outlining a proposal and her willingness to lead in finding a path to providing more resources for our infrastructure and at the same time reducing the tax burden on South Carolinians.”
Pitts spoke in Greenville in early January and advocated for a multifaceted funding approach that might include raising the vehicle sales tax from $300 to $500.
Sen. Joel Laurie, D-Richland responded to Haley’s address afterward, calling for collaboration and bipartisanship but that infrastructure needed more than $1 billion to make a difference in the state’s roads.
“My friends, the money is not going to fall from the sky. If we want better roads, we are going to have to pay for them,” he said. “Anyone that tells you we can do this without new revenue is not serious about addressing the problem. “
According to revenue projections by the S.C. Revenue and Fiscal Affairs office, the gas tax would see higher revenues during the first three years before beginning a slow decline leading to 2025.
The state’s gas tax – one of the lowest in the country – has not been raised in 27 years, and has seen steadily declining since 2006 despite increasing motor vehicle registrations, according to a separate November report from the SC Revenue and Fiscal Affairs office.
Haley’s address proposed a new workforce development program, advocacy for rural education initiatives and committed to fighting efforts to unionize the state’s industries.
“I cannot express to you the extent to which this is a game-changer when we are trying to bring new businesses to our state,” she said. “We have a reputation – internationally – for being a state that doesn’t want unions because we don’t need unions. And it is a reputation that matters.
