Are Gas Taxes Doing Enough?

Utah and Massachusetts are revisiting their gas tax policies.

March 02, 2020

ALEXANDRIA, Va.—States on both sides of the country are reviewing the current situation of gas taxes in their states, with some making changes so these taxes can better serve their states’ transportation needs.

In Utah, State Auditor John Dougall says that “with more fuel-efficient cars and the migration to alternative-fuel vehicles, the drivers’ funding of the transportation system is weakening,” he said, adding that “the gas tax is slowly dying,” reports The Salt Lake Tribune.

And increasing tax rates occasionally is not doing enough to keep up with the loss. One potentially jarring solution? Carlos Braceras, executive director of the Utah Department of Transportation, predicted last month that the gas tax will be replaced eventually by charging car owners for every mile they drive and by imposing more tolls.

Utah says that over the past 15 years, the purchasing power of the gas tax has gone down by 70%. And it’s not just declining in the Beehive State. As states revisit transportation budgets and alternative methods for imposing fees whether increasing tolls or making it usage-based, these future implications could impact the number of cars on the road.

Meanwhile in Massachusetts, House leaders are reviewing a fuel tax hike that adds 5 cents a gallon more to gasoline purchases, reports, WBUR news. The increase is part of a larger revenue package that will bring in an additional $522 million to $612 million annually for state transportation needs.

Under the proposal, gasoline taxes will bump up from 26.54 cents a gallon to 31.54 cents a gallon. The state tax on diesel fuel will increase from 26.54 cents a gallon to 35.54 cents a gallon.

But it doesn’t stop there: The proposal would hike fees on most ride-share services, such as Uber and Lyft. Fees on shared rides, like those taken through Uber Pool, would stay at the current 20 cents per ride. The fee on non-shared rides would go up $1 to $1.20 cents a ride, and the fee on non-shared luxury rides would go up a dollar on top of that.

The House bill also would lift the exemption rental car companies enjoy on sales taxes for their fleet. Currently, the companies do not have to pay sales tax on a vehicle purchased and registered in Massachusetts. If passed, those vehicles purchased in Massachusetts would be subject to the state’s 6.25% sales tax. The Massachusetts House is set to review the entire revenue package formally this week.