DALLAS – South Carolina Republican Gov. Nikki Haley asked lawmakers Wednesday to raise the state's motor fuels tax by 10 cents per gallon in exchange for a cut in the state income tax rate and changes in how state highway commissioners are appointed.
The 62.5% increase in the state's gasoline and diesel tax of 16 cents per gallon would be phased in over three years, Haley said in her State of the State address to the General Assembly. The increase would provide an additional $49 million for state road projects in fiscal 2017 if the proposal is enacted in the current legislative session.
The gasoline tax increase would provide an additional $3 billion for roads over 10 years, Haley said, while the income tax cuts would total $5.5 billion over the same period.
Haley said she would veto a gasoline tax increase if it is not accompanied by a reduction over 10 years in the state's top income tax rate to 5% from the current 7%, and a restructuring of the eight-member South Carolina Transportation Commission.
"I hope everyone listened carefully to what I said," she told the lawmakers. "This is a three-part package deal. If we do all of those things, we will have better roads and a stronger economic engine for our people. That's a win-win."
Haley's executive budget for fiscal 2017, which was released last week, would provide an additional $345 million for roads, including the additional gasoline tax revenues and $231 million of one-time revenues.
South Carolina's 16 cent per gallon fuel tax is the third lowest in the U.S. The state also levies a 0.75 cent per gallon sales tax on motor fuels. The average state diesel tax is 21 cents and the average state gasoline tax is 29.6 cents, according to the American Petroleum Institute.
Haley said she wants to change the selection process for the state transportation board that oversees highway projects, but did not provide specifics of the reforms she is seeking. Currently seven of the eight board members are selected by regional legislative delegations, with the governor appointing the chairman.
The selection process results in commissioners with a regional rather than a statewide perspective, she said.
"Our system screams out for reform and restructuring," Haley said. "Simply shipping more money into the current bureaucracy would be like blasting water through a leaky hose."
A Republican proposal in the House would expand the state's 6% sales tax to include fuel distributors and put a 1% sales tax dedicated to transportation on the November ballot, but does not include an increase in the gasoline tax. A House committee last week postponed action on the measure in anticipation of Haley's proposal.
Republican legislative leaders said they would work with Haley on a road funding plan but Democrats were skeptical. In addition to Haley, 28 of the 46 state senators and 78 of the 124 representatives in the General Assembly are Republican.
State Rep. Mandy Powers Norrell, a Democrat from Lancaster County who provided the party's response to Haley's speech, criticized the Republican legislative majority for killing a road funding proposal during the 2015 session.
"If Democrats were in control of the legislature, we would have a roads bill on Gov. Haley's desk within days," Norrell said.
"Republicans in the Senate actually filibustered their own roads bill last summer until it was dead for the year," she said. "While Republicans are fighting amongst themselves, our citizens continue to suffer with tattered roads and dangerous bridges."