Major state tax reform is tough enough. Throw in internal politics between the Utah House and Senate, and it's even more difficult.
A week ago, House Speaker Greg Curtis, R-Sandy, and Majority Whip Steve Urquhart, R-St. George, introduced the idea of removing the sales tax from food and raising the sales tax slightly on non-food items, ridding the state of one of its most-hated taxes.
"I have 38 votes to pass this in the House," Curtis said last week. Thirty-eight is a majority in the 75-member body. Having such consensus so early on such a major change is startling.
"I personally won't support it," said Senate President John Valentine, R-Orem. Valentine said he hasn't talked with his GOP caucus about what's now being called "the speaker's" sales-tax plan.
Switching to the third person, Valentine said he supports "the president's plan" — a motion Valentine himself made in the Tax Reform Task Force last week.
Valentine wants to remove the sales taxes from food and raise no other off-setting taxes. That would cut $225 million from state revenue. He'd make up that significant reduction by using anticipated tax revenue growth in fiscal 2006-2007 and cutting back programs funded by the sales tax, such as some Health and Human Service programs.
Valentine appointed himself to the task force, but Curtis appointed Urquhart to represent House GOP leadership on the panel.
Curtis' sales tax reduction plan was "sprung" on Valentine and other senators last week, the Senate president said. Several Capitol Hill sources say they have never seen Valentine, an 18-year legislator and normally a mild fellow, as angry as when he heard of the GOP House leadership's proposal and that it was soon going public.
Valentine won't confirm his personal feelings. "I will say that when I first heard about this Friday (Nov. 4) I decided to go to bat with an alternative."
Curtis' move has surprised more than a few legislators and Legislature watchers.
Removing the food tax is a popular stand and not one much discussed by Republicans. Sen. Mike Waddoups, R-Taylorsville, did team up for a couple of years with former Senate Minority Leader Scott Howell during the mid-1990s to push a phase-out of the food sales tax. Their bills always failed.
Some see Valentine's "cut the tax and cut popular programs" as just a move to block the counterproposal. They say his version is one that he really doesn't think can pass, and maybe he wouldn't even want it to pass.
But Valentine says his plan could work by "making rational changes" — and trimming back some programs now funded by the sales tax.
While state employees will get raises, maybe they could pay greater health-care co-pays or find other savings in the generous health-care plan, he said.
Still speaking in support of his large tax cut, Valentine said considering state finances, a much-discussed plan to give low-income Utahns a $75-per-person income tax credit in lieu of any food tax cut may well be a "goodness of fit," an economic term meaning that solution best meets adopted goals. "The $75 tax credit may be where we end up," he said.
Gov. Jon Huntsman Jr., who ran a campaign partly on repealing the food tax, says he will come out with a specific proposal on the food tax before the task force's final meeting Nov. 28.
"We are crunching the numbers right now," says Huntsman deputy chief of staff Mike Mower. Huntsman could back one of the three food tax proposals now being discussed — Valentine's, Curtis' or the $75 income tax credit — or he could have one of his own, Mower said.
The task force has been meeting two or three times a month since spring. It traveled the state in October holding public hearings. Dozens of different tax proposals have been discussed.
But there also has been the feeling that a lot of tax debate has been going on behind the scenes between Huntsman and GOP legislative leaders.
Hinting that legislative leaders have been too closed in discussing some tax reform ideas, Valentine said: "Frankly this tax debate has up to now been in these (legislative) offices. It should all be out in the public. Tax reform is like squeezing warm Jell-O — you squeeze and you don't know where the Jell-O will come out" between your fingers.
Curtis' plan would remove the whole sales tax — both state and local — from unprepared food. To make up most of the lost money, he proposes raising the state sales tax on non-food items by 0.5 percentage points and the local-option sales tax by 0.1 percentage points.
Thus, the base sales tax on non-food items would go from 5.75 percent to 6.35 percent.
The Utah Taxpayers Association, a group mainly supported by businesses, says that would be the "largest tax hike on Utah business" in years — around $60 million in total. That's because businesses don't buy much unprepared food but pay sales tax on all kinds of non-food purchases.
Curtis disputes the association's $60 million figure. "I don't think it would be anywhere near that much," he said.
But even if it were, Curtis said the GOP-controlled Legislature "has been very, very good to business" over the past decade or so. "We've given them a number of tax breaks, including the manufacturer's (sales tax) exemption."
Businesses will get even more tax breaks as part of the current tax reform process if proposals pass the Legislature, including a bill that would allow Utah-based firms to figure corporate income taxes in different ways, saving firms an estimated $32.4 million, Curtis noted.
The taxpayers association is "always saying, 'Don't tax business inputs,' " said Curtis. "Well, if you don't feed your employees for a couple of days, they're not going to be very good workers. But we are taxing their (nutrition) inputs, aren't we?"
When it gets right down to voting in the 2006 Legislature, "You are not going to see very many businesses say, 'No, continue taxing food,' " says Curtis, because the tax is so unpopular. "Plus the (speaker's) plan gives an overall $37 million tax cut in state taxes."
And that political savvy may be what strikes at the heart of some senators' anger — the House Republicans jumping out front on a very popular tax repeal, finding a way that it can work (by slightly increasing by 0.6 percentage points the sales tax on non-food items) and then forcing senators to make a very unpopular vote if they oppose it.
"I favor the Curtis plan," says House Minority Leader Ralph Becker, D-Salt Lake, adding that his caucus has not much discussed it and has taken no votes on it. "I'd like it to be revenue-neutral" rather than reducing revenues by $37 million. "And we have to find a way to help the small communities with one or two grocery stories, whose sales tax bases could really be harmed. But we can work that out."
Senate Minority Leader Mike Dmitrich, D-Price, said, "Removing the sales tax from food has always been a Democratic issue." And he finds Curtis' idea interesting. But already, GOP senators are talking it down, Dmitrich said. "I don't find much support in the Senate."
2006 is an election year for all 75 House members and 14 senators. Voting to cut the sales tax from food would be a popular re-election position.
It takes 15 votes in the Senate to pass a bill. Six Democratic senators are up next year, along with a few moderate Republicans. Two or three conservative senators who are up for re-election are in safe districts and may not support any sales tax cut. Two Democratic senators who may favor Curtis' bill are up in 2008.
Yet cobbling together 15 votes in the 2006 Senate with the body's GOP leadership against it would be difficult.
Democrats are not going to vote for Valentine's bill because they don't want to cut state programs by $225 million. "We don't want to harm Medicaid or Medicare, harm the federal matches," Dmitrich said. "Valentine's is not a good deal now. But we can support some kind of sales tax plan that doesn't hurt ongoing programs."