SALT LAKE CITY — Gov. Gary Herbert said Thursday he expects to see a tax reform plan passed by lawmakers this session, but he wasn't ready to say which, if any, services should not be taxed.

"I think everything should be considered," the governor said when asked about areas identified as already off the table by one of the lawmakers quietly putting together the plan, Sen. Lincoln Fillmore, R-South Jordan.

Fillmore told KSL Wednesday there's agreement that the broad categories of prescribed medical services, buying a house or paying rent, and tuition are off the table.

"Independent of whether or not that's wise, it's very politically difficult," he said Thursday. But Fillmore said there still may be an effort to "look to capture some of that" by taxing some parts of the services but not others.

"I understand the arguments," said Herbert, who called in his budget released in December for broadening the shrinking sales tax base by extending sales taxes to services while lowering the rate.

"Anybody finds out, 'Oh, by the way, my part of the economy is going to be taxed now,' they're going to say, 'No. Tax everybody else but don't tax me,'" the governor said.

He said making housing and health care affordable is important, but that doesn't mean those areas of the economy shouldn't be part of the debate. The same goes for tuition, Herbert said.

"There's no way to get around it," he said of paying more for whatever services are ultimately chosen to be taxed.

"You're going to pay more for your haircut. That's what you're going to say. You're going to pay more for your limousine service. You're going to pay more for your landscaping service. Pick an issue, you're going to pay more for that."

But, the governor said, the overall taxes paid by the vast majority of Utahns will fall with a low enough tax rate. "Would not that be a good thing? Would you not want to pay less taxes? It's a simple yes or no question."

In his State of the State address last month, the governor said making those changes, along with a $225 million cut, could drop the state's soon-to-be 4.85 percent sales tax rate to 1.75 percent.

GOP legislative leaders have said they'd rather see the state income tax rate cut, and Herbert said that could end up being part of the reduction, even though he doesn't think "that's the best place to go."

What's been missing from the public discussion are specifics, although Herbert and others have talked about limousine rides, lawn care services and liposuction, as well as other elective surgeries.

Those details are being left to a group of lawmakers, including Fillmore, who are working behind the scenes with the governor's office to come up with a plan that can be supported by legislative leaders as well as Herbert.

Read more:

First look at Utah tax reform plan coming; expect no sales taxes on medical, real estate services and tuition

Republican lawmakers in the House and Senate will get their first look during their caucus meetings on Thursday at a tax reform plan that will include new taxes on services that's being quietly worked on behind the scenes.

Both House and Senate lawmakers involved in the process said they expect to bring specifics about what should and shouldn't be taxed to the next GOP caucus meetings on Tuesday.

In closed-door caucuses Thursday, House and Senate Republicans were given what Senate Majority Leader Evan Vickers, R-Cedar City, described as a "primary education" about the urgency of addressing the sales tax situation.

"The biggest goal was to make sure we solidified there's a problem and everybody understood and recognized that," said Rep. Tim Quinn, R-Heber City, who is expected to carry the tax reform bill.

Quinn said there's not a problem with revenues, but with where it's coming from.

House Majority Leader Francis Gibson, R-Mapleton, said Utahns see the state's $1.3 billion surplus and "everyone says, 'What's the tax problem? We don't have one'. … A lot of today's discussion is to just bring people up to date."

The presentations in both caucuses detailed what the governor described as a looming crisis that, if left unaddressed, will result in "pressure to raise taxes or take from other areas we're funding."

That's because income tax collections, which under the Utah Constitution must be used for education, are growing much faster than sales taxes, which make up the bulk of the general fund that pays for everything else in the state budget.

At the same time, consumer spending habits have changed over the years and now the bulk of expenditures are for services that aren't subject to sales taxes, adding to the structural imbalance.

"We need to understand, this is not a matter of 'Let's say we think about it.' This is really a matter of we need to do something about it," the governor said. "Whatever that number ends up being, we need to do something this session."

Gibson acknowledged Fillmore's suggestion that some services are already off the table, but said, "I also know there's a Senate, there's a House. I think we'll come together on something but I would not want to eliminate (anything) right now."

The House majority leader said he knows there's doubts tax reform will be accomplished this session.

"I think there's been some question, 'Do we have enough time to get this done this session?' I think you guys understand we can move at paces that need to be moved," Gibson said.

"This is a big deal. It's a big discussion. So I don't want to say once in a lifetime, but it's maybe once in my legislative lifetime we have a big tax reform discussion," he said. "This is a big discussion and everyone's going to be affected."

Related topics