Taxpayers association questions revenue shift to fund higher education
In the event the Utah Legislature decides to raid the state's centennial highway fund to increase public education spending, Carbon County residents may face a 10 cent per gallon gas tax increase by 2006.
Revenue shifting has occurred for the last two years as public education's share of income taxes climbed from 82.8 percent in 2001 to 92.1 percent in 2004.
The revenues have been transferred from higher to public education, pointed out the Utah Taxpayers Association.
In turn, sales tax monies have been shifted from transportation to higher education to compensate for the loss of income revenues.
In November, Gov. Olene Walker announced an intent to increase state funding for public education without raising taxes.
One way to accomplish the goal involves diverting centennial highway fund sales tax dollars to higher education, indicated the association.
The diversion would allow the shifting of income tax dollars from higher to public education.
Gas taxes are already expected to increase 5 cents per gallon by 2006, added the association.
The diversion of sales revenues from the state's centennial highway fund would likely lead to a 10 cent per gallon increase, indicated the association.
Utah's income tax dollars may only be allocated for public and higher education, explained the independent public policy watchdog association.
Prior to 1997, public education received 100 percent of all individual and corporate income taxes collected throughout Utah.
The Utah Tax Commission and administrative services get a 2 percent to 3 percent piece of the pie.
The governor's proposal to shift additional revenue from centennial highway fund will basically leave the state one option: implementing a 10 cent per gallon increase in 2006, indicated the association.
Proponents of revenue shifting have relied on several arguments to justify raiding the centennial highway fund of sales tax revenue.
For example, the supporters maintain that roads should be financed by user fees like gas taxes and not subsidized by sales revenues.
However, few proponents would favor making mass transit cover all costs associated with providing bus and light rail services on the Wasatch Front, noted the association.
In 2001, the Utah Transit Authority received $5.37 in sales taxes for every dollar generated by passenger fares and advertising.
By way of comparison, the state highway and local road fund received $0.37 in related monies.
In 2004, budget analysts expect the ratio to decrease to 20 cents per gas tax dollar.
Last year, the state's legislative fiscal analyst reported that gas tax revenues as a percent of total personal income dropped from 0.94 percent in 1972 to 0.57 percent in 2001, representing a 39 percent decrease.
Several Utah legislators immediately started calling for a gas tax increase, pointed out the association.
However, the legislative fiscal analyst study neglected to clarify that the motor fuel burden declined because the state was relying on increased sales taxes to fund transportation. In 1972, Utah spent no sales tax dollars on transportation.
The state's sales tax burden climbed 0.55 percent from 3.15 percent of personal income in 1972 to approximately 3.70 percent in 2003, continued the association.
At the same time, the gas tax burden decreased to 0.37 percent of personal income and the changes are directly related.
In 2003, Utah allocated $110 million in sales tax revenues to public transit, noted the association.
Combined with the $65 million earmarked by the state for Utah highways, sales tax dollars used for transit and transportation amounted to 0.32 percent of total personal income.
Combined with current gas taxes, the total 0.89 percent of personal income is slightly lower than the burden reported in 1972, the benchmark identified by the legislative fiscal analyst.
However, the total costs to Utah consumers registers higher than the 0.88 percent gas tax burden experienced in 1974.
Utah lawmakers have set the precedent of utilizing sales tax dollars to reduce gas burdens.
Therefore, the only logical consequence of raising gas taxes to fund transportation would be to decrease the sales burden shouldered by residents across the state, concluded the public policy watchdog association.