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Like most states, South Carolina uses a “user pays” approach to fund infrastructure, dedicating various driver and vehicle related fees, which allow residents and visitors to pay into the system.
The state’s primary source of revenue for transportation infrastructure comes from motor fuel. Often referred to as the “gas tax,” the state charges a $0.28 user fee on each gallon of motor fuel (gasoline and diesel) purchased and an additional $0.0075 per gallon inspection fee.
The state’s fuel tax is included in the retail price paid at the pump. While the prices of gasoline and diesel can fluctuate frequently, the tax remains the same (28.75 cents per gallon) regardless of price.
South Carolina’s revenue trajectory changed with the passage of the road funding bill (Act 40) in 2017, which included an increase in the fuel tax of 12 cents, phased in at two cents per year over six years (2017 – 2022). As you can see, this legislation has been the sole driver of the increase in revenues for the state.
Motor fuel revenues are allocated to the state’s Highway Fund and Infrastructure Maintenance Trust Fund (IMTF) to address repairs and improvements to our state’s extensive transportation network. In addition, County Transportation Committees (CTCs) are solely dependent on gasoline revenues.
Our current transportation funding policies are based on historical assumptions about how we drive, what we drive, how much we drive, and how we purchase and acquire goods and services.
A lot has changed over the years. These changes reinforce the need to monitor revenue streams and assess their ability to keep up with population growth and inflation in a changing economy.
Traditionally, inflation has been the biggest revenue threat, which is why many states index their motor fuel taxes and/or vehicle-related fees to help revenues keep pace with economic factors.
However, additional factors beyond inflation must be considered when assessing the overall sustainability of transportation funding policies.
For example, fuel economy continues to improve and new vehicle fuel economy has reached a record high. In addition, more drivers are opting for hybrid and electric vehicles.
As our economy and consumer preferences continue to evolve, so must our transportation funding policies.
