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SALT LAKE CITY (AP) -- Utah is one step closer to eliminating the sales tax on food -- but giving cities and counties the option to raise it on everything else.
The House Revenue and Taxation Committee gave a favorable recommendation Tuesday to a bill that would allow municipalities to increase their local option sales tax from 1 percent to 1.1 percent and for counties to increase their tax from 0.25 percent to 0.28 percent.
That tax increase would help local governments make up for revenue lost by eliminating the sales tax on food, said the bill's sponsor, Rep. Merlynn Newbold, R-Salt Lake City.
But work would still need to be done before the impact on local governments could be minimized, said Roger Tew, lobbyist for the Utah League of Cities and Towns.
The league is working with Newbold on a new sales tax distribution agreement because some communities would be hit harder by the elimination of the tax on food than others, Tew said.
"That is not an easy task, but that's not an impossible task," Tew said.
A study by the Utah Tax Commission estimates that under the proposed bill cities such as Emery would see a 4 percent increase in revenue while a city like Sunnyside would see a 6 percent decrease.
Removing the sale tax on food has widespread support from legislators, Gov. Jon Huntsman and the public, but the sticking point in removing it has always been that local governments budgets could be devastated if they lose the revenue it generates.
Legislators have considered giving a tax rebate to low-income residents instead, but Newbold said that would create excessive administrative costs.
Few people would likely take advantage of the tax rebate, said Linda Hilton, director of the Coalition of Religious Communities.
"There are many programs where people can apply for assistance and they are very underutilized. They're very costly to administer. It is also a lot of money needed to be spent by government or an advocacy group to do outreach to find them, " said Hilton, who favors removing the food tax.
But the bill in its current form is making others nervous, including the general manager of the Utah Transit Authority.
The UTA depends on sales tax revenue from local governments to fund projects like rail line expansion. If the bill were to pass, UTA's budget would be decreased by $12 million a year, said John English, UTA director.
"It would have a very significant impact on our budget. It's about 10 percent of our total operating budget," English said. "It would delay the mid-Jordan line by seven years and delay the line to the airport beyond my lifetime."
(Copyright 2006 by The Associated Press. All Rights Reserved.)
