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Rep. Mike Schultz, R-Hooper, says his legislation to lower the gas tax by about 2 cents a gallon and add a new tax on electric-vehicle charging does two things. It cushions the blow of inflation in gas prices, and it makes out-of-state electric-vehicle drivers help pay for Utah’s roads.
But others say giving gas-burning drivers the carrot and electric drivers the stick will only perpetuate Utah’s serious air pollution problems.
HB301 (Transportation Tax Amendments) would drop the tax on gasoline and diesel fuel from 16.5% to 14.2%.
Under current law, the gas tax is set each year based on the average wholesale “rack” price of gasoline over the previous three fiscal years. Because gas prices jumped up last year after Russia invaded Ukraine, Utah gasoline buyers started paying 36.4 cents per gallon in state gas taxes on Jan. 1, 2023 — up from 31.9 cents in 2022. If HB301 passes, it would drop the tax down to 34.5 cents per gallon starting July 1.
“The reason for that is that the gas tax increased more than anybody anticipated,” Schultz told the House Revenue and Taxation Committee last week.
Rising prices, rising taxes
This year’s gas tax increase is 14.1%, by far the largest increase since the gas tax was overhauled in 2015. Even if Schultz’ bill passes, the rate in July will be 7.8% higher than last year. That is in addition to the 18.3 cents per gallon federal gas tax.
HB301 would also raise a cap the state would hit soon if gas prices stay higher. Currently, that cap is set at $2.43 a gallon. The bill increases the cap gradually each year to $2.96 per gallon by 2028. At that point, the 14.2% gas tax could be as high as 42 cents per gallon.
Gary Thorum, lobbyist for the Utah Petroleum and Retailers Association, thanked Schultz for “helping us deal with the inflation experience in the motor fuel area. After housing, it’s probably the area that has experienced the most inflation.”
According to the bill’s fiscal note, passage would reduce revenue to the state’s transportation fund by $35 million next year and $31 million in 2025. Gov. Spencer Cox’s budget forecast $28 million in growth in motor fuel tax revenue, so this bill would roughly eliminate that growth. Motor fuel taxes go to the state’s Transportation Fund and are used to build and maintain state and local roads.
In general, the cost per mile of driving an electric vehicle is less than a similar gas-powered vehicle — with or without this tax change, although the upfront cost of buying an EV is usually higher.
What about the air?
The Sierra Club, HEAL Utah, the Citizens Climate Lobby and O2 all spoke against the bill, which they said works against efforts to reduce Utah’s health-impairing air pollution problems.
“We’d like amendments that take into consideration air quality,” said Eliza Cowie, policy director for O2.
Opponents said the new 12.5% tax on electricity from charging stations would create a third layer of taxation for electric-vehicle owners in the state. As it is, EV owners pay sales and franchise taxes if they use charging stations that have a fee. Schultz said the new tax would be about $3 per full vehicle charge.
Utah EV owners also pay higher registration fees, which are intended to compensate for not paying any motor fuel tax. EV registration fees were put in statute last year by HB186.
The EV registration fee is currently $120, climbing to $180 by 2026 and $240 in 2032. The state also has a road usage program for EV owners who drive under 8,000 miles per year. They can pay a registration fee based off the number of miles they drive. Most EV owners opt for the flat rate.
“This issue was already addressed last session,” said Alex Veilleux, policy associate with HEAL Utah. Veilleux said HB186 was a carefully negotiated arrangement that already addresses concerns about EV owners paying their fair share for roads.
“We should be incentivizing the adoption of electric vehicles,” he added.
Rep. Keven Stratton noted that the charging tax still won’t raise as much revenue as a gas-fueled car driving the same distance. “Why not have that fee commensurate or equal to filling with fuel?”
Schultz said he just wanted to get something in place to address the fact that out-of-state tourists in electric vehicles currently are not paying into the transportation fund. “From my perspective, it’s a good place to see how it’s working.”
Not just tourists
Rep. Joel Briscoe, D-Salt Lake City, said he appreciated the desire to capture road money from tourists, but he pointed out that many charging stations are inside parking garages where tourists can’t access them. He opposed the bill.
The bill also includes an across-the-board $5 increase in vehicle registration fees.
The bill passed the House Monday on a 56 to 11 vote with eight absent, and it has been sent to the Senate for consideration. Gov. Spencer Cox’s office says the governor is neutral on the bill.
Tim Fitzpatrick is The Salt Lake Tribune’s renewable energy reporter, a position funded by a grant from Rocky Mountain Power. The Tribune retains all control over editorial decisions independent of Rocky Mountain Power.