Utah state lawmakers have approved competing proposals to help raise revenue for roads, bridges and transit by charging more tax on fuels. They will now work together on a possible final compromise.
The state now charges an excise tax rate of 24.5 cents per gallon on gas and diesel purchases. The tax rate hasn’t changed since 1997.
The Senate voted 20-5 on Monday, March 9, to advance a bill that would help the state address a projected $11.3 billion gap in transportation funding during the next 25 years.
Specifically, the amended bill would raise the gas tax rate by 5 cents to 29.5 cents per gallon. An additional penny increase would be made each year until it reaches 33.5 cents in 2019.
The diesel rate would be increased to 27 cents per gallon initially with one-half cent increases each year thereafter until it reaches 29 cents in 2019.
Sen. Kevin Van Tassell, R-Vernal, said the state has lost out on about 12 cents of buying power since the last fuel tax increase 18 years ago. He previously said on the Senate floor that the bill would help the state catch up.
“We have basically had a flat revenue source for transportation funds,” Van Tassell said.
“As we move forward and look to meet the needs of our transportation system, we need consistency –and the gas tax over the years has done that.”
According to a fiscal note attached to the bill, the tax increases would amount to an additional $133 million in the first two fiscal years.
House lawmakers on Monday voted 51-22 to approve an alternative plan that includes a component to turn the excise rate into a sales tax that would eventually result in regular increases. Initially, the change would be revenue-neutral but would increase as pump prices increase.
Rep. Jim Nielson, R-Bountiful, has said that the state would not be having this conversation if the fuel tax rate was linked to inflation. Instead, he pointed out the tax has lost purchasing power since the last time the Legislature took action on the rate.
To help counter the current trend, HB362 would start imposing a 10 percent tax on fuel once the wholesale price reaches $2.45 per gallon. The rate would be adjusted annually but would be capped at 40 cents per gallon.
Local governments would also be allowed to ask voters to raise sales taxes for roads and transit.
House and Senate leaders are working on a compromise to merge components of the Senate-approved bill, SB160, and the House-approved bill, HB362.
Gov. Gary Herbert has said he supports efforts to raise revenue for transportation work through a fuel tax increase or a sales tax.
The Republican governor said during one of his recent weekly press conferences that he recognizes “there is more than one way to skin a cat.”
“Maybe there’s a combination of both that will have to come to pass to get it through both bodies. Clearly we need to have an adjustment in how we fund transportation and I think this is the time to do it.”
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