The Utah Legislature is once again looking at funding options for the state’s critical transportation needs. Lawmakers considered addressing the issue in the 2014 legislative session but couldn’t settle on a solution before their 45-day time limit ran out.
Once the November elections are behind them, legislators will continue to examine a variety of options to fund Utah’s transportation needs. They need to do so. Utah’s current funding structure for roads is unsustainable, considering the gas tax has lost 40% of its purchasing power since last increased in 1997.
Currently Utah’s gas tax rate sits at 24.5 cents per gallon, which is 29th in the nation. That tax alone only produces a little more than $350 million per year for Utah’s roads. To make up for the additional funds needed to pay for Utah’s transportation system, the state also draws upon a number of earmarks from sales tax revenue that will provide roughly $291.3 million in FY2015. Your Taxpayers Association is working with Utah’s legislature to change those sales tax earmarks into a process that more closely ties the money collected for road construction and maintenance to highway users.
Earlier this year, lawmakers discussed several proposals to alter Utah’s current gas tax policy. One proposal included cutting the gas tax rate while increasing sales tax across the board to pay for transportation. Another proposal looked at increasing the gas tax to 32 cents per gallon by 2018. A third option looked to completely renovate the gas tax and create a two-component system.
The first component would have been a flat rate of 14 cents per gallon, and the second component a 3.69% rate on the price of gas, making the change revenue neutral for the upcoming fiscal year. All these proposals failed to gain any traction in the session, but similar proposals may be considered in 2015.
Your Taxpayers Association has previously written on these pages that sound tax policies rely on user fees for government services. When user fees are not possible, a tax should be as intimately related to the service provided as possible. That is why your Taxpayers Association has in the past pushed for proposals that included a 25 cents per gallon increase to the gas tax with a simultaneous cut in the state income tax.
In 2013 the Utah Taxpayers Association proposed the legislature increase the gas tax by 42.4 cents per gallon, placing the tax at 66.9 cents per gallon, while calling for all general sales taxes that were currently being diverted for roads be returned to other state agencies such as higher education. That proposal also included reducing the income tax rate from 5% to 4.57% to ensure the tax changes remained revenue neutral. These proposals should once again be considered as lawmakers look to meet the cost of Utah’s roads and highways.
Alternative funding options, such as mileage based user fees (MBUF), should also be considered as we look to the future.
These user fees, also known as vehicle miles traveled (VMT), are arguably the best way of connecting road use with transportation costs. It is also the best way of reducing congestion, providing long-term funding and creating greater transportation equity.
The state of Oregon is set to start the next phase in its VMT pilot project. Beginning in July of 2015, the Beaver State will allow 5,000 volunteer vehicles participate in the program. The details of the plan include:
- A 1.5 cents per mile road usage charge for travel on public roads (determined to be the equivalent of Oregon’s state gas tax)
- A refund/credit of the state gas tax to those motorists who sign up for the VMT program
- A refund/credit for travel on private roads in Oregon
- Use Oregon Department of Transportation (ODOT) developed methods by which VMT vehicles will measure and report mileage
- Options for VMT participants as to how their mileage will be collected and reported that includes at least one method not using GPS technology
- Establishment of an integrated open-systems technology architecture
- Use of private sector partners to provide options to VMT volunteers in lieu of the DOT system
- Requirements for the protection of personal information
- Enforcement standards including penalties for false statements, non-payment and tampering with in-vehicle technology
Your Taxpayers Association encourages Utah’s lawmakers to develop a similar system to what Oregon is doing. This is an innovative solution that leads our current archaic taxing process for transportation funding into a modern era that better aligns use with cost.