SALT LAKE CITY — Better not make plans for Dec. 12 if you want to be around when the Utah Legislature is expected to meet in special session to consider a sweeping tax reform plan that’s still undergoing substantive revisions.
Those aren’t expected to be ready for review until the next meeting of the Legislature’s Tax Restructuring and Equalization Task Force on Dec. 9, just a few days before lawmakers would be asked to vote on a plan intended to reduce income taxes while raising other taxes, including on food, gas and some services.
That’s still plenty of time, say GOP legislative leaders who are anxious to have what could amount to up to a net tax cut of up to $124 million in place before the start of the new year, when all of the House and half of the Senate is up for reelection.
Senate President Stuart Adams, R-Layton, said tax reform has already received more attention than it would have during the regular annual 45-day legislative session given that the task force has been working since the summer when a series of town hall meetings were held around the state.
“We’ve taken hours and hours and hours of public comment. I think the task force has listened. I think they’re responding to the public as best they can. There’s been a myriad of changes to the bill. There’ll be additional changes,” Adams said. “Eventually, I think, we’ll have a bill we can vote on, and I think we’re still headed to the 12th.”
House Speaker Brad Wilson, R-Kaysville, agreed.
“I’m optimistic we will have a special session in December,” Wilson said, describing the work still ahead for the task for as deciding how “to maximize the amount of Utahns that would receive a large tax cut. There are only a few items that need to be addressed prior to our next meeting and special session.”
The speaker said he is “confident the chairs will come back to the committee with a proposal that will protect public and higher education funding and restore balance within our tax code, all while giving hardworking Utahns a significant tax cut before the end of the year.”
What will be the fourth version of a plan first pitched in October by the task force co-chairmen, House Majority Leader Francis Gibson, R-Mapleton, and Sen. Lyle Hillyard, R-Logan, is supposed to contain changes to ensure more Utahns will see a tax break.
The size of the tax cut in the plan may be larger than the $80 million in previous versions of the plan because that would have meant nearly 30% of Utahns would have seen a tax increase. That number would drop to as low as 12% under options presented to the task force on what was to be its last meeting on Nov. 25.
But lawmakers have only set aside $75 million for a tax cut. That money was set aside after an unpopular House bill that would have raised taxes on most services was abandoned during the 2019 Legislature in favor of creating a task force.
House Majority Whip Mike Schultz, R-Hooper, said during last week’s meeting that money to pay for any cut larger than that would have to “come from somewhere else” and made a motion to have the co-chairmen work with legislative staff and the governor’s office to see what money is available, then decide how big the cut can be.
Schultz told the Deseret News that the additional funds could come by “hopefully working with the (governor’s) office to reduce some spending inside their agencies,” and stressed any budget cuts would not include public education. He said there have been discussions with the governor’s office.
Gov. Gary Herbert’s spokeswoman, Anna Lehnardt, said it’s the Legislature that’s “leading out on tax reform.”
She said that “while we always look for ways to improve efficiency and provide the best value for taxpayers’ dollars in crafting the budget, our office has received no direction from the Legislature — official or otherwise — to cut agency budgets.”
Lawmakers are trying to deal with Utah’s lagging growth in sales tax revenues, which aren’t keeping up with income tax collections as consumer spending shifts from goods to services. Because income taxes are earmarked in the Utah Constitution for education, the fear is money will eventually run out for other state needs.
An effort to amend the constitution to remove the restriction on using income tax revenues, something that requires voter approval, will wait until the 2020 Legislature begins meeting in late January. Lawmakers are also expected to consider at that time a proposal to increase funding for public schools by making it easier for local districts to raise property taxes.
The new changes to the special session tax plan being put together likely will focus on allowing joint income tax filers with no dependents to take advantage of the proposed exemption increase from $565 to $2,500, and limiting who qualifies for a new grocery tax credit of up to $125 per person for low- and middle-income families.
Not anticipated to change is the proposed increase in the state sales tax on food from the 1.75% rate in place for more than a decade to the full 4.85% rate, or the new sales tax on the wholesale price of gas expected to add about 12 cents a gallon to the price at the pump on top of the state’s existing 31-cents-a-gallon gas tax.
The plan also adds sales taxes to a limited list of services, including installations, pet boarding, ride-hailing services, towing, parking lots, online dating, streaming media and storage, while eliminating exemptions on some sales, such as textbooks sold off campus, vending machines that accept credit cards and newspapers.
There are also budget shifts anticipated, including depositing proceeds from state-controlled liquor sales into the state’s general fund and paying for school lunch and anti-underage drinking programs now funded from those sales out of the education fund.
But those shifts, which would also affect higher education, are supposed to hold public school spending harmless. The Utah Education Association and others, however, have been sounding the alarm about cutting the income tax rate from the current 4.95% to 4.64%, especially before an acceptable funding alternative is in place.
Adams said lawmakers have no intention of doing anything that would hurt public education.
“I can almost assure you that we won’t pick an option that doesn’t allow us to fund education properly,” the Senate president said. “Our commitment always has been, always will be, to do our best to fund education.”
House Minority Leader Brian King, D-Salt Lake City, said Democrats have problems with both increasing the sales tax on food and reducing the money earmarked for schools by cutting the income rate without spelling out how the funds would be made up.
“I am not dead-set against this, but I have concerns,” King said, about whether a plan could be ready in time for a special session.
“I think it’s just way premature to be thinking about doing these things in a special session. Or even the 2020 general session,” the minority leader said. “I’m not saying, ‘Hell no.’ I’m saying I want to understand this more, the details of it. I just don’t see how something this complex can be thrashed out thoroughly before Dec. 12.”
King, who is not one of the two Democratic lawmakers serving on the tax reform task force, also questioned the political benefits if the Republican supermajorities in both the House and Senate get a tax cut through before the end of the year.
“It’s almost more appearance than anything else,” King said. “I don’t know how much difference it makes.”
Republican legislative leaders have said Utahns should see less money withheld from their paychecks starting in January if tax reform is finished before the new year, allowing lawmakers to tell their constituents that they cut their taxes.
But University of Utah political science professor Matthew Burbank said lawmakers may really be hoping to avoid dealing with the issue in an election year since some of the elements of tax reform, particularly imposing new taxes on services, are likely to upset voters.
“I think it’s entirely possible that there is a real push to try to get something done to avoid that real problem of trying to do a big tax bill in an election year,” Burbank said. “That could happen. They could even hold a special session and that could pass. I’m skeptical, however.”
Like King, Burbank suggested an overhaul of the state’s tax structure is too much to try to do in a special session before the end of the year, given that there’s still work being done on the plan and time is running out with the holiday season underway to sell it to voters.
“I don’t see how they’re able to get this refigured, get this out to people, get everyone on board, and have a special session by the middle of December,” Burbank said. “They’ve really tried very hard to position this as an income tax cut, and isn’t that great. But that message doesn’t seem to be the one people are hearing.”