It’s Time for Utah to Rethink Gas Taxes, Not Raise Them

uph-photos-1-3-15-9As the legislative session is set to begin, one of the biggest rumblings coming out of the legislature have been around increasing gasoline taxes and/or indexing future gas taxes to gas prices. While there is definitely a case to be made for increasing the funding for our roads, it is time to look at better options for funding them instead of just raising taxes.

With the current proposal on the table, the gas tax would go up by around 10 cents a gallon initially and then be further adjusted on a yearly basis from there. An additional provision of a gas price increase would be that as the price goes up, so does the tax. As a result, gasoline proportionally more expensive as oil prices rise again at some point in the future. There is a twofold problem with this proposal.

  1. You are disproportionately taxing the poor. While a flat tax is considered regressive, a gas tax that rises as gas prices do is aggressively regressive. First, it takes a higher percentage of each dollar out of a poorer person’s wallet. Second, poor people are far more likely to drive older cars than wealthy people. Because of the continuing increases in EPA fuel efficiency standards, the per mile tax burden on the rich will decrease while the burden on the poor will increase.
  2. You aren’t paying for usage. Gas taxes used to be a relatively fair standard for paying for roads, but that is no longer the case. Someone who is driving a Toyota Prius or Tesla Model S are causing just as much wear and tear on the road as someone driving an old Dodge Neon, but they’re not paying much for the roads that they drive on.
It's Time for Utah to Rethink Gas Taxes, Not Raise Them
View of Monument Valley in Utah, looking south on US 163. Credit: Wikipedia.

How do we solve this issue? The Wall Street Journal explored some options a few years ago, and those options are the same to us today: tolls, mileage based fees, and taxing something else. Each of these has some issues:

  • Existing interstates can’t be tolled. This may change in the future, but so far the proposal hasn’t gone anywhere. This is why Utah can put tolls on any new lanes of traffic that we build on I-15, but can’t on the original lanes that were built in the ’50s. If the Obama Administration’s proposal passes, this could be the best option going forward.
    • Advantages: Will accumulate revenue from everybody who is driving through Utah, not just residents; covers actual miles driven on main arteries, not just those driven by Utahns.
    • Disadvantages: This will offload traffic to side routes and potentially increase traffic congestion in cities.
  • Mileage based or vehicle registration fees will disproportionately hit Utahns. Utah can’t collect fees or put GPS units on cars that are from out-of-state, so the cost of maintaining our roads will fall completely on Utah residents.
    • Advantages: Easy to collect (it could be done at the time of registration); will tax every vehicle equally based on miles or vehicle type
    • Disadvantages: Will only tax Utahns; sticker shock at collection time; potential for fraud and abuse
  • Taxing oil or other petroleum products. This puts the tax further up the production stream. As a result, a gas tax would be applied to plastics, jet fuel, kerosene, and all petroleum distillates.
    • Advantages: Spreads the tax out further
    • Disadvantages: How to collect the tax from out-of-state producers; potential price rises across the spectrum for products sold in Utah

Ultimately, I think that moving to a toll system on certain roads (I would suggest interstates and main arteries outside of cities) would be the fairest way to change the system. It’s not perfect, but it strikes a good balance between usage and collection and spreads the impact out over the largest group of people.

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