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Coronavirus casts uncertainty on tax cut, Utah Gov. Gary Herbert says

SHARE Coronavirus casts uncertainty on tax cut, Utah Gov. Gary Herbert says

The Capitol in Salt Lake City is pictured on Thursday, Feb. 13, 2020.

Spenser Heaps, Deseret News

SALT LAKE CITY — Warning of coronavirus’ potential to dampen the economy, Gov. Gary Herbert on Thursday threw water on the chances Utahns might see some type of tax cut this year.

“I think there is a desire to have a tax cut,” Herbert told reporters at his monthly news conference at PBS Utah. “I don’t know whether that is going to happen in this session.”

Legislative leaders have said some form of a tax cut remains on the table but no decisions have been made. As lawmakers continue to debate what to do following the collapse of tax reform, Herbert pointed to another wild card.

The big question, Herbert emphasized, is if it is prudent to pass a tax cut given the economic uncertainty posed by the new coronavirus. 

“It is something that heightens the worry that we are going to have a slowdown in the economy anyway,” Herbert said. “I think there is a lot of uncertainty even though there is a desire to give a tax cut.”

Herbert compared the economic hand-wringing going on now to what happened in the aftermath of 9-11.

“The coronavirus pandemic has the same potential,” he said.

Herbert added the structural imbalance in the state budget has to be addressed, and perhaps it would be best to wait on a tax cut until that overhaul is completed — a sentiment some legislative leaders have also expressed.

The tax reform package, passed in December in a special legislative session, would have lowered income taxes but raised sales taxes on food, gas and some services to address lagging growth in sales tax revenues compared to income tax collections. It would have cuts taxes overall by $160 million. But it still wasn’t well-received. Amid backlash, mostly over the sales tax on food, it became the subject of a citizens referendum that was headed for the November ballot had lawmakers not acted.

Even with concerns over the funding imbalance, some lawmakers are proposing bills to revive some of the tax cuts in the failed tax reform package, including increasing the state income tax dependent exemption to help families hurt by changes in the federal tax code as well as new breaks for Social Security and military retirement benefits.

The morning of Herbert’s comments, a bill filed by Rep. Travis Seegmiller, R-St. George, to cut the state income rate from 4.95% to 4.75% was made public, along with several other bills seeking certain tax credits. Seegmiller said he was told by legislative leaders to have his bills “ready” to discuss in a House GOP caucus meeting Thursday.

After closed-door caucus meeting, House Speaker Brad Wilson told the Deseret News the House majority made no decisions on any possible tax cuts or specific proposals.

“No, not even close,” the speaker said, adding it’s likely the discussion will “spill into next week.”

“There’s broad agreement we would like to do tax relief,” Wilson said. “The questions is just how and when.”

The day before, Wilson also pointed to possible economic “storm clouds” due to coronavirus. He said House Republicans decided in their closed-door caucus earlier this week to set aside $57 million to deal with an upturn in Medicaid demand should the economy falter, as well as $25 million to fight wildfires and cover costs associated with building. Still being discussed is perhaps putting $100 million in a new rainy day fund for education. But Senate Republicans have yet to sign on.

Still, that doesn’t mean tax cuts are off the table, legislative leaders have said.

But the clock is ticking. Lawmakers are entering the final 10 working days of the session.

Rep. Brad Last, R-Hurricane, the House chairman of the Budget Committee, said they intend to have the budget proposal ready by the end of next week.

“We’re trying to figure out how to land the plane,” Last said, saying they did discuss some tax cut bills but the House GOP still didn’t take positions on any of them. “Absolutely no decisions have been made at this point in time.”

Last said leaders are still “trying to get the flavor of the body,” but acknowledged “at some point we’ve got to figure out whether we’re going to do something in terms of a tax cut or not.”

Senate Budget Chairman Jerry Stevenson, R-Layton, said Senate Republicans would make some “policy decisions” about the budget Friday. He said the state has money that can be moved from higher education back to the general fund.

“There’s very adequate money in education,” he said.

Stevenson also would like set aside some ongoing money that lawmakers could tap into when the economy slips, noting drops in the stock market the past couple of days.

“If we approach this as a normal budget year, we will have a crisis next year,” he said.

Stevenson is not after a tax cut.

“I’m not preaching one,” he said. “Personally, as I look at the inside of this budget, I don’t think that’s a good idea this year.”

Contributing: Dennis Romboy