SALT LAKE CITY — Gov. Gary Herbert said Thursday he’s ready to call lawmakers into a special session of the Utah Legislature before the end of the year to deal with tax reform, but only if the House and Senate can agree on a proposal.
“I think a special session is still on the table if we can have some kind of consensus between the Senate and the House and really, the body of 104 legislators,” the governor said during the taping of his monthly news conference on KUED Ch. 7.
Passing a tax reform plan before the year is out would allow the anticipated tax cut to take effect on Jan. 1, he said, something both Senate President Stuart Adams, R-Layton, and House Speaker Brad Wilson, R-Kaysville, have also said they’d like to see happen.
But, Herbert said, “there’s still work to be done on what the proposal is, and what they’re going to settle on.” So far, though, he said the work of the Legislature’s Tax Restructuring and Equalization Task Force is “trending in the right direction.”
Earlier this week, the task force advanced a proposal from its co-chairmen, House Majority Leader Francis Gibson, R-Mapleton, and Sen. Lyle Hillyard, R-Logan, to the bill-drafting stage amid some friction. The proposal would raise sales taxes on food, gas and some services while reducing income taxes for a net tax cut of about $79 million.
The task force also agreed to open bill files on starting the process to amend the Utah Constitution to remove the requirement that income tax collections be used only for education and on establishing an alternative source of funding for schools.
At least two more task force meetings are scheduled, on Nov. 7 and 21.
The task force was created by the 2019 Legislature to find a fix for the state’s lagging growth in sales tax revenues, after Republican legislative leaders and the governor announced the scrapping of a House bill targeting new taxes on services that was opposed by businesses.
Herbert, whose last budget proposal included a $200 million tax cut as well as broadening the sales tax base to include more services, said Thursday he backed those portions of the task force co-chairmen’s plan as helping to create a more equitable tax system.
“Some things that aren’t being taxed probably ought to be taxed, and we ought to, in fact, in that process provide a significant tax cut to the people of Utah,” the governor said, noting the task force has talked about cutting taxes anywhere from around $200 million to $400 million, down to $50 million to $75 million.
The same is true of restoring the full 4.85% state sales tax on food, dropped more than a decade ago to 1.75%. That’s part of the task force co-chairmen’s proposal, along with a $100-per-person refundable grocery tax credit to offset the additional expense to families earning up to $60,000 a year.
“Rather than have a shotgun approach on taxing food, I think the legislative proposal is a more rifled approach,” Herbert said, because it offers tax relief.
He wasn’t prepared at this point, however, to endorse amending the Utah Constitution to do away with the earmark on income tax collections for education. Constitutional amendments must be approved by voters in a general election in addition to passing the Legislature.
“I would support it if they find buy-in from the educational stakeholders and they can show that there is going to be a sustainable revenue stream for education,” Herbert said. “That’s the worry, if we take away the income tax earmark, are we somehow going to be shortchanged” when it comes to funding education.
The governor said he believes that concern can be overcome, and “if that happens, then the earmark could be taken off — but if, and only if, we can provide another alternative.”
Just what that alternative might be remains to be seen. At last Tuesday’s task force meeting, some concern was raised that task force members were being asked to start the bill drafting process when there had not been any discussion about specifics.
House Majority Whip Mike Schultz, R-Hooper, the task force member who made the motion to open the bill file, said Thursday what makes sense to him is allowing local school districts to use the portion of the property tax levy dedicated to facilities to also be used for teacher salaries and other classroom needs.
The task force had been told at a previous meeting that there is some $1 billion available in taxing authority to local districts. Schultz said restricting some of that money to being used just for facilities can lead to overspending on what he called “Taj Mahal” school buildings.
“To me it sounds like a great idea,” he said, adding that nothing has actually been decided.
“There’s a lot of details I don’t think anybody knows. It’s going to be very complex,” Schultz said, so much so that the alternative funding proposal and the constitutional amendment may have to wait until the 2020 Legislature to be considered rather than dealt with in a special session.
Two additions were made to the task force co-chairmen’s tax reform proposal, removing the sales tax on feminine hygiene products and adding an earned income credit intended to help address intergenerational poverty, and there could be more coming.
Senate Minority Leader Karen Mayne, D-West Valley City, who had called for ending taxes on feminine hygiene products in her tax reform reform proposal, said she’s hopeful other parts of it may eventually be included, too, such as exempting basic food items from sales taxes, while adding back the full tax on soda and candy.
Another key item, Mayne said, is protecting the school lunch program now funded through state-controlled liquor sales. The co-chairmen’s proposal would deposit the $55 million now paying for the lunch program into the general fund, raising concern that some students might go hungry if the funding isn’t guaranteed.
“That’s important to us,” Mayne said of the Legislature’s minority Democrats. “We need to put in statute that money will always be used to feed children.”
Schultz said there likely will be more changes to the tax reform proposal and that the House and Senate are getting close to a consensus.
“Man, it sure feels like it. There’s a few concerns in the Senate and there’s a few concerns in the House, but I don’t see that we’re that far off,” the House minority whip said. “If we get the policy right in time for a special session, that’s the goal. Are we on track for that? I’m certainly optimistic that it’s still possible.”