Utah Legislature votes, governor signs repeal of controversial tax reform bill

Utah Legislature votes, governor signs repeal of controversial tax reform bill

(Carter Williams, KSL.com)

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SALT LAKE CITY — The Utah Legislature voted to repeal a controversial tax reform bill Tuesday after opponents of the bill gathered enough signatures to put the bill to a vote on the November ballot.

The House voted 70-1 to repeal the bill with Keven J. Stratton, R-Orem, acting as the only dissenting vote. The Senate voted 27-0 to repeal the bill.

Gov. Gary Herbert, House Speaker Brad Wilson and Senate President Stuart Adams first announced the bill’s repeal Thursday, but the Legislature’s vote makes it official. The bill to repeal the tax reform was dubbed HB185.

Herbert signed the bill Tuesday about 5:30 p.m. and said in a statement he hopes legislators can work together.

“I commend the many legislators and people of Utah who participated so fully in this process,” he said. “I remain hopeful that working together we will be able to modernize our tax code and provide long-term stability to fund education, Medicaid, and other essential services.”

The initial tax reform bill, or SB2001, enacted changes to the tax code in December during a special legislative session. The bill would have reduced income taxes but raised sales taxes on things like food and gasoline.

Proponents of the bill said the reform would ultimately save taxpayers money, but opponents argued the bill would have a disproportionately negative effect on low-income individuals and families.

Organizers gathered 152,000 signatures from across the state in time to get the referendum on the ballot and put it to a vote in November. The governor announced the bill’s repeal a day later. As of Tuesday morning, a total of 117,154 verified signatures were posted to vote.utah.gov, more than the nearly 116,000 required.

That number jumped to 130,470 by 5 p.m.

A potential referendum would have made it difficult for lawmakers to draft the state’s 2021 budget, Herbert, Adams and Wilson said in a news release last Thursday. Repealing the law will "enable the legislature to draft the budget without the uncertainty of a referendum potentially changing the tax code midway through the budget year," they said.

Just prior to the House vote on Tuesday, House Majority Leader Francis Gibson, R-Mapleton, said he realized there was a misconception that the bill was rushed.

“I will fiercely defend it that that was not,” he said.

Gibson, who was House chairman of the tax reform task force that created the bill, said forcefully, “We will be back. … We do not have a money problem in the state of Utah, we have a distribution problem.” He then asked for the House’s support to repeal “the second-largest tax cut in the history of the state of Utah.”

The bill would have slashed income tax for individuals and corporations from 4.95% to 4.66%, and those with children would have received an increased credit from $565 per dependent to $2,500 per dependent.

The bill would have also created an income tax credit for certain Social Security retirement income, as well as a state earned income tax credit. Those who received a federal-earned income tax credit on taxes from the prior year would have been eligible for the credit.

The bill would have also increased sales tax on a variety of goods, including groceries — which would have seen a sales tax increase from 1.75% to 4.85%. Other services, like Uber and Lyft, would have also been included in sales taxation.

KSL Investigates asked Christopher Collard, research analyst with the Utah Foundation, to break down the savings for low-, middle- and high-income families.

After announcing the bill’s repeal, Herbert said lawmakers didn’t communicate well enough how the bill would have saved Utahns money. The sales tax increase on food was a “catalyst” that led to opposition to the bill, even though the bill would have netted an overall tax cut of $160 million, he explained.

The bill would have also given one-time rebates to some low-income families in an attempt to offset the food tax hike, Herbert added.

"The belief that somehow we were going to hurt the poor became the rallying cry," he said. "There were aspects of it that were good, not understood, and we didn’t do a good job of explaining."

Sen. Lyle Hillyard, Senate chairman of the tax reform tax force, said before the Tuesday Senate vote that the task force will not be starting from square one but will be asking the public: “What would you do?” The task force spent the summer listening to constituents, the majority of whom expressed feedback that they did not want their taxes raised, he said.

To offer a tax cut, the task force needed to cut either income tax or sales tax, Hillyard said. Cutting sales tax didn’t make sense, though, because sales tax funds areas that need the money, like education, he explained.

“It’s easy to criticize what we did,” he said, noting that Utah faces a crisis with the general fund.

Hillyard also blasted Utah’s gubernatorial candidates for failing to reach out to the task force to find out what it was doing with tax reform and why it was doing it, noting that he was glad he wouldn't have to be the next governor.

Most of the candidates have spoken out against the tax reform.

"There was a big tax decrease that nobody was asking for, and then there were these tax increases that nobody wanted," Lt. Gov. and gubernatorial candidate Spencer Cox told KSL NewsRadio on Thursday. "So you get this combination that made people angry. ... One of the rare times we've seen the far right and the far left come together on an issue. That doesn't happen very often."

Lawmakers opened the 2020 general legislative session Monday at the state Capitol in Salt Lake City.

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