Utah lawmakers reach deal on fuel taxes

By Keith Goble, Land Line state legislative editor | Thursday, March 26, 2015

The Utah Legislature has reached agreement on a plan to help raise revenue for roads, bridges and transit by charging more tax on fuels.

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.

House and Senate lawmakers passed a compromise plan that will help the state address a projected $11.3 billion gap in transportation funding during the next 25 years. Specifically, the bill sent to Gov. Gary Herbert will raise the state’s fuel tax rate by 5 cents to 29.5 cents per gallon on Jan. 1, 2016.

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 increase will raise $101 million in the first two fiscal years.

The final version to clear the statehouse includes a House component to turn the excise rate into a sales tax, which allows for regular increases. Initially, the change will be revenue-neutral, but the tax will increase as pump prices rise.

Rep. Jim Nielson, R-Bountiful, has said that the state would not be having this conversation if the fuel tax rate were 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 will impose a 12 percent tax on fuel once the wholesale price reaches $2.45 per gallon. The rate will be adjusted annually, but will be capped at 40 cents per gallon.

A 29-cent-per-gallon floor is also included.

In addition, local governments are allowed to ask voters to raise sales taxes for roads and transit.

Removed from the bill was a provision to raise registration fees on alternative fuel vehicles.

Herbert is expected to sign the bill into law. The Republican governor has said he supports efforts to raise revenue for transportation work through a fuel tax increase or a sales tax.

To view other legislative activities of interest for Utah, click here.

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