While the State of Utah is swimming in surplus revenue (the Fiscal Year 2022 budget surplus is at least $1.4 billion), an often forgotten piece of legislation will be causing an automatic tax hike in a few months.
Beginning January 1st, 2023, the Utah gas tax will increase by 4.5 cents to 36.4 cents per gallon for both gasoline and diesel. This is due to HB 362 that was passed in 2015. One of the major facets of the bill was to put an “inflation rider” into the state gas tax. HB 362 changed the statute to set the state gas tax at 16.5% of the statewide average rack price of gas over the previous three fiscal years. With the large increases in gas prices over recent years that calculation is now producing a fairly large increase in the tax. The 4.5 cents increase will equate to a 14% tax hike.
The average gas tax nationwide is 28.85 cents per gallon; clearly, Utah is already above this average. However, it is worth noting that Utah has one of the best/lowest property tax burdens in the nation and a fairly low sales tax rate compared to most states.
While it is true that high gas prices have caused strain and this increase is unfortunately timed, the costs of building and maintaining roads have also increased. The Utah Taxpayers Association has always advocated for user-fees in taxation and believes that those who use a service, like roads and water, should pay for it. The gas tax has historically been a fair user fee, in that those who use the roads more, buy more gas and therefore pay their fair share. However, with the increase in fuel efficiency and the proliferation of electric vehicles, the gas tax is being eroded as an effective way to pay for road usage.
In recent years, your Utah Taxpayers Association has been working with UDOT to help craft the Road Usage Charge (RUC) program which charges drivers on a per-mile-driven basis rather than a gas tax. The program is only open to electric vehicles at this point, however, a plan to offer it to all vehicles in place of the gas tax will need to be formulated sooner than most think.
In order to make sure all road users are paying their fair share for the roads, we also helped promote and pass HB 186 (R-Ward) in 2022. HB 186 raises the additional fee electric vehicles pay each year in place of the gas tax so they pay their fair share for road usage. As the electric vehicle fleet becomes a larger percentage of the total fleet in Utah, this will ensure that Utah will be able to pay for the roads that all drivers need.