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New interest at Capitol in eliminating sales tax on food

There was a surprising amount of interest Wednesday in eliminating sales taxes entirely from food purchases among members of the Legislature\'s Revenue and Taxation Interim Committee.
There was a surprising amount of interest Wednesday in eliminating sales taxes entirely from food purchases among members of the Legislature\'s Revenue and Taxation Interim Committee.
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SALT LAKE CITY — There was a surprising amount of interest Wednesday in eliminating sales taxes entirely from food purchases among members of the Legislature's Revenue and Taxation Interim Committee.

"People have to eat. So I have a real concern about being cavalier about this," Sen. Deidre Henderson, R-Spanish Fork, said. "I think we need to really, in this instance especially, understand the human cost, particularly to our families."

Henderson recalled that as a mother of five children, there was a time when she had to go grocery shopping with a calculator, and an increase in sales taxes on food would have meant she would have "put fewer things in my basket for my kids."

Her comments helped redirect the discussion from restoring the full sales tax on food and providing a tax credit for low-income Utahns to looking at ways to remove it completely.

Rep. Tim Quinn, R-Heber City, asked staff to come back with a calculation showing how much the sales tax rate would have to be increased to collect the same amount of revenue if food purchases were made exempt.

While Quinn said he wasn't ready to advocate what he estimated would be about a quarter of a percent increase on other sales, such a shift might be "perhaps something that's amenable to everyone."

Sen. Jim Dabakis, D-Salt Lake City, said he planned to introduce legislation next session eliminating what he called "the most regressive tax humanly imaginable." The state, he said, "shouldn't be collecting this sales tax on food at all."

Utah reduced the state sales tax on food over two years in 2007 and 2008, dropping the rate to 1.75 percent from 4.7 percent. Up to an additional 1.25 percent can be charged by local governments on food purchases.

But there has been a push for years to restore the full rate on food by lawmakers concerned about the erosion of the state's sales tax base, which brings in just over a third of the nearly $10 billion in revenues collected annually.

During the 2017 Legislature, Republican leadership tried to push a proposal that would have taxed food at the same rate as other purchases while providing a tax credit for low-income Utahns, but the deal fell apart in the final days of the session.

Now, lawmakers are using the interim between sessions to consider what can be done about sales taxes with the intent of making recommendations for the 2018 Legislature that begins meeting in January.

No decisions were made after more than six hours of discussion Wednesday that also included extending an existing sales tax exemption for manufacturing equipment, a move that would carry a $72 million price tag.

But committee members were told there are options when it comes to the sales tax on food, including charging the full rate on specific products — candy, soft drinks, dietary supplements and bottled water — as many states already do.

Only seven states impose the same sales tax on food as on other purchases. Utah is one of six states with a lower sales tax rate on food. The rest of the country either exempts food entirely or doesn't have a sales tax.

Retailers don't like the split system that requires them to figure out which of the tens of thousands of items on their shelves should be taxed as food, Utah Retail Merchants Association President Dave Davis told the committee.

"It's just massively complex," Davis said, noting a box of doughnuts counts as food but a single doughnut sold with a napkin doesn't because it's considered prepared food. And a bag of fruit is taxed at the lower food rate, he said, unless it's in a basket.

Wearing a "Make Hunger Visible" T-shirt, Bill Germundson said the organization associated with Crossroads Urban Center is campaigning to remove the sales tax on food.

"Nobody likes the food tax. The vast majority of people would like to see it go away. I think we all know, deep down inside, that taxing basic necessities like food is wrong," Germundson said. "That why so few states tax food."

He said for the low-income families served by the center's food panty, the extra money "would mean all the difference in the world. It may mean they could buy a gallon of milk or a loaf of bread."

The Rev. Mary Jandra, of St. Stephen's Episcopal Church in West Valley City, told the committee there are people who have to decide between paying rent and buying food because of their low-paying jobs.

"If we can help them by removing the sales food tax, that's at least one thing that will help them in their daily lives and maybe make an impact," she said, citing "drastically" increasing numbers of people at local food banks.

After the meeting, the committee's chairman, Sen. Howard Stephenson, R-Draper, said despite the discussion he's not sure the mood of the Legislature has changed when it comes to the sales tax on food.

"Today we heard a different side," Stephenson said. "It will be interesting, though, to see what that kind of momentum does in this committee."