PRESS RELEASE
September 29, 2004

Contact: Stephen Kroes, Executive Director
(801) 272-8824, ext. 5
(801) 573-8824 (mobile)

Fueling our Future: Options for Financing Major Transportation Projects

Utah Foundation today released a Special Report analyzing various solutions to funding a $23 billion need for transportation projects in the coming 25 years. This report, entitled, “Fueling our Future: Options for Financing Major Transportation Projects” is available at www.utahfoundation.org. A four page executive summary is available as well as the full 20-page report.

Regarding this report, Steve Kroes, Executive Director of Utah Foundation, said, “Utah, especially along the Wasatch Front, is facing a transportation crisis. Highway congestion is getting worse, and the planners say we have $23 billion in unfunded transportation projects designed to handle our growth. With a need that large, it’s likely that significant tax increases will be discussed by policymakers.”

The purpose of this report is to provide policymakers and interested parties with factual information on the impacts of various tax proposals. The report estimates the amount of revenues that would be produced from these taxes, how much debt could be supported by a given tax rate, and how each tax proposal fits into a framework of sound revenue policy. Utah Foundation is not lobbying for a tax increase or any particular solution, but the organization was asked to provide this analysis to help decision makers better understand the pros and cons of these decisions.

Among the findings of the report are:

Utah’s current reliance on gasoline taxes to fund transportation is inadequate. Inflation continually erodes the value of a fixed price-per-gallon excise tax, and over time, increased vehicle fuel economy means the tax provides a smaller and smaller amount of revenue per mile traveled on the highways.
New revenues for transportation should adhere to sound principles of taxation: providing adequate, stable funding; interfering as little as possible with economic decisions of taxpayers; treating similar taxpayers similarly; being based on the ability to pay; being easy and economical to administer; and providing for transparent accountability for funds.

Those taxes that would produce the greatest amount of revenue with reasonable implementation costs include:

• Increasing the current gasoline tax by five cents per gallon would produce $68.7 million a year or $2.4 billion over 25 years.
• Increasing the gasoline tax by five cents and adjusting the rate for inflation changes the 25-year figure to $10.8 billion, a remarkable increase that illustrates how inflation matters over long periods.
• Applying the current state sales tax to motor fuels would produce $93 million a year or $4.8 billion over 25 years.
• Levying a new sales tax rate of one-quarter percent statewide would produce $81.5 million a year or $4 billion over 25 years.
• Levying a property tax statewide at 0.1% would generate $133 million a year or $5.2 billion over 25 years.

Any new taxes for transportation should adhere to sound principles of taxation: providing adequate, stable funding; interfering as little as possible with economic decisions of taxpayers; treating similar taxpayers similarly; being based on the ability to pay; being easy and economical to administer; and providing for transparent accountability for funds. Steve Kroes remarked that “Policymakers probably don’t want to enact a complicated package of many smaller taxes that would be difficult to comply with. If a tax increase is needed, they should seek those that provide the most ‘buck for the bang,’ or in other words, the revenue should be worth the political and economic pain involved in levying a new tax.”

Utah Foundation is a nonprofit, non-advocacy research organization. Our mission is to encourage informed public policy making and to serve as Utah's trusted source for independent, objective research on crucial public policy issues. Learn more about Utah Foundation at www.utahfoundation.org or www.utahpriorities.net.

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