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UNLV study: Raise fuel tax to fix state highway fund deficit

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Updated: 3/21/2013 1:09 pm
LAS VEGAS -- If Nevada expects to maintain roads and highways as the state population grows, tax on fuel must be increased by 2.8 times to keep up with the demand, according to a report released this week by the UNLV Center for Business and Economic Research.

In 2012, the Nevada State Highway Fund ran a deficit of $136 million. CBER projects the deficit will increase to $220 million in 2020, $284 million in 2025 and $377 million in 2030 if nothing is done to increase revenue.

Nevada taxes its motor fuel sales on a per-gallon basis, which means that tax revenues have not kept up and will not keep pace with inflation. To fix the deficit, the state would need to increase its current tax rate on motor fuels of 17.65 cents per gallon at an average rate of 6.8 percent each year over the next 17 years, the CBER study finds.

“Weighing all the options to fix the deficit, an increase in the state motor fuel tax appears to be the most attractive,” said Steve Brown, CBER director. “While an increase of the size we estimate seems high, we believe it will be more acceptable to the public than the alternatives.”

If fuel taxes are not increased, the state must consider alternative options, such as checking odometers at the end of every year to charge mileage fees. Or, vehicle registration fees could be increased to meet the funding demand for new roads.

The current and growing deficit has occurred because of inflation and the improving fuel efficiency of motor vehicles. A rising number of motorists are using Nevada roads more often, but spending less money on gasoline.

In 2011, Nevada had a population of 2.7 million people, and the annual vehicle miles traveled in the state totaled 22.4 billion. The population will grow 1.08 percent annually and will reach 3 million by 2020 and 3.3 million in 2030, according to the Nevada State Demographer.

This problem is not unique to Nevada. Others states face the same problem and are beginning to discuss various policy options. Washington and Oregon for example, are considering and testing mileage tax programs.

-- From news release
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