The Our Schools Now citizen/business initiative petition-backers are preparing to file a petition that, if approved by voters in 2018, would increase the state sales tax by 0.5 percentage points and hike the personal state income tax rate by an additional half-a-percentage point.
The increases would together bring in around $700 million more each year for public schools; Capitol Hill sources tell UtahPolicy.com.
It may well be that few state Republican lawmakers, nor GOP Gov. Gary Herbert, will get behind the revised initiative.
But previous surveys by UPD’s pollster Dan Jones & Associates have found majority support among voters for OSN’s previous idea of a 7/8th of 1 percent increase in the state personal income tax rate – which was opposed by Herbert and most legislative Republicans.
Herbert and legislative GOP leaders have lobbied OSN-organizers not to run a citizen initiative petition that would only raise the income tax rates – arguing such a move could harm the state’s growing economy.
USN and others doubt the GOP leaders’ concerns.
But, apparently, for the sake of at least listening to those concerns, OSN’s filed petition will deal with both taxes – sales and personal income.
If ultimately approved by voters, the petition would raise the state’s portion of the sales tax from 4.7 percent to 5.2 percent.
The local option sales taxes imposed by cities, towns, and counties would not be increased, neither would the transit district local option sales tax.
The petition, if approved, would raise the current 5 percent flat-rate income tax rate to 5.5 percent.
The corporate state income tax rate of 5 percent would not be increased.
Herbert and GOP lawmakers have argued that such increases could badly tip the basic triad tax rate system – a supposed “balance” of a three-legged stool of sales, income and property taxes.
However, as a Utah Foundation study showed last year, Utah’s state and local tax bases have been severely impacted over the last 20 or 30 years by lawmakers continually giving tax exemptions, deductions or credits to special interest groups.
The Foundation study found that the state income tax alone – having been changed over the last decade – is now furnishing more than $1 billion a year LESS than it otherwise would have to support public education.
By the Utah Constitution, all personal and corporate state income tax revenue must go to public or higher education.
Besides giving various tax breaks, over recent years the Legislature and governor have taken sales tax money away from higher education and given it to other programs -- most going to build new roads.
That has shifted income tax monies into higher education, away from public education – even though Herbert likes to point out that since the Great Recession more than $1 billion in new tax revenue has gone into schools.
The OSN group was formed over a year ago with the idea of finding a way to dramatically increase tax revenues for public schools.
The politics of the OSN effort is complicated and daunting.
Herbert and GOP leaders, starting before the 2017 Legislature, have been pushing back against a large voter-self-imposed tax hike for schools.
Senate President Wayne Niederhauser, R-Sandy, and House Speaker Greg Hughes, R-Draper, and other members of majority leadership in both houses, came up with the idea during the session of modifying the sales tax imposed on food and changing personal income tax exemptions to provide a “revenue-neutral” change that, over time, would naturally grow more revenues for schools.
But House and Senate Republicans couldn’t agree on specifics – so those plans died.
However, with the approval of Herbert, various legislative interim study committees are now studying how sales and income tax exemptions could be changed to broaden the state’s tax bases, with an eye to providing more school monies down the road.
But such changes would in no way approach the now-$700-million annually the revised OSN’s petition would raise.
Utah ranks last in the nation in per-student funding and has for years.
Utah students’ test scores are now starting to falter.
And teacher pay is so low, despite more teachers graduating each year from public state colleges, school districts can’t find replacement teachers – as many new teachers quit the profession or move out of state saying they can’t earn a living wage here.
As previously reported, OSN-backers are looking to start their petition gathering in August.
Following petition law, after a petition is formally filed with the Utah Elections Office (which could happen within weeks), a group must hold seven public hearings around the state. Depending on citizen feedback, petitioners can then modify their formal petition.
After that, petition packets are issued by the UEO, and the process of voter signature gathering can begin.
OSN is organizing down to the elementary school level – with a teacher, or PTA leader, or others from each school in the state being tapped to carry petitions.
While much of the signature gathering will be done by volunteers, OSN has hired a professional signature firm to oversee the petition process – thus making it more likely it will succeed.
OSN must gather around 120,000 signatures statewide, with 10 percent coming in each of 26 of 29 state Senate districts.
UtahPolicy is told OSN wants to have a firm 120,000 valid signatures in hand before the start of the 2018 Legislature the end of January.
While it may be that GOP leaders will come up with a tax reform package for the 2018 Legislature, it is almost assured conservative lawmakers – especially in an election year for all 75 House members and half of the 29-member Senate – will not push through major tax hikes for schools.
In fact, it is likely whatever the Legislature does will be “revenue neutral” – with the idea that tax changes will, down the road, bring in more money for schools.
That is not good enough for OSN, various sources tell UtahPolicy – as Utah schools could still languish for years underfunded.