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Utah tax reform: Four things to keep in mind

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Roger Tew, senior policy adviser with the Utah League of Cities and Towns, discusses the GOP leadership-backed tax reform bill during a meeting of the House Revenue and Taxation Standing Committee at the Capitol in Salt Lake City on Friday, March 1, 2019.

SALT LAKE CITY — Utah lawmakers seem intent on holding a special session a week from Thursday to begin passing a tax overhaul package that has more moving parts than anything you will assemble Christmas morning.

In government, parts tend to move in unintended ways. In that sense, haste may not always make waste, but it may make things people can’t foresee. 

But if legislators insist on being hasty, here are four things they at least ought to keep in mind.

First, don’t tell Utahns you are “restoring” the full state portion of the sales tax on groceries. That language assumes the money rightfully belongs to the government, not the people being taxed. Republicans understood this concept well a decade ago when they fought efforts to “restore” the Bush tax cuts.

Raising the tax on unprepared food from 1.75% to 4.85% is a tax increase on one of life’s biggest necessities. It would take money out of the pockets of real people, and it would especially hurt the low- to moderate-income people who earn just enough to not qualify for assistance. It is both a tax increase and a policy decision. 

You may call it removing an exemption, if you like. Groceries currently are exempted from a portion of the state’s sales tax. But then you would need to compare it to the many other tax exemptions the state grants. 

Last year, the State Tax Commission said 69 of these added up to $650 million per year that otherwise would go into state coffers. These have been given mainly to major employers that are considered important to the local economy. 

Economic development is important. So is helping struggling people buy food. A once yearly tax credit won’t make it easier to buy groceries today.

Second, stop saying tax reform already has received enough public attention and input. The Deseret News quoted Senate President Stuart Adams saying reform already had received more attention than it would have during the regular 45-day legislative session that begins in January.

This is a flimsy justification for hurrying the process in a special session. 

Yes, lawmakers traveled the state this year and held public hearings. They presented a detailed statement outlying what lawmakers perceive to be an imbalance in tax revenues and they listened to how Utahns feel, in general, about taxes and reform.

But the actual bill lawmakers will consider Dec. 12 won’t be ready for review until Dec. 9. That is the document that needs the thorough vetting of a legislative session. The devil, as the saying goes, lives in details.

Third, perhaps the largest part of the overall tax reform plan will be a constitutional change allowing the state to use income tax revenue for something other than education. That would require a public vote. 

The public can be fickle. Last year, voters turned down a gas tax hike that would have freed up more general fund money for education, essentially ruining a plan that ended an initiative drive for more school funding. 

What happens if voters reject this constitutional change, too? If lawmakers reduce income taxes during the special session, wouldn’t that leave schools shortchanged? 

Lawmakers should explain why they don’t let voters tackle the income tax issue first, then implement tax reform later. The obvious answer is that the 2020 elections might change the players in charge, but those are the players who would have to deal with a mess if voters reject the constitutional change.

Finally, the most likely way lawmakers would ensure that a shift away from income taxes won’t hurt schools is to allow local school districts greater leeway in raising and spending property taxes. 

If so, they should remember that taxes don’t exist in a vacuum. Just two examples: Salt Lake County leaders are contemplating a property tax hike of 7.88% right now, or nearly $16 million. Utah County is considering a hike that would virtually double the county’s portion of property taxes there. 

The same people who pay these would pay higher school district taxes, as well as the higher gas taxes and food taxes, and the taxes on selected services lawmakers are considering. The proposed cut in income taxes from 4.95% to 4.64% might not be seen as making up for it all.

Utahns just need to remember that we won’t know whether all the parts fit together for quite some time.

Lawmakers say they want the income tax cut to be ready for all workers to enjoy beginning Jan. 1. A recent statement from the tax commission said this likely won’t happen unless Utah workers change their withholdings to reflect new tax tables, which won’t be ready for a while.

In the end, there may be no way to stop lawmakers from hurrying to meet next week. Utahns just need to remember that we won’t know whether all the parts fit together for quite some time.