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SALT LAKE CITY — The Utah Legislature’s tax reform task force has scheduled an Oct. 22 public hearing on what may be a proposal that includes sweeping changes to taxing the price of services, food and gas in the state, along with shifting income taxes that now are spent on schools to other needs, and some sort of tax cut.
Or not.
Just what the Tax Restructuring and Equalization Task Force is recommending to resolve the budget imbalance created by lagging growth in sales taxes remained a mystery Thursday at the end of what is expected to be the task force’s final study meeting.
No votes have been taken by the task force, made up of tax experts as well as state lawmakers, despite hours of presentations by legislative staff on a wide variety of possible policy changes over four meetings that started in mid-August. Public input was not taken, but town hall meetings were held around the state last summer.
Now the task force co-chairmen, Sen. Lyle Hillyard, R-Logan, and House Majority Leader Francis Gibson, R-Mapleton, intend to talk privately with task force members before detailing a proposal at next Wednesday’s closed-door Republican caucuses during the Legislature’s monthly interim meetings.
Only then will a proposal be advanced for the Oct. 22 public hearing, Hillyard told reporters Thursday. The public won’t see what passed muster among the Legislature’s GOP supermajority until its posted online Friday, along with any other proposals submitted by task force members.
Hillyard said he wants to know from the task force members, “what’s a go, what’s a no-go. I don’t want to embarrass anybody by having something that turns out to be a no-go for the majority of people. We’ve spent too much time to waste time.”
Then, the longtime senator said, House and Senate Republicans will consider the proposal.
“We’ll see if anything blows up in my face. We’ll see where we are. Because the old rule of 15-38-1 really applies,” Hillyard said, referring to the votes needed for legislation to pass the Senate, the House and the governor’s review. “So we may as a task force come back and say, ‘We think this ought to happen’ and we may get resounding from our caucuses, ‘No.’”
The task force was created by the 2019 Legislature after legislative leaders scrapped a House bill that would have imposed new sales taxes on an array of services ranging from haircuts to legal advice, along with new fees on real estate transactions and health insurance policies while reducing tax rates.
Neither Hillyard nor House Majority Whip Mike Schultz, R-Hooper, who filled in for an absent Gibson at Thursday’s meeting, were willing to talk about what the new tax proposal will include. There was so little discussion about taxing services and removing sales tax exemptions for business that Thursday’s meeting ended early.
I don’t want to embarrass anybody by having something that turns out to be a no-go for the majority of people. We’ve spent too much time to waste time.
–Sen. Lyle Hillyard, R-Logan
Schultz did say at the meeting and later to reporters that a tax cut remains a priority.
“We don’t have a revenue problem. We want to give more money back to the citizens of this state through a tax cut. What that number is, we don’t know yet,” Schultz said. Lawmakers set aside $75 million for a tax cut last session, but he said even numbers as high as $225 million have been discussed.
Republican legislative leaders have said repeatedly their preference for a tax cut is to drop the state’s 4.95% tax rate.
But in order to reduce taxes, Schultz said a fix needs to be found for the slowed growth in sales taxes as consumer spending shifts from goods to services. Under the Utah Constitution, the state’s other main source of revenue, income taxes, can only be spent on education. Sales taxes pay for the bulk of the rest of the budget.
While the state continues to end up with budget surpluses, sales tax revenues are actually falling short of projections. Schultz said that when the budget year ended on June 30, the state’s education fund had a surplus of $140 million, but the general fund made of sales taxes was “$40 million in the hole.”
At the same time, gas tax revenues fell nearly $650 million short of covering the state’s transportation needs despite a recent hike in the rate, money made up through an earmark on sales tax revenues for roads, putting “real strain” on the general fund, Schultz said
Options the task force has heard include a constitutional amendment to lift the restriction on spending income taxes, which would require voter approval; restoring the full state sales tax on food while giving low-income Utahns a tax credit; increasing the gas tax or adding sales taxes to the price at the pump; and taxing new services.
“There’s some big items we have to handle. But they’re very controversial,” Hillyard said, citing the constitutional change already opposed by the education community. “Do we really want that fight?” he asked, suggesting there may be “something else we could do to make public education feel comfortable.”
Also unclear Thursday is whether tax changes would be considered in a special legislative session. When the bill taxing services was pulled last session, Gov. Gary Herbert and GOP legislative leaders said a new plan would be put in place in a special session by the fall.
Hillyard said some options, such as giving low-income Utahns a credit on their income taxes to make up for paying additional sales taxes on food, would need to be dealt with before the 2020 Legislature begins meeting in late January.
“I’m not pushing nor am I opposed to it,” Hillyard said of a special session on taxes.
Schultz was more optimistic
“It depends,” Schultz said. “If the task force has a proposal to send forward, I think there could be a special session.”
