Utah task force moves toward tax reform, increased fuel costs

December 4, 2019

Keith Goble

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Work continues at the Utah statehouse on a plan to collect additional sales tax to cover expenses that include transportation work. Legislators plan to meet in special session to get the tax reform package enacted before the end of the year.

The Utah Legislature’s Tax Restructuring and Equalization Task Force recently unveiled a tax reform bill. After making some revisions to the draft bill, the task force decided at its Nov. 25 meeting to hold an additional hearing on Monday, Dec. 9.

The revised 182-page proposal crafted by Republicans at the statehouse 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

On occasions when the price for a gallon of gas reaches $2.50, the state’s 31-cent tax rate would 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, commercial drivers would pay an extra 10 cents per gallon in excise tax – up from 31 cents.

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 $500 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 up to $205 million.

Income tax

In an effort to reduce the hit to many Utah residents’ pocketbooks form the tax reform plan, the state income tax rate would be reduced from 4.95% to 4.64%.

Trimming income tax collections is estimated to save residents $580 million.

Advocates tout the $80 million in tax savings for residents when accounting for the income tax cuts and additional sales taxes.

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.

Discussion among task force members is continuing in the lead-up to the Dec. 9 hearing. Among the possible changes is boosting the overall tax cut to as much as $124 million.

Next steps

The fuel tax increases are billed as a short-term fix while legislators work on a long-term transportation funding solution. Among the options being considered is a vehicle-miles-traveled tax.

The task force is working toward getting the proposed tax reform package approved during a planned special session on Dec. 12. The other option would be to wait until the regular session convenes in January 2020.

More Land Line coverage of news from Utah is available.

Other state activity to benefit transportation

Work continues at the Pennsylvania statehouse to identify and move forward with initiatives to aid transportation. A special panel recently revealed a list of recommendations and suggestions to address transportation funding needs in the coming year.

One New Hampshire state lawmaker is behind a push to tap fuel-efficient vehicles for more money to help the state bridge the gap in lost fuel tax revenue.

Keith Goble

Keith Goble has been covering trucking-related laws since 2000. His daily web reports, radio news and “OOIDA’s State Watch” in Land Line Magazine are the industry’s premier sources for information regarding state legislative affairs.