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Lawmakers, Our Schools Now finalize compromise deal

FILE - The sun sets on the Utah state Capitol, Thursday, March 8, 2018, in Salt Lake City.
FILE - The sun sets on the Utah state Capitol, Thursday, March 8, 2018, in Salt Lake City.
Rick Bowmer, Associated Press

SALT LAKE CITY — A deal between lawmakers and Our Schools Now, the group behind an initiative raising sales and income taxes to bring in $700 million for education, was finalized in the final hours of the 2018 legislative session.

The House and Senate passed the key elements of the deal, a nonbinding question for voters about raising gas taxes 10 cents a gallon and a property tax freeze that was already part of GOP legislative leadership's tax reform package.

Gov. Gary Herbert has already backed the agreement that halts the petition drive to put the Our Schools Now initiative before voters in exchange for an extra infusion of money into public and higher education.

Now, instead of voters going to the polls in November to decide whether to increase both sales and income tax rates by .45 percent, they'll answer a nonbinding question about adding 10 cents to the state's 29.4-cents-per-gallon gas tax.

And individual and corporate taxpayers in Utah will see a drop in their state income tax rates, from 5 percent to 4.95 percent, while corporations will get a $27 million tax break from the switch to a single sale factor formula.

But property taxes could go up by as much as $125 million a year by 2020 as a result of a five-year freeze in the only property tax levy set by state lawmakers that allows more revenue to be captured as property values rise.

Approved Thursday were HB491, which creates a one-time option to put a nonbinding opinion question on the November ballot about raising gas taxes by 10 cents a gallon, and HJR20, which spells out what will be asked.

The other piece of the deal, the property tax freeze, was contained in HB293.

That bill, labeled "Tax Rebalancing Revisions," also includes the income tax rate drop and complicated corporate apportionment change that were both seen as must-haves by Republican leadership.

"It ends the threat of the largest tax increase in the state's history," the Senate sponsor of HB293, Sen. Lincoln Fillmore, R-South Jordan, said, while at the same time providing tax relief for Utahns.

The bill also helps equalize school funding to assist school districts that have low local property tax yields because of lower property values in their areas, something lawmakers have sought to do for year.

“I think this is great step in the right direction in terms of getting money into education the right way,” said the bill’s sponsor, Rep. Brad Last, R-Hurricane.

Last said the bill will "ultimately lead to keeping more of the income tax (revenue) in education and strengthen the local property tax component."

A number of House members said the bill was essentially property tax increase that would carry on years to come.

Rep. Tim Quinn, R-Heber City, one of 23 House members — all Republicans — who voted against the bill, describing it as a tax increase in perpetuity.

“So it would be fair to say this isn’t a five-year tax increase. It’s the tax increase that will keep on giving in perpetuity,” he said.

Rep. Keven Stratton, R-Orem, offered an emotional floor speech in support of the tax bill, noting it does the things state lawmakers “have a constitutional responsibility to do.”

Stratton expressed his gratitude to House Speaker Greg Hughes, R-Draper,"for the work of this body. I’m proud we came together with one voice. So I encourage us to do right by this bill and let our voices be heard on the (ballot question) that will come before the people.”

The Salt Lake Chamber endorsed the tax bill, which accomplishes what Republican legislative leaders set out to do at the beginning of the session, as well as sealing the deal with Our Schools Now.

“The Salt Lake Chamber has been an ardent supporter of greater investment in Utah’s education system, modernizing our tax code and ensuring our infrastructure is equipped to handle our robust population growth, this solution addresses all three,” Chamber President and CEO Lane Beattie said in a statement.

But Americans for Prosperity of Utah opposed Last’s bill.

“Now is not the time to raise taxes on hardworking Utahns,” the group's state director, Heather Williamson, said, calling it a "crippling property tax increase" that comes on the heels of the $1.5 trillion federal tax cut.

“Why would lawmakers even consider raising taxes when we’re just about to feel unprecedented relief? This massive property tax increase is not the Utah way," Williamson said.

Gas taxes won't increase unless the 2019 Legislature takes action, but voters will be asked to state their opinion about boosting the price at the pump by 10 cents a gallon on the November ballot.

The question that lawmakers agreed voters should be asked is: "To provide additional funding for public education and local roads, should the state increase the state motor and special fuel tax rates by an equivalent of 10 cents per gallon?"

While there was no discussion about the language in the Senate, House members spent a lot of time debating how the ballot question is worded.

Rep. Justin Fawson, R-North Ogden, pushed for more detail about the proposed increase and said the wording is "masking the intent and manipulating the public."

Rep. Becky Edwards, R-North Salt Lake, said voters will have access to plenty of information — pro and con — before the election.

"We're not trying to hide anything from the voters. We're not trying to be sneaky here," Edwards said.

Although the ballot question is nonbinding, some House members argued during floor debate that it is anything but that because there is no way lawmakers could ignore the will of the voters.

"It is impossible for this to be nonbinding," said Rep. Mike Kennedy, R-Alpine.

And if voters reject the gas tax increase, he said the Legislature wouldn't be able to impose it next year even if lawmakers believe it needs to happen.

Rep. Karen Kwan, D-Murray, said the bill "is a great way to marry two needs, transportation and schools. … The best part of this is that it goes to voters."