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Tax cut by the end of the year? Utah House speaker hopeful

But tax reform effort seeming to slow down

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FILE - The Utah Capitol is pictured on Wednesday, March 7, 2018, the penultimate day of the 2018 Utah Legislature.

The Utah Capitol is pictured on Wednesday, March 7, 2018, the penultimate day of the 2018 Utah Legislature

Scott G Winterton, Deseret News

SALT LAKE CITY — Utah House Speaker Brad Wilson said Wednesday he’d like to see a special legislative session on tax reform before the end of the year so that a tax cut can be put in place at the start of 2020 — an election year for all House members and about half of the Senate.

“We’re working very hard to find a solution to our tax challenges in this state, our structural imbalance, but also, how do we get a tax cut in place for the citizens. Personally, I think a lot of us would love to see something done before the end of the year,” said Wilson, R-Kaysville.

That way, he said, the lower rate could be in effect Jan. 1 for Utahns, who may be “potentially even seeing their take-home pay and their paychecks bump up to reflect that tax cut.” Legislative leaders have long said they prefer a reduction in the state’s 4.95% income tax rate.

Senate President Stuart Adams, R-Layton, said he also hopes to see a special session on tax reform this year and would like to see the rate drop by at least a quarter of a percent, a decrease that carries about a $225 million price tag. Lawmakers set aside $75 million for an unspecified tax cut earlier this year.

Wilson, who initially talked about a $225 million tax cut at the start of the 2019 Legislature, said the amount of the reduction has to be balanced with state needs, especially when it comes to paying for transportation infrastructure, also shaping up as a key piece of the larger tax reform effort.

Besides a tax cut, recommendations from the co-chairmen of the Legislature’s Tax Restructuring and Equalization Task Force include restoring the full state sales tax on food, imposing limited sales taxes on services, and removing some sales tax exemptions, including on gasoline.

But lawmakers seemed a long way off Wednesday from getting behind the tax reform proposal.

Wilson said he expects the task force to continue meeting over the next month or so to do a “deep dive” on those recommendations, which came from House Majority Leader Francis Gibson, R-Mapleton, and Sen. Lyle Hillyard, R-Logan.

The task force has not taken any positions on the long list of proposed tax changes they have studied. Hillyard said earlier this month the plan was to bring the chairmen’s recommendations to the supermajority Republican caucuses to determine if the votes were there before making the details public.

That changed, Hillyard said Wednesday, when legislative leaders got a look at the recommendations.

“They weren’t all on board,” the longtime senator said. As a result, Hillyard said there may be changes in the recommendations he and Gibson intend to circulate among lawmakers Thursday and post online for the public to see by Friday.

Senate Republicans, he said, are “really nervous” about imposing sales taxes on gas, because last year voters rejected a non-binding ballot question about raising the gas tax by 10 cents a gallon to support public education. On a gallon of gas that costs $2.50, the 4.85% state sales tax would amount to 12 cents a gallon.

Raising the state sales tax on food, now at 3%, to the full 4.85% rate is “a really sticking point over in the House,” Hillyard said. During a briefing of Senate Democrats, he said there would be a tax credit proposed to help offset the expense to low-income Utahns.

Two more task force meetings are being added in November beyond what had been anticipated to be the task force’s final meeting, a public hearing on the recommendations set for next Tuesday. Besides the chairmen’s recommendations, the task force will consider other proposals from members.

GOP senators discussed specifics in their closed-door midday caucus, but House Republicans didn’t talk about the tax reform proposal at all during a brief open caucus, instead hearing from a national tax expert, Bill Fox from the University of Tennessee.

Before adjourning, Wilson told House Republicans that a tax reform proposal wasn’t coming until next week and stressed the need to deal with a reduction in the state income tax rate by the end of the year in a special legislative session.

”Just be aware,” the speaker told the caucus, “this is probably going to heat up a little bit. And when I say heat up, I mean we’re going to see a lot of stuff come out pretty fast. We’ll try and keep you as informed as we can, but I would ask you to reach out to us as soon as you have questions or concerns.” 

Senate Majority Leader Evan Vickers, R-Cedar City, said after a lengthy caucus discussion on the recommendations, Senate Republicans are willing to move forward, even if they aren’t exactly enthusiastic about taking on taxes.

“Nobody’s really happy talking about restructuring taxes. I don’t know that there’s anybody jumping up and down in their chair and saying, ‘We’ve got to do it,’” Vickers said.

Adams put it this way: “We’re doing things that aren’t really fun, but we’re getting them done.”

Vickers said senators talked about making a “significant, meaningful income tax cut” that could include a cap of some $60,000 before Social Security benefits are taxed and ensuring that Utah families don’t pay higher taxes because of the impact of the federal income tax cut, about a $70 million fix.

On Tuesday, the Senate president confirmed to the Deseret News that adding state sales tax to gas purchases, on top of the 31-cents-per-gallon gas tax, is part of the recommendations. Adams said he expects to include a directive to the Utah Department of Transportation to come up with a better user fee sooner rather than later.

Both Adams and Wilson said a longer-term fix is needed for transportation funding. Gas tax revenues are in decline as more people drive alternative fuel vehicles and have never been enough to cover the cost of roads in the state, so nearly $650 million in sales taxes are shifted to transportation at a time when sales tax collections are slowing.

That slowdown, blamed on a shift in consumer spending from goods to services, has combined with a restriction in the Utah Constitution on the use of the state’s other main source of revenues, income tax, for education to create what lawmakers are calling a structural imbalance.

Adding sales tax to gas purchases would be a stop-gap measure while the state continues to explore alternative road user fees, including charging drivers by the miles they travel and adding additional tolls.

Neither Adams nor Wilson have ruled out seeking to amend the Utah Constitution to remove the earmark on income taxes for education. An amendment to the constitution must not only pass the Legislature with a two-thirds vote, it must also be approved by voters in a general election.

But Adams said that may take more time and may not be part of any proposal that advances to a special session of the Legislature.

The task force was created last session, after Republican legislative leaders pulled a House bill that would have imposed sales taxes on many services, ranging from haircuts to legal advice, a prospect that drew opposition from the business community.

The intent was for the task force to come up with an alternative proposal in time for a fall special session.

Contributing: Katie McKellar