With extra online sales tax money expected to flow, Gov. Gary Herbert says gas tax hike might be avoided

(Trent Nelson | Tribune file photo) Utah Governor Gary Herbert in his Salt Lake City office, Thursday March 8, 2018.

Gov. Gary Herbert says a proposed 10-cent-a-gallon increase in Utah gasoline taxes — which polls show is unpopular — might not be needed as part of a deal struck this year to help generate $300 million more for schools.

That’s thanks to a U.S. Supreme Court decision that now allows states to collect online sales tax from out-of-state merchants who sell to Utahns. Residents always legally owed that tax, but the state had no way to collect it. Residents were supposed to report it on income tax returns, but few did.

If collecting more online sales tax revenue generates enough to cover funds now penciled in for schools, maybe that gasoline tax won’t be needed, Herbert said Thursday at his monthly news conference on KUED-TV

“Certainly that could be a discussion,” he said, but adds many questions remain.

In a follow-up interview, Herbert made clear that he hopes voters will support the gasoline tax in a nonbinding question on the Nov. 6 election to keep all options open to help schools.

Lawmakers agreed to put the issue on the ballot as part of a compromise with Our Schools Now. That group had pushed a ballot initiative that sought more than $700 million in new school funding through a combination of sales and income taxes.

In exchange for the group halting its initiative drive, lawmakers passed a property tax bill estimated to generate $200 million for schools. An additional $100 million could be raised indirectly by the gas tax.

The gas tax itself would be used for roads. But it would replace general fund money from sales tax now used for highways, and allow that money to be shifted to education.

“The gasoline tax itself is certainly much better than the original proposal by Our Schools Now,” Herbert said. “I believe to raise income tax would have a much more disruptive impact on our economy, the healthiest most diverse economy in America.”

But he noted in an interview, “The gasoline tax does not seem to have, based on polling, support.” A Salt Lake Tribune-Hinckley Institute of Politics poll this week showed 56 percent of registered voters oppose it, while 42 percent support it.

“If we find that money coming in [from new online sale tax revenue] would be enough to offset and forgo the raising of the gas tax … that’s part of a discussion going forward. We will have that debate,” he said.

But the governor said many things must occur first.

That includes enacting laws to collect that out-of-state online sales tax. Herbert said that likely will not be addressed until the next regular session of the Legislature, which convenes in January.

Next, the state must develop accurate estimates of how much revenue the extra online sales tax may produce, and whether it could offset the proposed gas tax hike.

“We don’t know how much money is going to be generated. There have been guesstimates, estimates, speculation,” he said.

And he said a general debate will come about how to use extra online taxes. Herbert notes lawmakers have talked about them to lower the state’s sales tax rates — and keep the overall revenues neutral.

Herbert favors looking into perhaps not making “it absolutely revenue neutral, but put some of that money into education funding. That’s going to be part of the vote coming up on the online sales tax.”

Our Schools Now issued a statement Thursday saying it still sees the gas tax — and the ballot question on it — as critical to education funding, and that it supports the deal as it was struck in the Legislature this year to increase school funds.

“This ballot question means critical and direct investments inside every Utah classroom,” it said.

“While per-student spending has been flat for 20 years, 89 percent of Utahns believe education funding is too low,” it said. “We will continue advocating for the ballot question and appreciate Gov. Herbert’s endorsement.”