It may go unnoticed with the normal ups and downs of gasoline prices at the pump, but Utah is raising its gasoline tax by 1.1 cents a gallon Jan. 1.
Even bigger hikes may come in April, perhaps around 11 cents a gallon, as part of the tax reform package passed this month by the Legislature. However, a grassroots group is gathering signatures on a referendum hoping to block it and let voters decide whether to repeal it next November.
The state currently charges a 16.5% tax on the statewide average annual rack price from refiners for gasoline. State law requires the Utah State Tax Commission to reset the amount charged at the pump for that once a year, on New Year’s Day.
The commission issued a bulletin saying that following state formulas, the tax will go up by 1.1 cents to 31.1 cents a gallon both for gasoline and diesel. A year earlier, it went up by 0.6 cents a gallon.
The state tax is on top of the federal fuel tax of 18.4 cents per gallon for gasoline and 24.4 cents for diesel.
So the total federal and state tax on a gallon of gasoline in Utah will be 49.5 cents a gallon.
In a special session earlier this month, the Legislature passed a tax reform package that, in part, also makes gasoline purchases subject to sales tax — besides the other gasoline tax. Gov. Gary Herbert also signed that legislation.
Beginning on April 1, gasoline would also be subject to the state sales tax of 4.85% on the average rack price of gasoline (based on an average of the past three years). It would be collected at the distributor level, and essentially built into the base price that consumers pay.
At current gasoline prices, that could add about 11 cents a gallon.
Critics have called the change a double taxation on gasoline. They also have attacked the tax package for raising the sales tax on food and for cuts on income tax that decrease the potential funding pool for public education.
However, state leaders defend the package by saying it cuts overall taxes by $160 million and creates new tax credits for low- and middle-income earners.
Still, a group led by former state Rep. Fred Cox, R-West Valley City, has started a referendum drive that, if successful in gathering some 116,000 signatures adding up to 8% of registered voters in 15 counties before Jan. 21, would stop the new law from taking effect until after voters decide whether to repeal it in next November’s general election.
The benchmarks are difficult to reach. Other recent voter initiatives aimed at writing new laws (referendums are aimed at repealing enacted laws) required a year or more to gather so many signatures and used paid signature gatherers.
Still, the tax-reform referendum has received some significant backing.
Earlier this week, all but one of Utah’s declared candidates for governor — Republican and Democrat — endorsed the referendum. The one who did not is Lt. Gov. Spencer Cox, who declined to do so because his office oversees the referendum process, but he noted that before the special session he came out in opposition to raising the tax on food.
In the past, consumers griped that some gasoline retailers used tax hikes as an excuse to raise prices higher than needed to cover them. And retailers complain that they often must absorb tax hikes without raising prices to compete with others.
“Whenever taxes go up, retail profits go down,” John Hill, executive director of the Utah Petroleum Marketers & Retailers Association, said last year.