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Tax hike drives gas prices higher

Posted Tuesday, January 25, 2005

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North Carolina gas prices have jumped 11 cents in the past few weeks. Much of the increase is due to a surge in oil prices, but part of the reason can be traced to the halls of the Legislative Building in Raleigh.

As we rang in the new year, the state's gas tax went up 2 cents, bringing to total state tax to 26.6 cents per gallon.

North Carolinians now pay 45.3 cents in combined federal and state taxes on every gallon they pump. That's a little higher than the national average of 44 cents, according to figures published by the American Petroleum Institute.

The increase may have drivers complaining, but state budget officials are happy. The Department of Transportation believes the tax increase will bring in an extra $105 million by June 30. The state's gas tax is refigured every six months, based on the wholesale price of motor fuel during the preceding six months.

North Carolina was one of six states in which the tax rate increased automatically at the beginning of the year. The state's gas tax comes in three pieces. There's a flat tax of 17.5 cents and a 0.25-cent inspection fee, and the rest is adjusted every six months according to a formula based on changes in wholesale prices.

On July 1, the variable portion of the state tax rose from 6.8 cents to 7.1 cents to reflect recent increases in wholesale prices. Continued wholesale increases added an additional 2 cents Jan. 1, bringing the total state tax to 26.9 cents. Added to the federal gas tax of 18.4 cents, that brings the combined state and federal tax to 45.3 cents per gallon.

The American Petroleum Institute says gas taxes are higher in North Carolina than in all but 14 other states, but AAA counted 29 states where gas is more expensive than in North Carolina.

North Carolinians are paying about $1.82 for a gallon of gas -- not far from the national average of $1.86. According to, drivers in Kailua Kona, Hawaii, pay the most for gas -- $2.59 per gallon. People in Cheyenne, Wyoming, pay the least at $1.62 per gallon.

Experts say the price of gasoline could continue to rise if OPEC cuts production at its upcoming meeting.

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