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After tax reform repeal, some lawmakers hoping to revive tax break for families

There’s a ‘moral responsibility’ to return that money, supporter says

The Utah State Capitol on the opening day of the Utah State Legislature Monday, Jan. 23, 2012. Scott G Winterton, Deseret News

SALT LAKE CITY — Even though the Republican leaders of the Utah Legislature want to take a time out on tax reform this session following the hasty repeal of the sweeping package targeted by a citizens referendum, there’s a push to go forward with a tax break for families.

Rep. Tim Quinn, R-Heber City, said he is having a bill drafted to increase the state income tax exemption for dependents to make sure families earning up to around $90,000 are no longer hurt financially by changes made as part of the federal income tax cut a few years ago.

“I’ve been here long enough to know my answer is about to be stupid, but I can’t imagine that we wouldn’t pass it,” Quinn said Wednesday, despite feeling pressure to put any tax cut on hold until the 2021 Legislature can address the state’s lagging growth in sales tax revenues.

While he said some would argue that his bill would hurt future attempts at tax reform, Quinn doesn’t “know how we say we’re going to keep Utah’s money until we figure out a tax policy that’s palatable to both chambers and to the public. I don’t know how we do it.”

He already has the backing of Rep. Keven Stratton, R-Orem, the only lawmaker to vote against repealing the tax reform package Tuesday. Stratton said he doesn’t want to see the Legislature “throw in the towel” on tax reform this session but tackle it piece by piece, starting with increasing the dependent exemption.

“My constituency is certainly concerned about that,” Stratton said, suggesting the tax break may be seen as helping sell less-popular portions of tax reform. “I don’t want that to be sugar on bad medicine. Let each thing stand on its own merits and let’s educate the people Utah will do hard things.”

Sen. Lincoln Fillmore, R-South Jordan, a member of the Legislature’s tax reform task force that put together the tax reform package, said he would be willing to sponsor Quinn’s bill in the Senate, saying it’s a top priority for both him and the families in his Senate district.

“Utah taxpayers have paid more than their government needs for many years and it’s long past time that some of that money gets returned to taxpayers,” Fillmore said. “We should have done that two or three years ago.”

But he said it’s not clear how much support there is for Quinn’s bill.

“I can’t answer for what the political chances of it are, but I know it’s the right policy,” Fillmore said. “It’s a mark against the Legislature that we haven’t fixed this problem before now.”

Sen. Dan McCay, R-Riverton, said lawmakers have “in my opinion, a moral responsibility to return that money to the families,” who saw their state income taxes jump after the federal government eliminated dependent exemptions used to calculate what they owed.

McCay said he is looking this session for ways to shift spending out of the state’s general fund that depends on sales tax revenues to the education fund that comes from income tax collections to ease some of the budget concerns.

“I know there’s reluctance,” McCay said of dealing with tax reform this session. “My hope is we will get past the initial feeling of, you know, rejection, really, from the voters. We’ll get past that initial feeling and we will take what we’ve learned and we will work together.”

Quinn’s bill, expected to be introduced in the next week or so, would amount to an $80 million tax break, the amount of money set aside last year by lawmakers for a tax cut that was intended to be part of the tax reform package passed in a special December legislative session.

The package, which would have reduced income taxes while raising sales taxes on food, gas and some services, included $132 million to extend an increased dependent tax break to even more families as part of what would have been an overall $160 million tax cut.

Quinn said he didn’t believe he could get the higher amount through this session, so his bill will have a steep phaseout of the tax break for higher-income Utah families. He tried unsuccessfully to fix the exemption issue in the 2018 session, but lawmakers came back into a special session that year to approve a $30 million tax break.

Also a member of the Legislature’s tax reform task force, Quinn was one of the Republicans who joined Democratic lawmakers in voting against the tax reform package in December. He opposed raising the state sales tax on food from 1.75% to the full 3.85% rate.

Senate Minority Caucus Manager Derek Kitchen, D-Salt Lake City, said the support for the citizens referendum to put tax reform on the November ballot shows Utahns aren’t looking for a tax break but rather for lawmakers to spend their money wisely.

Tax reform backers “like to talk about how the residents of the state of Utah said, ‘Don’t raise our taxes.’ I believe that residents don’t want their taxes raised. However, with this referendum, what they said loud and clear in all 29 counties is, ‘We do not need a tax cut,’” Kitchen said.

That includes the increased dependent exemption.

“The dependent exemption, that was not the rallying cry of the referendum. It was, ‘Don’t tax food. How dare you tax food,’” Kitchen said, adding that as a progressive Democrat, he’d like to see sales tax removed entirely from key staples such as produce.

Both House Speaker Brad Wilson, R-Kaysville, and Senate President Stuart Adams, R-Layton, were noncommittal Tuesday about dealing with the tax break or other aspects of tax reform this session.

“As I’ve said for over a year now, tax cuts are a priority and we need to stay focused on making that happen. Exactly what vehicle we choose to give people tax relief and when that occurs is something we’re going to still need to work out,” Wilson said.

“It’s a challenge to change your tax code and not have some flexibility around revenue sources to adjust tax rates at the same time,” the speaker said. “So in an ideal world, we would still be lowering taxes at the same time as we address the structural imbalance. I think that’s still the long-term objective.”

Wilson said whether that objective changes can be decided later in the 45-day session.

“We’re in Day 3 of the session and we just repealed the bill yesterday. I think we will have a better sense of that probably in about two to three weeks. So we’ve got plenty of time to work on that,” he said. New revenue estimates used to finalize the budget are due next month.

Adams also noted the session has just started.

“It’s too early. We don’t have a budget yet. Let’s get the budget put together then we’ll find out what we have,” the Senate president said. “We have to prepare for a downturn. It’s really hard to say we’re going throw away all of our surplus right now when we haven’t prepared for a downturn.”

He said increasing the dependent exemption won’t be the only request made for a tax cut.

“We’ve got requests to actually remove the income tax off of Social Security and I think there’s good reason to do it,” Adams said, referring to another tax break included in the now-defunct tax reform package for low- and moderate-income Utahns.

“We’ve got military retirement on the table. We’ve got all kinds of things on the table,” he said. “What we do, I think, will depend again on the budget and the will of the body, of both bodies.”

The repeal bill passed by lawmakers Tuesday was signed into law the same day by Gov. Gary Herbert.

Lt. Gov. Spencer Cox, whose office oversees elections, issued a statement Wednesday clarifying that means the referendum won’t be on the ballot in November. State Elections Director Justin Lee had said the law was not clear about what happens if a law is repealed during the referendum process.

“Since that law has been repealed, there is no longer an existing law to refer to the people, effectively making the referendum moot. Therefore, the referendum question will not appear on Utahn’s ballots this year,” Cox said, thanking county clerks for their efforts to verify more than 145,000 voter signatures.