KEARNS — Many in the standing room-only crowd gathered Thursday night for the Legislature's tax reform task force's only town hall meeting in Salt Lake County were still focused on last session's failed bill adding sales taxes to services.

"I don't want to raise my fees to make up for collecting this tax," said Geniel Ashcraft, an estate planning attorney who runs her own law office. She said adding a sales tax to her services is an undue burden on those seeking legal help.

Brian Hollien, president of Morris Murdoch Travel, told the task force he spent a lot of time at the Capitol during the 2018 Legislature warning that travel agencies and other services would lose clients to out-of-state competitors.

"We’re not ignorant of the fact there’s an issue here," Hollien said during the public comment period of the two-hour meeting at the Kearns Oquirrh Park Fitness Center, urging the task force not to reconsider sales taxes on services.

Others questioned the need to address the shift in consumer spending from goods to services that, combined with growth in the state, has seen income tax collections earmarked solely for education outpace sales taxes that pay for everything else.

"Is there a problem?" asked Brett Hastings, a founder of the newly formed Utah Legislative Watch, noting the state is still collecting plenty of sales tax revenues. "It seems to me the idea our tax system is broken is not a foregone conclusion."

His advice to the task force: "Slow down. This is too complicated and too important an issue to decide in a summer session."

Lawmakers created the Tax Restructuring and Equalization Task Force after scrapping HB441, a bill that not only would have extended sales taxes to everything from haircuts to lawn care, but also cut sales and income tax rates.

Related:

Utah needs to tax personal services to catch up with digital age, report says

A report released Tuesday by the Tax Foundation praises Utah's growth and strong economy but offers some constructive criticism for what it describes as an outdated tax system.

The goal, Gov. Gary Herbert and Republican legislative leaders said at the time, was to come up with an alternative fix that could be approved in a special legislative session in later summer or early fall.

There was no talk of timetables by members of the task force at the second of eight town hall meetings scheduled throughout the state. The group has only held a single meeting and won't sit down again until sometime after town halls conclude July 30.

But there were some hints about what may be considered, even as members repeatedly reminded the audience of about 200 people that they were starting over with all options on the table.

"Nothing is golden to us," Senate Minority Leader Karen Mayne, D-West Valley City, said. "Nothing is sacred to us. We want to do a good job. We’ll go as slow or as fast as we need to."

Tax attorney Steve Young said he is "convinced there is eventually going to be a problem with our general fund if we continue to earmark" all income tax revenues to education, as required by the Utah Constitution.

One solution that he said would protect funding for schools would be to earmark money as a percentage of total state revenues based on past spending so "that way, legislators' hands are not tied."

Young also suggested targeting specific services such as ride sharing or legal research that are a direct cost to a buyer rather than part of the overall price of a service.

"One big danger if we go impose a broad-based tax on services is we will increase the cost of doing business in our state. It will cost far more to produce anything," Young said. "Capital will flee, businesses will leave."

Another tax expert on the task force, Keith Prescott, also said any broadening of the sales tax base needs to be focused on final consumption. He said an accountant might charge sales tax on preparing a tax return, but not on a corporate audit.

"As far as I'm concerned, that's where we should head," Prescott, a member of a similar past group formed by then-Gov. Olene Walker to look at tax reform that also recommended taxing services.

Prescott, also part of the mid-2000s tax reform effort that lowered Utah's income tax rate to a single 5 percent rate, said he's also got some ideas about income taxes, but wasn't specific about what those ideas are.

"It's not a massive change," he said. "We're going to be careful about this, but we're not afraid to look at income tax."

Rep. Joel Briscoe, D-Salt Lake, suggested looking at a carbon tax. Briscoe said the tax could lead to cleaner air along the Wasatch Front while raising several hundred million dollars.

"It's going to be difficult. We may not come up with any solution," said Sen. Lyle Hillyard, R-Logan, the co-chairman of the task force. But Hillyard said he hopes Utah doesn't wait for a crisis, as other states have done, before dealing with the issue.

House Majority Leader Francis Gibson, R-Mapleton, the other co-chairman, told the audience it's better not to wait.

"It is a lot easier when times are good to start building sort of a wall to protect you from something coming in the future," Gibson said.

Earlier this week, the task force launched a new website, StrongerFutures.utah.gov. Comment forms can be filled out on the website, which has information about the tax reform process including details about the town hall meetings.

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