Utah to Increase Gasoline Taxes to Pay for Roads

Utah’s recent move to raise gasoline taxes to fund transportation could be a model for other states, especially since it was a bipartisan effort in a Republican dominated legislature, as Eric Jay Toll writes for Phoenix Business Journal. Those supporting the bill found that in Utah, a conservative state, the arguments that worked best were those about economics, writes Michael Russell for Transportation for America. They contended that a state with a good transportation system would attract more businesses than one without one, as businesses need transportation to ship their goods and for their employees to commute to work. In addition, supporters said, postponing repairs to the transportation infrastructure would only cost more over time.

Utah’s comprehensive transportation funding bill was inspired by the fact that the state expects its population to double within 35 years. The state’s existing funding sources have not changed since 1997, and would not be able to accommodate the growing population in this state, which has the highest birth rate in the country. 

Russell writes:

In specific terms, the bill replaces Utah’s current fixed 24.5 cents-per-gallon rate with a new rate of 12 percent of the statewide wholesale gasoline price, beginning January 1st, 2016, and indexes that rate to inflation. The bill also specifies that the tax can’t dip below the equivalent of 29.4 cents per gallon (i.e. a floor mechanism) or climb above 40 cents per gallon (i.e. a cap mechanism). Additionally, diesel, natural gas and hydrogen will see an incremental rise in their taxes until they reach 16.5 cents per gallon (an eight-cent increase for diesel and natural gas).

The bill also lets Utah counties ask voters for approval of a 0.25% local sales tax, which could be used for nearly any local transportation need, including roads, transit, and bicycle and pedestrian infrastructure, Russell writes. If voters give the go-ahead to such a sales tax, the revenues would be split, with the county getting 20%, cities getting 40%, and the county’s transit agency getting 40%, Russell writes. If a county has no transit agency, the county would get 60% of revenues, and cities would get 40%, he reports.

The Utah constitution mandates that all state gas tax revenue be used on roads only, Russell writes. The new optional sales tax would thus give county and local governments a new way to raise additional revenue for whatever their needs are, Russell writes. He quotes Lynn Pace, vice president of the Utah League of Cities and Towns: “We needed more flexibility, and that pushed people towards the [local option] sales tax because it was flexible, more flexible than the gas tax.”

Arizona Sen. Steve Farley (D-Tucson) said that his state, which has not raised its gas tax since the early 1990s, could learn from Utah’s approach to transportation funding, Toll writes. Farley introduced a bill that would allow Arizona counties to add a local sales tax, but that bill did not make it to the floor, Farley said, as Toll reports. Toll quotes Farley as saying that if Utah can make the changes with both parties on board, that means that saving the transportation network is not a bipartisan issue. “Talking about it shouldn’t be toxic,” he said.

Effect on car shipping rates would be negligible from this increase  – due historically low fuel prices, read more about Utah car shipping rates.  

Last month, Keith Lang wrote for The Hill that six states were increasing their gasoline taxes to help fund transportation projects: Idaho, Georgia, Maryland, Rhode Island, Nebraska, and Vermont. These states took action to help replace federal transportation funding that has not been forthcoming in recent years, Lang writes. The federal gas tax has provided the bulk of transportation funding going back into the last century, Lang writes, but has not been increased since 1993. There is also the fact that cars have become more fuel-efficient, using less gasoline, which could result in less tax revenue, he writes. “The federal government typically spends about $50 billion per year on transportation projects, but the [federal] gas tax will only bring in $34 billion annually without an increase,” he writes.