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Will Proposal To Fund Roads Mean $80 Million Cut To General Fund?

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By Jenny Brundin

http://stream.publicbroadcasting.net/production/mp3/kuer/local-kuer-956127.mp3

Salt Lake City, UT –

When Stuart Adams was a House representative in the early 2000's, he led the lengthy battle to deliver the Legacy Highway. Adams went on to become chairman of Utah's Transportation Commission. Now a Senator, he sees a growing need for more roads and highways. Those projects are now more expensive to build. But the gas tax - which funds such projects - hasn't changed since 1997. It's a flat rate of 24.5 cents per gallon, whether gas is a dollar or 5 dollars a gallon.

ADAMS: We have to find a way to fund transportation. One is - we can raise the gas tax, or we can look from within.

Adams is pushing hard for a revenue stream for roads that grows with inflation. And he doesn't want to raise the gas tax. So he's sponsoring Senate Bill 229. It bumps the amount of future growth in sales tax on vehicles and vehicle-related products -- to pay for highways and other road projects.

ADAMS: This bill allows us to try to look from within to find additional spots where we can find revenue rather than raise taxes.

Here's how his bill would work. Let's say you buy a car. The sales tax you pay on that car goes into the state's general fund - that pays for Utah's colleges, prisons, parks, and programs for Utah's poor. Right now about 8 percent of that car tax moves into a special fund for transportation projects. Adam's bill proposes bumping that amount until it hits 17 percent - that's the amount of sales tax revenue that comes from automobile-related sales. What would that mean? Some say less money for the colleges, prisons, parks and programs for the poor.

MCDONALD: This way of taking money out of the general fund, obviously, impoverishes higher education and other programs which I find reprehensible.

Doug McDonald is a former chief economist for the Utah Tax Commission and a consultant for Utahns for Public Schools. The hit to the general fund would be significant. Nearly $80 million dollars.

MCDONALD: They want to do more construction than they are now; they ought to pay for it with an increased gas tax.

In other words, all Utahns who use the roads, should pay for them. A proposal to raise the gas tax 5 cents a gallon passed a Senate committee but has stalled. It has the backing of the Salt Lake Chamber and counties. Allison Rowland, the tax and budget analyst for Voices for Utah Children, says the gas tax is a regressive tax in that it places a greater burden on families with lower incomes.

ROWLAND: But it's better to raise money for highways through increased gas taxes - price at the pump - than through this sort of quietly pushed transfer from the general fund.

A new fiscal note released last week on another bill sponsored by Senator Stuart Adams causes heartburn for Rowland. Senate Bill 270 would raise the 1.7 percent tax on food to 4.4 percent. But sales taxes on other items would be lowered from 4.7 percent to 4.35 percent. The bill has lost steam, but lobbying pressure to pass it has been fierce and advocates for families are watching it closely. Again, Allison Rowland.

ROWLAND: The general fund would lose over 9 million dollars per year starting in 2013, with the general fund paying for important things like health, corrections, salaries for nurses, for police officers, this are things that Utah needs.

Senator Adams says he doesn't want the state to be losing money so he anticipates more tinkering with the tax rate.

ADAMS: That'll be adjusted up to 4.36, the idea is its revenue neutral.

Adams says the idea behind the bill is to stabilize the state's stream of revenue. When the economy went bad, people were buying less and sales tax receipts dropped sharply. But people always buy food, so he says, it's a more stable source of revenue.

ADAMS: When the economy turns, down, it actually has more money coming into the state because we're stabilizing the rate. But people who buy groceries would pay more.

ROWLAND: So the question is who would this bill help? The fiscal note makes it pretty clear.

Policy analyst Allison Rowland says to start, Utah businesses, who pay about 35% of the state's general sales tax, would be paying a million less a year into state coffers.

ROWLAND: Businesses don't eat, they don't buy groceries to any large extent, but they would see reductions in many of their purchases.

Senator Adams says that's not the intent of the bill.

ADAMS: It's not there to help businesses; it's there to stabilize the rate.

Who else would be helped? The new fiscal note shows $33 million dollars in on-going revenue for local taxing entities, like the Utah Transit Authority. Lobbying hard for any bump in the sales tax on food includes former House Speaker Greg Curtis, now a lobbyist for local entities. A couple of years after the sales tax on food was lowered, the recession hit - and people stopped buying high priced items. Gerry Carpenter is a UTA spokesman.

CARPENTER: In the end it's cost us about 30 million dollars in revenues, approximately 7 million dollars a year.

UTA has laid off about 100 people since the recession started, cut about 4 percent of transit service. All when UTA is gearing up to run more TRAX lines into the west side of the valley and ridership is up 12 percent.

CARPENTER: We're in an economy right now with rising fuel prices where transit becomes more critical than ever. It's a lot cheaper to pay a $2.20 bus fair or pay a monthly pass than it is to fill your tank up and drive yourself everywhere, and there are people very dependent on our services.

Policy analyst Allison Rowland:

ROWLAND: I sympathize with the needs of local governments to have greater revenue but I'm not at all sympathetic with the idea that this revenue should come from taxing more on food.

She and other food tax hike opponents say it would hurt low-income people because a greater proportion of their income is spent on food. Lawmakers have four days to decide whether to take up the bill. If they don't, Senator Adams' ideas on how to fund roads and stabilize the tax base are sure to come back.

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