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Raise Utah’s gas tax or reform it? House and Senate divided

First Published      Last Updated Mar 09 2017 06:58 pm

Transportation » House seeks reform that would raise tax over time, Senate sees that as risky.

Utah Senate and House leaders are offering competing proposals on whether to raise or reform gasoline taxes this year — and each group says the other's plan is too risky.

"That makes for an interesting session" as the Legislature convenes Monday, said House Transportation Committee Chairman Johnny Anderson, R-Taylorsville.

Additionally, leaders have dumped or revised other recent proposals about how to raise money to address a projected $11.3 billion shortfall for priority highway and transit projects in the state's long-range 2040 Unified Transportation Plan.

That includes sidelining an idea to raise registration fees on electric, hybrid and alternative-fuel vehicles because they escape or pay little gasoline tax to fund roads. Leaders say that, for now, it is more important to encourage people to buy such cars to help reduce air pollution than to hike taxes on them for roadwork.

Also, cities, counties and the Utah Transit Authority had been seeking separate authority for local sales tax increases to fund their own transportation needs. Legislative leaders are telling them to work out a single proposal that will meet all their needs.


Revamped tax • "I'm trying to find ways to raise revenues without raising taxes," says incoming House Speaker Greg Hughes, R-Draper.

He wants to reform the gas tax so that revenues would rise as fuel prices do, but without imposing a tax increase right now.

Utah currently charges a state gasoline tax of 24.5 cents per gallon, which has not been raised since 1997.

Hughes would like to convert it from a per-gallon tax to a percentage tax. So, for example, if gasoline cost $2.45 a gallon, he would like to charge a 10 percent tax to match the current 24.5 cents per gallon in revenue. If gas prices increased to $3 a gallon, a 10 percent tax would raise 30 cents a gallon in revenues.

Hughes argues that lawmakers could truthfully say they did not raise taxes because the rate would be constant, while the new system simply would allow revenues to keep up with inflation.

Too big? • But such a revision "could be one of the largest tax increases our citizens have faced," argues Senate President Wayne Niederhauser, R-Sandy. "If gas prices go back to $3 or $4 a gallon, that could be a huge tax increase."

He says revenue also would be volatile, perhaps going up and down wildly with gas prices — making it difficult to budget for highway needs. He says a cents-per-gallon tax is stable and allows better planning and budgeting.

"Volatility at least implies it goes up at some point," Hughes argues. "Now it only goes down. It's a guaranteed loss every year."Adding some tax floors and ceilings could stop too big of gains or losses.

Gasoline tax revenues have decreased annually because the 24.5 cents loses value to inflation. At the same time, newer vehicles offer improved mileage, reducing gas sales and revenue. Meanwhile, hybrids and alternative-fuel vehicles largely escape gasoline tax, and their numbers are increasing.

Tough politics • Niederhauser says it would be wiser to raise the gasoline tax than reform it into a volatile system. "You have to periodically raise it, and politically that's difficult. But it's the best tax policy in looking at pure economics rather than what's politically popular."

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