Should Utah eliminate the sales tax on purchases of food?
Now that the initiative to make this change has qualified for a place on the ballot next November, this state's voters had better start educating themselves on the pros and cons of this issue.That shouldn't be too hard to do since the food tax initiative seems likely to dominate the 1990 election campaign in the absence of other big propositions or contests for major elective offices.
Up to a point, the prospect of eliminating the sales tax on food may seem attractive. Indeed, this page repeatedly favored such a move in the mid-1970s.
After all, any sales tax is regressive - meaning that it falls most heavily on the poor, who must spend a larger portion of their income for necessities than do people with average or higher incomes. It's not always easy to oppose the elimination of this tax in the aftermath of a $300 million surplus in Utah. Many other states have eliminated the sales tax on food.
Under the right circumstances, Utah could do so, too - if the tax on food were phased out gradually and if at least some of the money lost from its elimination were offset by additional revenue from other sources.
But the initiative on the ballot next November would take full effect in mid-1991, not in stages. Moreover, those pushing this initiative see it not as a way of shifting part of the tax burden from the poor to others; rather, they see it as an alternative to the more sweeping tax reduction proposals that Utah voters rejected two years ago. Consequently, it's hard to go long with the food tax initiative at this point.
The case against the initiative is intensified by the possibility that the loss of revenue from the sales tax on food could cost Utah more money in higher interest rates on future bond issues by depriving this state of its enviable AAA bond rating.
Without new revenue to offset it, eliminating the sales tax on food would cripple the Utah Transit Authority and Utah's efforts to attract the Olympics. Plenty of local governments in Utah would be badly hurt, too. All told, the impact is estimated at around $100 million a year.
That may not mean much in comparison to the recent state surplus. But keep in mind that this surplus was achieved by stinting on a variety of valuable programs, including welfare services, the Salt Palace, and the State Prison. Keep in mind, too, that it wasn't so long ago when the Legislature had to be called into special session year after year to deal with repeated shortfalls in state revenue. That history could easily repeat itself, particularly if the sales tax on food is eliminated without new revenue from other sources.
Indeed, it would not be easy to find new, offsetting revenue in ways that would not hurt the poor. Hike the sales tax on non-food items? Utah already relies more on the sales tax than most other states. Increase the property tax? Ouch! Few taxes are more unpopular. Besides, even if the sales tax on food is left in place, Utah is going to be under increasing pressure to raise more revenue as Washington cuts back on federal allocations to the states in an effort to balance the national budget.
One final point: Remember when a proposal to eliminate the sales tax on food was on the ballot in Utah in 1980? Less than a month before the election, polls showed 60 percent of the voters favored the change. But when ballots were cast, the proposition was decisively defeated.
In view of what happened in 1980 as well as what happened to more sweeping tax limitation efforts two years ago, it doesn't take much crystal ball-gazing to foresee the likely fate of the current effort to eliminate Utah's sales tax on food.