Utah’s legislative leaders are suggesting an intriguing proposal, coming on the heels of a failed effort at tax reform, that would open up the state income tax to help with the needs of children and the disabled while establishing a dedicated fund to protect education from the fluctuations of economic cycles.
It’s being billed by some as the last option for beginning to fix the state’s revenue imbalance, in which income tax collections are exceeding those from the sales tax. Utah is unique in that its constitution requires all income tax revenues be earmarked for education, which lawmakers say is beginning to threaten funding for other programs.
This monumental shift in state funding is embodied in two bills. One, HB357, would set up the dedicated education fund and seed it for long-term growth. The other, SJR9, calls for an amendment to the state constitution to open the income tax to fund services for children and people with disabilities.
That will require a vote of the public. SJR9 contemplates putting this on ballots in November.
As we said, this is intriguing. Too bad it is being introduced so late in the legislative session.
Lawmakers are constitutionally bound to end the annual session after 45 working days. These two bills were introduced with a little more than a week left. That’s about how much time last year’s Legislature was given to consider a massive tax-reform package, and the results were not good. As the details became available, flaws became apparent. Lawmakers were forced to abandon the plan before the session ended.
They have struggled ever since to find a workable solution, passing a version in a December special session that had to be repealed in January after a grassroots referendum effort gained traction.
This effort may answer the question of how to loosen restrictions on the income tax without harming education, although the bulk of school funding still would rest with the discretion of lawmakers. Perhaps it doesn’t go far enough in opening that fund. Perhaps it might not provide enough money to protect education from any economic storm.
Perhaps all of these questions could be hashed out in the campaign leading up to November’s vote. However, we wish lawmakers had more time to hash them out in hearings during the session. The fact that the state’s education leaders seemed to be caught off guard by these two bills does not give us confidence.
Lawmakers, admittedly, are in a difficult spot. Voters have demonstrated they don’t want sales taxes extended broadly to services. They don’t want taxes raised on groceries, and they aren’t wild about adding a sales tax to gasoline purchases. Meanwhile, the coronavirus seems to have the economy verging on a slowdown that might move the state’s revenue imbalance into a critical stage.
Time is an ally here. Lawmakers ought to use some of it. Remove these two bills from immediate consideration. Put them on interim committee agendas, where their details can be understood and debated. Then hold a special session later in the year to consider passing final versions well in advance of November’s election.
Of all the perceptions lawmakers may convey to voters, haste can be the most damaging.
Opening the income tax for other purposes may be a necessary step. But there is time to do so deliberately and carefully.