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Thursday, December 7, 2023

Voters say no to 33% gas tax increase. Tax Task Force says tough—you’re going to pay it.

Ronald Mortensen, Ph.D, Co-Founder

On November 6, 2018, Utah voters resoundingly said No! when asked if they would support a 10 cent per gallon increase in the gas tax—65% No (689,254 votes), 35% Yes (363,878 votes).  So, what does the Tax Restructuring and Equalization Task Force do? They ignore the vote of the citizens and include a “temporary” 4.85% state sales tax on a gallon of gasoline in their tax reform proposal.


A state sales tax on gasoline would raise the price of a gallon of gas by 9.7 cents—based on the July wholesale price of $2.00 per gallon in the Rocky Mountain Region. The total state sales tax on a gallon of gas will go from 30 cents to 39.7 cents—a 33% tax increase and on January 1,2020 that will increase to 40.8 cents per gallon since the legislature has already built in an automatic increase in the existing per gallon gas tax.


Legislators love the idea of a sales tax on gasoline since as gas prices go up the state’s take on each gallon of gas sold automatically increases.  At a wholesale price of $2.50, the state sales tax would bring in 12.1 cents per gallon, $3.00 14.5 cents, $3.50 17 cents per gallon, $4.00 19.4 cents per gallon. Therefore, before you know it, the state sales tax on a gallon of gasoline will have increased by 67%.


A state sales tax on gasoline will hit lower income Utahns the hardest since they drive older, much less fuel efficient cars and generally commute further to work than do better off individuals. Rural Utahns, who routinely drive long-distances, will also be disproportionally impacted by a sales tax on gasoline. On the other hand, a state sales tax on motor fuel favors higher income Utahns who drive electric, hybrid or newer, more fuel efficient vehicles.


As far as the sales tax on gasoline being a temporary tax, paraphrasing Ronald Reagan, “Government taxes, once launched, never disappear. Actually, a government tax is the nearest thing to eternal life we'll ever see on this earth!”


Furthermore, in keeping with its penchant for using the tax code to reward Utah’s wealthiest citizens and to help big businesses socialize their costs while privatizing their profits, aviation fuel will continue to be taxed at between 2.5 cents per gallon and 9 cents per gallon. The 2.5 cents per gallon rate on federally certificated air carriers (SLC Airport) has been in place for 18 years but legislators are in no hurry to increase that tax. The estimated value of the aviation tax exemption is in the range of $180 million.


So, the Task Force is planning to ignore another vote of the citizens by raising the state’s gas tax by 9.7 cents a gallon and it is targeting those who can least afford the tax—low income and rural drivers. But it is not touching the tax on aviation fuel which benefits the airline industry and private aircraft owners.


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