Day 29 - Gas tax increase?
Rep. Wayne Harper is sponsoring HB158 which would increase gas taxes by two cents every two years from July 1, 2009 until December 31, 2018. Currently, the state gas tax is 24.5 cents per gallon, and if this bill is approved, the gas tax will be increased to 34.5 cents per gallon by July 1, 2017. Using 2007 as the base year, this would be an annualized increase of 3.5% over a ten year period.
The federal gas tax is currently 18.4 cents per gallon gasoline and 24.4 cents per gallon for diesel.
Do gas taxes need to be increased?
Gas taxes need to be periodically increased for inflation since the gas tax is a fixed amount per gallon. Sales and income taxes, on the other hand, automatically increase over time due to inflation and population growth.
How much revenue will 2 cents per gallon generate?
Each cent-per-gallon gas tax increase raises an additional $14 million per year. Therefore, a two cent-per-gallon tax increase would yield $28 million per year.
How does Utah's gas tax compare to other states?
The American Petroleum Institute (www.api.org) collects data on state gas taxes. State comparisons are a little tricky since some states impose local gas taxes and some states impose sales taxes in addition to gas taxes. According to API's data of October 2006, Utah's gas tax of 24.5 cents per gallon is a little below the national average of 27.1 cents per gallon (Note: this is a volume-weighted average which means that larger states impact this average more than smaller states).
As a percent of income, Utah's gas tax burden (0.55%) is actually higher than the national average (0.37%) even though the cents-per-gallon tax is lower in Utah than the national average. (Source: Utah Taxpayers Association). This probably attributable to Utahns driving longer distances than residents of other states.
Is now a good time to raise the gas tax?
Yes. The Legislature is already committed to cutting general taxes by $210 million. Overall, the gas tax increase will be more than offset by the reduction in income and sales taxes.
When the state increased the gas tax in the late 1990s, the state also reduced the state sales tax rate.
Utah needs to spend more on transportation, and user fees are a good source of revenues for roads.
Disclaimer: Like all legislation, HB158 may eventually be modified, meaning that the above points may no longer be 100% relevant.