SALT LAKE CITY — There were lots of charts and graphs but little discussion about restoring the full sales tax on food, reducing the state income tax rate and other proposals on the agenda Monday for the first meeting of the Utah Legislature’s tax reform task force following a series of public hearings around the state.
The Tax Restructuring and Equalization Task Force took no action after three hours of presentations. There are expected to be at least four similar meetings on additional proposals, including imposing new sales taxes on services and removing the state constitutional earmark requiring that income tax revenues be spent on education.
Once those meetings are finished the proposals will be debated, likely in GOP caucus meetings that can be closed to the public, before a final recommendation is put together for possible consideration in a special legislative session before the end of the year. That’s also the point when the task force will take public comment.
“I think this is such a big thing. It’s so huge,” Sen. Lyle Hillyard, R-Logan, task force co-chairman told reporters when asked about the unusual process, suggesting that without it, tax reform “would fail. It would be so tied up in technical things that we would not be able to move any further.”
During the 2019 Legislature, a bill intended to address the increasing concerns over lagging growth in sales tax revenues by expanding sales taxes on a wide range of services ranging from haircuts to legal advice while cutting rates and giving tax breaks to the poor and elderly, was pulled by legislative leaders amid protests.
Restoring the current 3% state sales tax on food to the full 4.85% state sales tax rate was not part of last session’s bill but had support in the Senate. Monday, the task force was told eliminating the reductions made more than a decade ago under former Gov. Jon Huntsman Jr. would add $250 million in new revenue.
The added expense to shoppers could be offset by a grocery tax credit, available through filing an income tax return or possibly a separate form annually. Giving every Utahn $100 grocery tax credit annually, as Idaho does, carries a $300 million price tag, while a credit that phases out at $60,000 for a married couple costs $65 million.
Another option of an earned income tax credit aimed at the working poor, and reducing or eliminating taxes on Social Security and military retirement benefits, both subject to income taxes in Utah, were also part of the lengthy presentation from legislative staff.
Also put on the table is a reduction in the state income tax rate, seen as a potential way of balancing out the revenue increase from restoring the full sales tax on food. House Majority Leader Francis Gibson, R-Mapleton, task force co-chairman, said it’s appropriate to consider given the “politics of our body.”
Lawmakers set aside $75 million for an unspecified tax cut on top of any other actions taken on tax reform. A member of the task force, Rep. Tim Quinn, R-Heber, the sponsor of last session’s scrapped tax reform bill, said it seemed “a bit conspicuous” that the tax cut was being talked about at the same meeting as the food tax.
Quinn, who previously had tried to remove all state sales tax from food, suggested that meant a possible reduction of the state income tax rate from 4.95% to 4.75% was coming. Gibson said because the income tax cut is “one of the big ones” being considered, it was important to start talking about it early.
The state is anticipating a $97 million surplus, the result of $140 million more than estimated in income tax collections minus a $43 million shortfall in sales tax revenues for the budget year that ended June 30. Since 2013, sales tax revenues have fallen short three times, while incomes taxes consistently exceed expectations.
There was a bit of friction over a proposal not on Monday’s agenda: amending the Utah Constitution to allow income tax revenues to be used for more than public and higher education. Rep. Joel Briscoe, D-Salt Lake, a task force member, said he needed to know what the plan was to protect school funding before proceeding.
Gibson took exception to Briscoe suggesting in his closing comments that Utahns get in touch with their representatives in the Legislature on tax reform, saying some members issue a “call to arms” when the education earmark is brought up.
“I don’t think any of our colleagues in the House or Senate would say we’re not going to fund education,” Gibson said, noting some $1.5 billion in new spending has gone to schools. Any constitutional amendment requires voter approval in addition to two-thirds support of both houses.