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Advocates warn tax reform may hurt Utah’s poor

Utahns Against Hunger: ‘We shouldn’t do it on the backs of people who can afford it least’

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Rep. Francis Gibson, R-Mapleton, looks up into the gallery of the House of Representatives Friday, Jan. 31, 2014.

FILE - Rep. Francis Gibson, R-Mapleton, looks up into the gallery of the House of Representatives Friday, Jan. 31, 2014.

Scott G Winterton, Deseret News

SALT LAKE CITY — A group of advocates for low-income Utahns had a strong message Thursday for members of a legislative tax reform task force about to hold the latest in a series of hourslong meetings about dealing with the state’s lagging sales tax revenues.

“If we’re going to balance our tax code, we shouldn’t do it on the backs of people who can afford it least,” Neil Rickard of Utahns Against Hunger said during a news conference called to back removing all sales tax from food purchases, restoring the state income tax rate to 5% from the current 4.95%, and other tax policy changes.

In a letter to the Tax Restructuring and Equalization Task Force, some two dozen organizations including Utahns Against Hunger, the Coalition of Religious Communities and Voices for Utah Children also cited “a chronic shortage of public revenues” that’s resulted in a long list of unmet needs in education and other budget areas.

“We’ve been cutting taxes for a long time and the result is that we’re paying less. But before you get out the streamers and banners and put on the party hats, as much as we all love lower taxes, we do need to think about whether we’re meeting our obligations,” said Matthew Weinstein of Voices for Utah Children.

Particularly to the poor, he said, who struggle with what he termed a regressive tax system in Utah that makes lower-income residents pay a higher share of their earnings in taxes to state and local governments than those with more money.

“Even in the height of economic expansion — the economy is supposedly roaring — we still have a 9% poverty rate here in Utah according to the census numbers from last year that just came out today, which is nearly 100,000 households,” Weinstein said.

The issues raised by the advocates were not discussed by the task force Thursday, which has not taken public comment since holding a series of town hall meetings around the state over the summer. At least one more meeting is scheduled, in October.

But afterward, House Majority Leader Francis Gibson, R-Mapleton, the task force’s House chairman, made it clear there’s no interest in raising tax revenues. The 2019 Legislature set aside $75 million in an unspecified tax cut to be recommended by the task force, formed after a bill imposing new sales taxes on services was scrapped.

“I don’t think my message has ever changed. It’s not a revenue problem. It’s a distribution problem,” Gibson said. “I’m not even going to allow the committee to propose any type of solution that enhances revenues without tax relief at some point.”

The task force’s Senate chairman, Sen. Lyle Hillyard, R-Logan, said he’s hearing from many people who have “bright ideas” about how to solve the strain on the state budget as growth income tax collections that must be spent on education continue to outpace sales tax revenues that pay for just about everything else.

“When you sit down and look at them, you say, ‘Oh, what interest do they want to protect? What is their interest in the whole thing?’ That’s the difficult thing we have to do, is look at the overall benefit of the whole thing,” Hillyard said. He said the state’s poor stand to be hurt the most if a fix isn’t found for sales taxes.

“Those people will be hit the worst because we won’t have money to fund the types of programs that really help them,” he said.

No recommendations have been made by the task force, which is reviewing a wide range of proposals. In August, members heard restoring the current 3% state sales tax on food to the full 4.85% state rate would bring in $250 million and could be offset by a grocery tax credit, similar to the $100 annually given to Idaho residents.

“I think we’re sensitive to the needs of those that could be potentially be harmed,” Gibson said.

At the news conference, Rickard called restoring the full sales tax on food a “drastic and permanent” change to family budgets. If a family spends $45 a week on groceries, he said the annual additional cost of the increased sales taxes is estimated at $144, “or enough money to feed that family for a month.”

A grocery tax credit, Rickard said, is a “flawed solution” that wouldn’t help those who don’t find out about the program or who don’t file tax returns. Such programs, he said, maybe have noble intentions, but are often the first to go in an economic downturn.

A chart in the letter to task force members showed that Utahns earning less than $22,500 spend 5.1% of their income on sales taxes, compared to 0.07% for the state’s top 1% of earners, who make an average of $1.3 million. Overall, the lowest earners spend 7.5% of what they make on taxes, compared to 6.7% for the highest earners.

Beside removing the sales tax entirely on food purchases and raising the income tax rate, the advocates also are seeking to eliminate the state income tax on Social Security benefits for low- and moderate-income seniors and establish an earned income tax credit to help the working poor.

Thursday’s tax reform task force meeting focused almost entirely on how transportation is funded. Utah’s gas tax covers less than half the cost of road building and maintenance, with some $644 million coming from a sales tax earmark.

Utah Department of Transportation officials outlined alternative sources of funding, including a road usage charge set to be tested shortly and become available in January to Utahns who drive alternative fuel vehicles and want to avoid new fees being imposed.