SALT LAKE CITY — Utahns’ top concern about the Legislature’s just-completed tax overhaul is whether they’ll end up paying more to the state, according to a new poll released Thursday, but Gov. Gary Herbert said they shouldn’t worry.
“They want to pay less? That’s going to happen,” the governor told KSL after signing the massive tax reform bill passed in a special legislative session Dec. 12 that cuts state income taxes while raising state sales taxes on food, gas and some services.
The end result is an overall $160 million annual tax cut, plus an additional $72 million in one-time checks to low- and moderate-income residents tied to the new, higher state income tax dependent exemption and the grocery tax credit intended to offset the increase in the state sales tax on food from 1.75% to 4.85%.
Herbert said an analysis by his budget office projects taxes will go down for 86% of Utahns next year, providing new tax credits for families of four earning up to $75,000 annually. The exception, he said, are some of the state’s higher earners.
“This is an exercise in excellence by our representatives in the Legislature. I applaud their efforts,” the governor said of tax reform during his monthly news conference on PBS Utah. “I’m sure they’d rather take a beating than have to go through this process. But they’re doing the right thing for the right reasons.”
He said there’s more work to be done on tax reform, calling the more than 200-page bill “a pretty good step in the right direction,” but acknowledged the public will need additional information before becoming comfortable with the changes.
“I understand tax reform and why we need to do it. But I also recognize that it’s technical, it’s complex, it’s confusing, it’s hard to understand, and what you don’t understand — and probably only have partial information for — you fear,” he said. “So I understand the anxiety of many.”
Just over a third of voters polled for UtahPolicy.com chose ensuring the new tax structure does not increase the overall tax burden for average Utahns as the most important value for lawmakers to keep in mind as they addressed the impact of lagging sales tax revenues on the budget.
At the same time, 28% of Utahns ranked not increasing the tax burden on the poor as their top priority. That was followed by 14% who said it was guaranteeing a set amount of funding for education; 13% said taxing richer residents more; 6% chose making the state more competitive at attracting businesses; and 4% said giving the state more budget flexibility.
The results are part of a Utah Political Trends poll conducted for the online political news source by Y2 Analytics from Nov. 19 through Dec. 7 among 911 registered Utah voters. The poll has a margin of error of plus or minus 3.4 percentage points.
The governor said lawmakers met the goals set by Utahns in the poll. For those earning below the federal poverty level, about $25,000 a year for families, there’s up to $6,100 available in federal and now state earned income credits to help them get through “challenging times.”
When it comes to schools, Herbert said his proposed budget due out next month will include “ a robust increase” in education spending, similar to the more than $1 billion in new, ongoing appropriations made over the past four years.
“That trend will continue, I will promise you that,” he said, despite the nearly $640 million cut made in income taxes that, under the Utah Constitution, are earmarked for education. Lawmakers are expected next session to consider starting the process to amend the constitution to remove that earmark, which requires voter approval.
The governor cautioned that without a guarantee of an acceptable alternative funding option, such an amendment may fail at the ballot box in November 2020. Options being discussed include making it easier for local school districts to increase property taxes.
“If there’s not support from the education establishment and all the stakeholders, I don’t think the public will support a removal of the earmark,” Herbert told the Deseret News. “I think that’s just the reality.”
Monday, a former Republican state lawmaker, Fred Cox, submitted a citizens’ referendum to repeal tax reform. More than 10,000 people have joined a private Facebook group seeking volunteers to gather the more than 116,000 voter signatures needed by Jan. 21 for a place on the November ballot.
The referendum could mean a delay in tax cuts, the governor said.
“We’ll wait and see,” he said. “The only concern I do have with a referendum is it does put the tax commission in a holding pattern. So the tax benefits, the tax cut benefits, may be delayed some. ... I think we’ll know if the referendum has any traction and whether it’s going to happen or not towards the latter part of January.”
Whether the referendum — approved for circulation Thursday by Lt. Gov. Spencer Cox’s office, which oversees elections — affects the $60 million in refund checks to low- and moderate-income taxpayers who claimed dependents on their last state tax return also remains to be seen, Herbert said.
“We’re working with the (Utah State) Tax Commission to analyze what does that really mean,” he said. “This is kind of a unique situation.”
Those refund checks are set to be mailed in February or March. Another $12 million has been set aside for Utahns earning below the federal poverty rate, with checks expected to be sent out in July to help cover the increased sales tax on food.
Senate President Stuart Adams, R-Layton, said lawmakers are waiting, too, to see how successful the referendum is. The tax reform law takes effect on Feb. 11, he said, although the income tax cut is retroactive to Jan. 1, and the sales tax increases begin April 1.
“We’re planning to move ahead and, hopefully, people will get their refund checks. I wouldn’t want to predict what’s happening with the referendum,” the Senate president said. “The governor’s right that this could have an effect, obviously.”
Adams said if referendum organizers are falling short on signatures by about mid-January, that’s a signal for lawmakers to go forward with tax reform. But if they’re on track to meet the requirement, that will require the Legislature to make a “judgement call” about proceeding.
House Speaker Brad Wilson, R-Kaysville, said he is “optimistic that tax cuts the Legislature has implemented for working families will start showing up in paychecks and the mail in 2020.”
The co-chairman of the Legislature’s Tax Restructuring and Equalization Task Force that advanced the tax reform bill, House Majority Leader Francis Gibson, R-Mapleton, in a text message, was more emphatic.
“The governor signed the tax reform bill today and this tax reform bill is the law,” Gibson said. “This will give many many many good men and women a tax reduction. ‘If’ a referendum is being worked on and becomes successful, then we will discuss the effects of the referendum on this tax break for Utahns at that time.”