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Tax Modernization: Utah’s Transportation Funding Problem

Colby Oliverson Blog

Introduction

As has been widely publicized, Utah’s tax system must be modernized to maintain the core government services that contribute to our high quality of life. And while it can be said that Utah has adequate tax revenue, the problem centers on the allocation of that revenue.  

One such issue is the mismatch between gas tax revenues and the cost of our transportation infrastructure. A failure to address this mismatch threatens Utah’s long-term prosperity.

The Problem

Utah’s transportation costs over the past two decades far exceed gas tax revenue growth, and this trend is expected to continue. The demand for roads, as measured by vehicle miles traveled (VMT), and road construction and maintenance costs are all growing faster than the gas tax base. Gas tax rate increases partially offset this disparity; however, gas tax revenues are still not keeping pace with the demand for roads due both to significant inflation in road costs and to more fuel-efficient and electric vehicles on Utah’s roadways. The combined impact of all these factors is fewer gallons sold per mile traveled. 

Consider the following facts illustrating these points:

  1. The gas tax base (gallons sold) grew by nearly 30% between FY 2000 and 2018
  2. Road demand as measured by vehicle miles traveled increased by nearly 45% between FY 2000 and FY 2018
    • Gas tax revenues have increased by a little over 55% between FY 2000 and 2018, higher than the growth in the tax base because of tax rate adjustments
  3. Inflation for road construction and maintenance increased by over 175% between FY 2000 and FY 2018

Not only are fewer gallons being sold per mile traveled, but the purchasing power of gas tax collections is also declining significantly. Adjusting for actual road cost inflation, gas tax revenues per vehicle mile traveled have declined by over 60% between FY 2000 and 2018. Even adjusting for CPI inflation, which is much lower than actual road cost inflation, gas tax revenues per vehicle mile traveled have declined by over 25% between FY 2000 and 2018. 

Lower revenues per vehicle mile traveled translates to significantly impaired ability to keep up with transportation demands in our rapidly growing state.

The Direction of the Solution

Transportation cost inflation that greatly exceeds gas tax revenue growth, fewer gallons sold per VMT, and the declining purchasing power of gas tax revenues per VMT are major transportation funding issues that Utah must address in the months and years ahead to maintain our transportation system–a core component to our quality of life.

As policy makers in the tax modernization task force continue to craft sales tax modernization throughout this summer, this issue, among others, should be a topic to be addressed. The task force is charged with reviewing the entire tax structure and will develop recommendations for the governor and legislature to consider (to see when and where the statewide listening tour will occur, follow this link).

Utah is revered for its ability to proactively tackle difficult issues and transportation funding is one that must proactively be addressed to benefit generations to come.