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Tax competitive services offered by governments?

But the change could mean some price increases

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It is fundamentally unfair, says Sen. Michael Waddoups.

Not that the Senate killed his bill Wednesday, but that government with its seemingly unlimited source of tax revenue and its exemption from paying taxes has increasingly found itself in the business of competing against businesses.

"Our policy should be they compete on an equal basis," he said. And that means government should pay taxes on some of the services it offers.

But without the two-thirds vote needed to pass SJR6, Waddoups agreed to send the idea to the Tax Review Commission that will study it throughout the coming year.

Waddoups, R-Taylorsville, wanted to change the Utah Constitution to allow taxation of governments in some cases, even though that policy change could mean increased prices for some services. For example, those who use public golf courses might have had to pay more for greens fees, and it could have cost more to go swimming in the city pool because of costs to cover the new taxes.

A factor in the decision to kill SJR6 was that lawmakers are reluctant to do anything to incur the wrath of golfers. Several years ago, lawmakers decided to impose a sales tax on greens fees, and the result was unrelenting protests.

"The potential result of this bill could be increased green fees," Waddoups said. "But it won't automatically do that. It just changes the Constitution to allow the Legislature to decided which exemptions to keep and which (services) will be taxed." Golfers, he added, would have ample opportunity to come before the Legislature to argue their case as to why city, county and state golf courses should not pay the same taxes that a private golf course does. If they don't make a convincing case, "then the tax should be imposed," he said.

Sen. Bill Hickman, R-St. George, found himself in a quandary. A staunch supporter of private property rights, he, too, believes government unfairly competes with the private sector. But he also feared the wrath of the hordes of Washington County golfers, most on fixed incomes, who can't afford higher fees.

It was the broad nature of the constitutional amendment and how it could be interpreted that did not set well with many lawmakers. Waddoups had structured the amendment to exclude public schools, city government buildings and public libraries from any taxation resulting from the change.

But some private school advocates suggested public schools, which compete with public schools for students, should not be exempted from the bill.

Waddoups said there is no legislative appetite for taxing cemeteries or irrigation districts. But in other arenas, the problem has become acute.

For example, he said, the Boyer Co., owners of a strip mall in Taylorsville, were in negotiations with a private workout facility to occupy a vacant building. But when the city announced it would look at building its own recreation center, the company immediately backed out.

"They couldn't compete against public money," he said.

Many cities have their own power companies, which do not pay taxes but still compete with private companies.

The most egregious examples, Waddoups said, are Provo city, which last year announced it wanted to provide its own broadband telephone service.

And in North Ogden, "the city is thinking of going into the subdivision business," he said.

With the constitutional amendment, "they could still do it. They would just have to do it on a taxable basis just like a private business would."

With the change, every service provided by government that is also provided by the public sector would have to come before the Legislature, which would decide if the exemption should be retained or not.

"The Legislature will show wisdom," Waddoups promised. "We don't run willy-nilly doing things."


E-mail: spang@desnews.com