Gas Taxes are Broken, But How Do You Fix Them?

Imagine if you had to pay 2015 prices with 1997 dollars. Unfortunately, that’s the exact situation that we’re in with gas taxes. Between inflation and increased fuel efficiency, they just don’t buy what they used to, a situation that’s been a boon (yay de facto tax cuts) and bane (boo decreased road maintenance). It’s obvious that a fixed per-gallon excise tax on fuel isn’t a stable way to fund roads proportional to usage. What’s less obvious is what can be done about it.

Photo by Ken Teegardin Source
Photo by Ken Teegardin
Source

One of the more intriguing proposals on the table is from the Utah Taxpayers Association. (Side note: I typically think they’re a bunch of cronyist liars, but stopped clocks and such.) They’re proposing a system where excise taxes are replaced with a certified tax rate, a system very similar to the existing truth in taxation laws governing property taxes. It also includes a provision to increase the amount collected based on growth in vehicle miles traveled, not inflation. This would ensure that even as fuel prices and sales fluctuate, the revenues would stay relatively stable.

While this could solve things going forward, the question is still on the table: what, if anything, do we do about the 18 years where inflation has chipped away at the purchasing power of our gas taxes? Right now, the Utah House and Senate are debating that very point. The House is pushing a proposal to switch to a straight-up percentage of sales whereas the Senate favors increasing the excise tax between 5 and 10 cents. Neither of these seems to take into account pricing volatility, increasing fuel efficiency, or inflation all that well.

Ultimately, we’ll end up with the roads we’re willing to pay for. There’s a reflexive reaction to tax increases, especially on fuel, but we can’t both use the roads and not pay for our use of them. Utah has done pretty well at making do with what we have, but we can’t do it forever.

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