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Utah Senate and House leaders are offering competing proposals on whether to raise or reform gasoline taxes this year and each group says the other's plan is too risky.
"That makes for an interesting session" as the Legislature convenes Monday, said House Transportation Committee Chairman Johnny Anderson, R-Taylorsville.
Additionally, leaders have dumped or revised other recent proposals about how to raise money to address a projected $11.3 billion shortfall for priority highway and transit projects in the state's long-range 2040 Unified Transportation Plan.
That includes sidelining an idea to raise registration fees on electric, hybrid and alternative-fuel vehicles because they escape or pay little gasoline tax to fund roads. Leaders say that, for now, it is more important to encourage people to buy such cars to help reduce air pollution than to hike taxes on them for roadwork.
Also, cities, counties and the Utah Transit Authority had been seeking separate authority for local sales tax increases to fund their own transportation needs. Legislative leaders are telling them to work out a single proposal that will meet all their needs.
Revamped tax • "I'm trying to find ways to raise revenues without raising taxes," says incoming House Speaker Greg Hughes, R-Draper.
He wants to reform the gas tax so that revenues would rise as fuel prices do, but without imposing a tax increase right now.
Utah currently charges a state gasoline tax of 24.5 cents per gallon, which has not been raised since 1997.
Hughes would like to convert it from a per-gallon tax to a percentage tax. So, for example, if gasoline cost $2.45 a gallon, he would like to charge a 10 percent tax to match the current 24.5 cents per gallon in revenue. If gas prices increased to $3 a gallon, a 10 percent tax would raise 30 cents a gallon in revenues.
Hughes argues that lawmakers could truthfully say they did not raise taxes because the rate would be constant, while the new system simply would allow revenues to keep up with inflation.
Too big? • But such a revision "could be one of the largest tax increases our citizens have faced," argues Senate President Wayne Niederhauser, R-Sandy. "If gas prices go back to $3 or $4 a gallon, that could be a huge tax increase."
He says revenue also would be volatile, perhaps going up and down wildly with gas prices making it difficult to budget for highway needs. He says a cents-per-gallon tax is stable and allows better planning and budgeting.
"Volatility at least implies it goes up at some point," Hughes argues. "Now it only goes down. It's a guaranteed loss every year."Adding some tax floors and ceilings could stop too big of gains or losses.
Gasoline tax revenues have decreased annually because the 24.5 cents loses value to inflation. At the same time, newer vehicles offer improved mileage, reducing gas sales and revenue. Meanwhile, hybrids and alternative-fuel vehicles largely escape gasoline tax, and their numbers are increasing.
Tough politics • Niederhauser says it would be wiser to raise the gasoline tax than reform it into a volatile system. "You have to periodically raise it, and politically that's difficult. But it's the best tax policy in looking at pure economics rather than what's politically popular."
While the Senate GOP caucus has not taken a formal position on gas taxes, Niederhauser believes members would support an increase to make up for the 40 percent in value he says it has lost since it was last raised.
He said the Senate might support indexing "just a small portion of it" so that part would rise automatically with inflation.
But Hughes says that plan likely won't fly in the House.
"What I told the Senate is, 'I just don't think you're going to get the 38 [House votes] needed to raise taxes,' " he said. "From 1997 to today, if no one's done it [raised gasoline taxes], I just don't see at least in my body anyone doing it, especially spending the political capital to raise the tax only to see it dwindle again."
Registration fees • Hughes and Niederhauser support sidelining an idea from the Transportation Interim Committee to raise registration fees on electric cars, hybrids and alternative-fuel vehicles to force them to pay more for roads since they largely escape gas taxes.
Both say that shift may make sense sometime in the future when clean-fuel cars are more common, but that it makes sense to hold off for now to encourage purchases of these vehicles to help reduce air pollution.
Anderson, the Transportation Committee leader, said he is proposing a registration-fee increase for all-electric cars, but only to fund a program to expand recharging stations around the state to make using them on long trips more feasible.
Local tax hike • Despite their own disagreements, Hughes and Niederhauser are encouraging cities, counties and UTA to work together on a single proposal for higher sales taxes for transportation which would need voter approval at the local level rather than pushing separate, possibly competing proposals.
"I'm not playing referee with these locals, and I'm not picking winners and losers," Hughes said. "I'm willing to give them more tools in the toolbox for them to make their decisions" by allowing them to ask voters to approve higher sales tax for transportation, as long as everyone is included.
Locals would also take the heat for any such tax increase, he noted, instead of legislators.
Niederhauser said that the only way he sees the Senate allowing voters to consider higher local sales taxes for transportation is if the plan addresses all local transportation needs ranging from roads to transit and active transportation such as bicycling and walking.