Why is the Legislature Talking About the Gas Tax In a Banner Economic Year?

Utah begins 2015 with significant economic momentum, and Utah’s economy is the envy of the nation. So why would the Utah Legislature be discussing increasing the motor-fuel tax with a growing economy and record state revenue surpluses?

Let’s be clear. As a Chamber of Commerce and Utah’s business leader, we generally oppose increases in income, sales or property taxes that are not supported by the public. But we have been adamant that the State of Utah should ensure that transportation user fees are increased and adjusted to preserve purchasing power to meet critical mobility needs.

“We are grateful as a business community that our Legislature is cautious and even pessimistic to consider increasing taxes,” said Lane Beattie, president and CEO of the Salt Lake Chamber. “However, a thriving economy requires investment. And investment requires sacrifice.”

Utah is a growth state with our population expected to increase 60 percent by 2050 and all of this growth requires investment in human and physical capital. Utah's future growth relies upon a transportation infrastructure that current funding mechanisms no longer adequately support. 

This structural imbalance in how we pay for transportation investment is because Utah’s motor fuel tax has lost nearly 50 percent of its purchasing power since 1997. So any discussion to increase the $0.245-cent-per-gallon motor-fuel tax is only returning lost value from decades of inaction. 

“We have made major investments in our transportation infrastructure over the last decade and our economy is thriving because of it,” said David R. Golden, chair of the Utah Transportation Coalition and executive vice president of Wells Fargo. “We have ignored the declining purchasing power of the motor-fuel tax for too long and shifted the burden away from users. This will not work moving forward.”

Add that to an estimated $11 billion transportation funding deficit by 2040 for state, local and transit needs, and thus the discussion on increasing the motor-fuel taxes and giving our local communities and transit more tools to increase funding. 

And while we have identified our long-term needs for growth, we have real needs now to keep our economy moving. 

A recent Utah Foundation Study found that 82 percent of Utah’s cities and 95 percent of Utah’s counties believe current transportation funding is simply insufficient. Approximately $180 million is spent annually to preserve $25 billion in roadway infrastructure assets, including pavement and bridges. But UDOT has projected that an additional $67 million per year will be needed to maintain the statewide transportation network to the standard Utahans have come to expect. 

Additionally, as the Wasatch Front and other regions grapple with increased growth, we must make transportation investments to improve our air quality. Already, transit takes 120,000 daily car trips off the road. And active transportation programs like GreenBike | SLC Bike Share have removed 571,000 vehicle-miles-traveled annually from Utah’s roads.

There are a number of proposals the Utah Legislature is considering to meet these needs including increasing the current motor-fuel tax, making regular adjustments with variable rate and/or modernizing a fixed per gallon gas tax to percentage or what economist call an ad valerom tax. 

“The motor fuel tax is a user fee. Unlike most government services, transportation is metered at every pump,” said Natalie Gochnour, chief economist, Salt Lake Chamber. “We can match supply with demand and realize all sorts of benefits in the process.”

How would this work? Under the current structure, the state would collect the same $0.245 if the cost of a gallon of gas were to increase from $1.00 to $2.00. Two proposals under consideration under the legislator, the state would capture that growth in prices and put those enhanced resources towards improving our infrastructure. 

Another proposal would allow cities, counties and transit to increase local sales taxes by $0.25 cents per $100 purchase. This proposal would generate critically need funds and provide flexibility to address local needs.

Utah Foundation recently found that Utah’s state and local tax burden is at its lowest point in the past 20 years after reaching a peak in 2007. So acting on transportation funding will not place an undue burden on Utahns. Some may criticize action with the ol’ refrain “don’t tax you, don’t tax me” tax that fellow behind the tree. And in a year with record surpluses that sentiment could not be louder. 

However, with deteriorating infrastructure, growing local needs, ever increasing population, unique air quality challenges and ever increasing general fund earmarks weighing on the state budget instead of on users, it is time to act and address our structural imbalance in transportation funding.