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SALT LAKE CITY — Drivers in Utah may be paying sales tax in addition to the gas tax when they fill up their gas tanks under a package of tax reform options expected to be presented Wednesday at least to Republican state senators in their closed-door caucus meeting.
“It’s something that’s being looked at,” Senate President Stuart Adams, R-Layton, told KSL Tuesday, calling imposing the state’s 4.85% sales tax on gas purchases, estimated to raise $200 million to $275 million, “probably at best a temporary solution” to Utah’s budget imbalance.
The state’s key revenues, sales and income taxes, continue to climb, but growth in sales tax collections has lagged as consumer spending shifts from goods to services. A significant chunk of the state’s general fund that comes largely from sales taxes now goes toward transportation.
At the same time, income taxes can only be used for education needs under the Utah Constitution. Amending the constitution to allow more flexibility has been discussed by lawmakers and remains an option, Adams said. However, such a change must also win voter approval in a general election.
The Senate leader said there’s still a need to find a better source of revenue than the gas tax for roads, but “right now, I think over the next little while, it may be that a sales tax is the best option we can find for transportation funding.”
Besides adding what would amount to 12 cents a gallon in tax, on top of the 31 cents per gallon gas tax, when fuel prices are $2.50 a gallon, state lawmakers are also looking at other options — restoring the full sales tax on food, adding sales taxes to limited services including Uber rides and streaming videos, and lifting some tax breaks.
Task force
The Utah Legislature’s Tax Restructuring and Equalization Task Force put together the package of options. The task force was created after legislative leaders scrapped a House bill that would have made a wide variety of services, ranging from lawn care to legal advice, subject to sales taxes amid protests from the business community.
The package is also expected to include a tax cut. GOP legislative leaders have made it clear that they want to see the state’s 4.95% income tax rate dropped, and $75 million was set aside during the last session for an unspecified tax cut.
The task force had talked about offsetting restoring the full state sales tax on food from the current 3% with some sort of tax credit, likely aimed at lower-income Utahns. Utah is one of six states that now taxes groceries at a reduced rate, while only seven states tax food purchases at the full rate.
No recommendations have been made publicly yet by the task force, which held eight public town hall meetings around the state over the summer and then several meetings where members heard presentations on various options.
Wednesday's caucuses
Wednesday’s caucuses, held midday during a break in a day of legislative interim meetings, also would be the first time many in the Republican supermajority hear how the task force and its leaders, House Majority Leader Francis Gibson, R-Mapleton, and Sen. Lyle Hillyard, R-Logan, are leaning.
Gibson did not respond to a request for comment and House Speaker Brad Wilson, R-Kaysville, said a decision will be made Wednesday morning about whether tax reform will be discussed at the House GOP caucus meeting.
It’s not safe to rule out or include anything.
“I think it’s unlikely we will have anything in caucus tomorrow. We have a lot of feedback the chairs (of the task force) are working on and digesting,” Wilson said. He said he was not sure whether the sales tax on gas would be part of any caucus discussion.
Senate Republicans, however, will take up the topic. Whether they reach any decisions remains to be seen.
“It’s a moving thing,” Hillyard said Tuesday. “It’s not safe to rule out or include anything.”
Unanswered questions
Adams, too, said nothing is set in stone.
“At caucus, we’re getting feedback,” he said. “There’s still a lot of unanswered questions.”
Those questions include whether a proposal will be ready in time for a special legislative session, or will have to wait until the 2020 Legislature begins meeting in late January. Adams said lawmakers are “definitely trying to get this ready to go so the work the task force has done can be implemented.”
