‘Tax Hike’ or ‘Revenue Increase’? The Devil is in the Details

Question: When is a vote for a tax hike not really a vote for a tax hike?

Answer: When it’s an election year.


Rep. Johnny Anderson, R-Taylorsville, briefed the Utah House GOP caucus on Tuesday about a bill he’s planning on running.

And while Anderson bluntly said the bill (it is not yet numbered or introduced) will be a small tax hike in 2015, it wouldn’t take effect in 2014.

And this year all 75 House members and half of the 29-member Senate are up for re-election.

“This is a tax hike,” said Rep. Mike Noel, R-Kanab.

“It is a revenue increase, not a tax hike,” said House Majority Assistant Whip Don Ipson, R-St. George. “It is revenue neutral.”

“No, it’s a tax hike,” said Noel.

Stop, you are both right.

Anderson’s idea is to make his gas tax/sales tax adjustment bill revenue neutral for its first year.

The 24.5 cent per gallon gas tax would be cut in half at the pump, only 12.25 cents per gallon.

But the state’s general sales tax, now at 4.7 percent on all sales but unprepared food, would go up to 4.9 percent, (up 0.2 percentage point).

After the first year, the per-gallon gas tax would go up automatically to match inflation increases in road maintenance products.

That automatic increase would be capped at 2 percent.

For example, if the cost of asphalt went up 1 percent, the per-gallon gas tax would go up 1 percent the next year.

If the cost of asphalt went up 5 percent, the per-gallon gas tax would go up just 2 percent the next year.

If the price of asphalt didn’t go up, there would be no adjustment.

But Anderson told House GOP colleagues not to count on that – the cost of road maintenance has gone up each year since 2008.

Anderson said his rough estimates (he does not have an official fiscal note, since his bill is not yet written) show that if the per-gallon gas tax went up 2 percent, the “average” family driving 12,000 miles per year in a car that got 25 miles per gallon would pay $1.17 more in gasoline tax for the whole year – or 12 months of driving.

But remember that the state sales tax would go up 0.2 percentage points on all purchases. And that small tax hike would be dedicated to the state’s Transportation Fund.

Anderson said he will introduce his bill to place that 0.2 percent on unprepared food, as well as on all other purchases in Utah.

Back in former Gov. Jon Huntsman Jr.’s time, the governor got the Legislature to remove the state sales tax on unprepared food.

Local government and transit and other special sales taxes are still paid on unprepared food.

Anderson said including unprepared food in his bill will mean the sales tax only needs to go up by 0.2 percentage points to make cutting the per-gallon gasoline tax in half revenue neutral.

If you don’t include unprepared food – a major purchase in many of Utah’s big families – then the sales tax needs to go up by 0.3 percentage points.

The tax shift, from per-gallon tax to state sales tax, would not harm local governments, said Anderson.

They would still get the 70-percent-state/30-percent-local split that now comes out of the state’s Transportation Fund.

Anderson said his “revenue neutral” bill won’t be a tax hike in 2014.

And that is what is sinking several other gasoline tax increase bills. House GOP leaders say there will be no tax hike this election year.

Royce Van Tassell, vice president of the Utah Taxpayers Association, told UtahPolicy that the UTA has no position yet on Anderson’s bill, since it has not yet been written and made public. Historically, the association opposes most tax increase for local and state government.

Anderson added that his bill does nothing for the huge back-up of under-funded roads and bridges.

“This only keeps us even” in road maintenance over the next few years.

A special committee reported last year that Utah will need $11 billion more in road funds up through 2040 than the current gasoline tax is providing.

That is to pay for put-off road and bridge maintenance and replacement.

His bill “does nothing to catch-up to the 2040 problem,” said Anderson.

That $11 billion must be address some other way, most likely through a combination of gas tax increases and/or general sales tax hikes in years to come, political leaders say.

Finally, cutting our state gasoline tax in half should help gasoline retailers in Utah border towns.

One House member said Utah’s current 24.5 cent per gallon tax is roughly the same as neighboring states’ gas tax at the pump.

Halving that tax will encourage long-haul truckers and others to fill up in Utah, generating more tax for the Beehive State.