Utah Legislature meets on tax reform deal, increased fuel costs
December 12, 2019
The Utah Legislature was scheduled to meet Thursday to decide on a tax reform plan to collect additional sales tax to cover expenses that include transportation work. Fuel tax rates would be affected.
The Legislature’s Tax Restructuring and Equalization Task Force voted on Monday, Dec. 9, to support an extensive tax reform bill. After making some revisions to the draft bill, the panel took the steps necessary to bring the issue to the full Legislature.
Gov. Gary Herbert signed the call Tuesday for a special session to decide on the revised 199-page proposal crafted by Republicans. The proposal would raise the state’s sales tax on food, gas, and certain other services. The excise tax on diesel would also be increased by about 33%.
Sales tax increase
Legislators will be deciding on a plan that authorizes the state’s 31-cent tax rate to be raised about 12 cents to 43 cents.
Diesel fuel purchases are not exempt from the effort to boost state tax revenue. Instead of being charged a sales tax on fuel purchases, starting in April 2020 commercial drivers would pay an extra 6 cents per gallon in excise tax – up from 31 cents.
In 2022, the diesel rate would be raised another 4 cents to 41 cents.
Rather than repeal the existing exemption on diesel, a new excise tax of 6 cents will be added beginning April 1st of 2020 through 2021. In 2022, the diesel excise tax will increase to 10 cents.
— Speaker Brad Wilson (@BradWilsonGOP) December 11, 2019
Excluding diesel from the sales tax collection and instead charging more in excise tax is touted to aid truck operations asking for consistent pricing for advanced billing.
Additionally, the state’s 4.85% sales tax would be collected on food – up from 1.75%.
Services that include ride-sharing, towing, and shipping and handling or taxable sales also would be taxed.
The additional tax collected on food, fuel and services is estimated to raise about $475 million.
Specific to gas purchases, tacking on the state’s 4.85% sales tax would be in addition to the current 31-cent fuel tax rate. The additional revenue via gas and diesel tax collection is estimated to raise $170 million.
In an effort to reduce the hit to many Utah residents’ pocketbooks, the state income tax rate would be reduced from 4.95% to 4.66%.
Trimming income tax collections is estimated to save residents $635 million.
Advocates tout the $160 million in tax savings for residents when accounting for the income tax cuts and additional sales taxes. They note the tax savings amount was doubled from the proposed $80 million following larger projected revenue surpluses.
Critics have concerns about the tax reform process to this point and about how the tax changes could affect education and the loss of revenue via the income tax cut.
I agree, and thanks, @KarenMayneUT5: “People of this state decided to dedicate income tax to our students. We are not honoring that … I appreciate the work that’s been done, but the most vulnerable Utahns will pay the price.” https://t.co/ZINm5tQL22
— Elizabeth Weight (@RepEWeight) December 10, 2019
They have called on lawmakers to wait until the regular session convenes in six weeks to decide on the package.
House Speaker Brad Wilson, R-Kaysville, said the issue has been well prepared for passing muster with the legislature. As a result, he said there is no need to wait any longer.
“The proposal being sent to the legislature from the task force represents the sausage we’ve worked on over the past year … It’s well-seasoned and has been prepared by many good cooks,” Wilson posted on social media.
Next steps in tax reform
The increases to fuel tax rates are billed as a short-term fix for transportation funding while legislators work on a long-term solution. Among the options being considered is a vehicle-miles-traveled tax.