'Big, bold ideas' should be on agenda for tax reform task force, Utah lawmakers say

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SALT LAKE CITY — The Utah Legislature's new tax reform task force has yet to meet but there are already some surprising proposals for the agenda, including doing away with state income tax and slicing government spending.

"Hopefully, we'll look at anything and everything," Senate Majority Whip Dan Hemmert, R-Orem, said during a presentation on what tax reform should look like during the Utah Taxes Now Conference on Tuesday.

That means considering "a crazy idea" like getting rid of the income tax, Hemmert said. "I think we should be looking at big, bold ideas that make our tax system better irrespective of where the money's coming from."

Another panelist, Phil Dean of the Governor's Office of Management and Budget, said transportation should also be examined by the task force formed by the 2019 Legislature after protests helped scrap a bill imposing new sales taxes on services.

Dean said about $1 billion in state and local sales taxes now go to pay for roads and other transportation needs on top of gas tax revenues, and billions more are being sought just for improving access to the Point of the Mountain development.

He suggested ways be found to better align transportation spending with revenue that comes from road users. Lawmakers have talked about a range of options, such as tolls or fees based on vehicle miles traveled.

Rep. Robert Spendlove, R-Sandy, a panelist and a member of the task force, said there are basically four approaches to solving the budget imbalance caused by growth income tax collections outpacing sales tax revenues.

Broadening the state's tax base is one, Spendlove said, accomplished, for example, by adding sales taxes to service costs or gasoline sales at the pump, or by boosting the statewide property tax.

So is just raising tax rates. Spendlove said the state sales tax rate, now at 4.85 percent with an increase approved by voters to pay for Medicaid expansion, started at 2 percent in 1933 when it was first imposed on purchases.

Another option is amending the Utah Constitution to allow income taxes to be spent on more than public schools and higher education so the fastest-growing source of state funds is available for other parts of the budgets.

Spendlove said that's "one of those long-term solutions, but it's going to be politically difficult to do." However, because constitutional amendments require voter approval, he said it would "not be the Legislature deciding, it would be the people."

The option that doesn't get enough discussion, Spendlove said, is belt-tightening.

"I don't think we have a revenue problem. I think we have a problem of expectations of what the government is supposed to do," he said. "We perceive that the public is demanding or expecting us to be constantly expanding government services."

But if the money's not there, those expectations need to be managed, Spendlove said, citing the voter-approved Medicaid expansion that lawmakers scaled back earlier this year, saying the tax increase in Proposition 3 wasn't high enough.

The same goes for transportation infrastructure, he said.

"We have to start saying, 'We can't expand our freeways. We can't build a new highway,'" Spendlove said. "Even if we are able to solve this, I think we need to have a serious conversation of what is the proper role of government."

The work of the tax reform task force was a key topic at the annual half-day conference put on by the Utah Taxpayers Association at the Grand America Hotel that attracted business and community leaders as well as lawmakers.

House Speaker Brad Wilson, R-Kaysville, assured the audience that the task force intended to "start from scratch" rather than pick up where HB441, the failed bill from the 2019 Legislature, left off.

The bill would have imposed new sales taxes on a wide range of services such as haircuts, lawn care and legal representation while lowering the state sales and income tax rates.

But it met with opposition from the business community and others, including the Utah Eagle Forum. A new group, Utah Legislative Watch, held a news conference Tuesday raising concerns about tax reform.

Both the Utah Eagle Forum and Utah Legislative Watch have called for waiting until the 2020 Legislature to deal with tax reform rather than holding a special session sooner.

Brett Hastings, a founding member of Utah Legislative Watch, said in a statement the group believes "that implementing sweeping tax reform during a summer session, after just a few weeks of discussion, is ill-advised."

Legislative leaders and Gov. Gary Herbert, who recommended taxing services in his budget proposal, have said they expected to take up tax reform in a special session this summer or early fall.

However, when the task force membership was announced earlier this month, House and Senate leaders suggested it could take more time to overhaul the state's tax base.

Hemmert said during a separate presentation on the state Senate's perspective on tax reform that there's no interest in rushing a decision.

"So if that happens in six months, great. If that doesn’t happen until the general session, great," he said. "We’re much more interested in getting it right and getting it done completely than moving fast."

Wilson did not bring up the special session issue during his presentation on the House's perspective on tax reform. The task force's co-chairman, House Majority Leader Francis Gibson, R-Mapleton, has said there will be a special session.

"It's my goal to have this done in a special session," Gibson told a reporter Tuesday. "I still think there's enough time."

The speaker said in an interview that, if the task force's recommendations work, there will be a special session. "I would like to see us put it into action as soon as possible," he said, especially if it includes a tax cut.

The budget approved last session set aside $75 million for cutting taxes as part of the tax reform effort.

"That, from my perspective, is why there should be a high sense of urgency around a special session. But only if we have the right solution," Wilson said. He said he agreed with the Senate that the process should not be hurried.

"There's no benefit to rushing this. We haven't set a specific date," the speaker said, adding that he believes the issue is better handled in a special session where it can be lawmakers' sole focus. "It would be my personal hope we could do it this year."

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