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Big tax break for business may be limited to refineries, sponsor says

By Lisa Riley Roche | Posted - Feb. 27, 2017 at 6:35 p.m.



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SALT LAKE CITY — The sponsor of a bill that would give manufacturers a $60 million tax break that won preliminary Senate approval Monday said he now intends to limit the exemption to just $1.8 million for refineries that produce cleaner Tier 3 fuels.

"We're making great strides, but we can do more to clean up our air," said Senate Majority Whip Stuart Adams, R-Layton. "One of the most productive ways we can clean up our air is to move to Tier 3 fuels."

Adams said amending SB197 to focus just on giving refineries a sales tax exemption for purchases of equipment expected to last less than three years will help prod Utah refineries to make those fuels available here.

There's a federal mandate to produce more of the lower sulfur fuels, but the Environmental Protection Agency is allowing companies to average reductions so a Salt Lake City refinery with a Gulf Coast counterpart would not necessarily have to comply.

To produce fuels that meet the new standard, Adams said refineries here would have to choose between "making a significant investment in the plant, and it's very, very expensive," or switching to equipment that wears out quickly.

Giving them a sales tax break on that equipment could be enough of an incentive, he said.

"They can shut us out. But if we do this, I'm hearing from them that they're … willing to make that committment to Tier 3 fuels," Adams said.

The bill was debated with the across-the-board tax break intact because he said his proposed amendment was not finished. It won preliminary approval with a 21-4 vote, but several senators indicted they may not support it on the final vote.

Adams said he expects to be able to make the change to the bill on the Senate floor soon.

Still, the majority whip said "it's very good tax policy" to extend the sales tax break already available to companies making longer-term investments in manufacturing equipment to those that must replace such equipment faster.

But with a $60 million annual price tag at the state level, plus another nearly $28 million to local governments, Adams said the state just doesn't have the ability "to make that economic committment. We're not there."

Lawmakers have been trying to find a way to raise more money for education in response to a proposed ballot initiative that would increase the 5 percent state income tax rate by seven-eighths of a percent to raise $750 million.

So far, legislative leaders are looking at a tax reform package that would restore the full state sales tax on food and lower the amount of earnings that no longer qualify for income tax exemptions while reducing both the sales and income tax rates.

That plan is intended to be revenue neutral the first year and then result in higher tax collections as the base is broadened. The argument was made that the larger manufacturing tax break would have the same effect over time.

"This is the classic case of 'broaden the base and lower the rate,'" Sen. Jake Anderegg, R-Lehi, said during Monday's debate, suggesting the tax break would create new, high-paying jobs that would bring in more revenues to the state.

Several senators, however, questioned the appearance of giving a business tax break at the same time there's talk of raising the 1.75 percent sales tax on food to the full state rate, now 4.7 percent.

"I wonder about the signal we give to the population in Utah," Sen. Lyle Hillyard, R-Logan, said, describing himself as "nervous about talking about" both increasing the sales tax on food while eliminating it for some businesses.

Sen. Jim Dabakis, D-Salt Lake City, said lawmakers should be putting money toward education, not tax breaks.

"Where do we put our capital? Where do we put our money? Where do we put our souls?" Dabakis asked. "As much as I'd like to give these companies $60.1 million a year, I suspect it's a better investment to put it in our classrooms." Email: lroche@ksl.com Twitter: DNewsPolitics

Lisa Riley Roche

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