State, local competition emerging to raise gasoline tax
Remember old-time gasoline wars, when stations would take turns slashing prices to attract customers? Now an opposite sort of competition is surfacing to hike local and state gasoline taxes Â and it could increase them by 11.5 cents next year, and 17.5 cents over five years.
Utah's cities and counties have already asked the Legislature for permission to impose a new local 3 percent tax on gasoline Â which initially is expected to boost the price by 10 cents a gallon Â to provide money for local roads.
Now, Rep. Jim Nielson, R-Bountiful, is proposing a separate gasoline tax hike of 1.5 cents a year for five years Â 7.5 cents total. It would go entirely for state highway needs if the local-option tax also passes. But if the local tax fails, Nielson's increase would be divided among state and local governments.
The Legislature's Transportation Interim Committee is scheduled to hear debate on both proposals on Wednesday.
Currently, Utahns pay federal gas tax of 18.4 cents plus a state tax of 24.9 cents (that is divided among state and local governments). If both new tax proposals pass, it could push the total to 54.8 cents a gallon next year, and 60.8 cents over five years.
"To me a conservative principle is that those who use the public resources should also be those who pay for them," Nielson said. He said that is happening less with roads because the gasoline tax has not been raised in 16 years Â and its purchasing power has lost 40 percent since then with inflation.
Also, cars now get better mileage, so people pay less tax per mile driven.
Catch-up • "If we don't adjust it, the user fees will cover less and less of the costs of transportation. I don't think of this so much as a tax increase" as a means to catch up with the lost value of the tax, Nielson said. "Fixed gas tax rates have to be adjusted regularly to keep up with rising costs."
But next year is an election year for legislators Â and tax increases are difficult to pass then.
That's one reason cities and counties have asked for permission to impose a local-option gasoline tax. While legislators would authorize it, they would not actually raise the tax themselves. Counties would do that, giving legislators some political cover.
Cities and counties seek a 3 percent tax on the retail price of gasoline (not counting gas taxes), which has averaged about $3 a gallon over the past year which would bring an initial tax of 10 cents a gallon. Their proposal calls for annually figuring what the average cost of gasoline has been for the previous year, computing a 3 percent tax on it, and adding that amount to each gallon for the coming year.
That method would also allow taxes to keep up with inflation.
Taylorsville Mayor Jerry Rechtenbach told the Legislature last month that cities and counties now get about 4 cents a gallon from the current state gasoline tax, but that falls far short of their needs.
Billions in backlog • The Utah Foundation recently released a report saying that with current taxes, Utah will have a $11.3 billion shortfall over the next 30 years for high-priority highway and mass-transit projects. Rechtenbach said city and county roads account for $3 billion of that shortfall, but the gas hike they seek would cover it.
Nielson said it may be tough for legislators to support that local tax hike without also doing something to cover state highway needs.
He said supporting the larger tax sought by the cities and counties may also be tougher politically than supporting his smaller hike.
Nielson is also proposing a separate bill to make the state's gasoline tax match inflation by tying it to changes in the Consumer Price Index.
Nielson some legislators have told him they will support the tax increase, but not the automatic indexing Â so he wants them considered separately.
Gov. Gary Herbert in his transportation summit last week highlighted problems caused by not increasing the state's gasoline tax since 1997 Â but stopped a bit short of endorsing a hike.
"Unfortunately, while our transportation needs remain in the fast lane and are even accelerating, the gasoline tax we use to fund these needs is stuck in the slow lane in second gear," Herbert said.
Instead of supporting hiking the gas tax, he said, "I also believe no single solution can address all current and future transportation needs. As they say, there is no silver bullet."
He added, "We must explore and implement multiple strategies that address both state and local needs. We must address multiple modes of transportation and ensure those who use the system pay their fair share of the costs."
The Transportation Interim Committee has been looking at a variety of possible tax and fee increases to fund future needs.
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