There’s been a lot of “hype” over the last several weeks and months that the 2018 Legislature is going to pass major tax reform this session, says House Speaker Greg Hughes.
Unfortunately, Hughes, R-Draper, told UtahPolicy.com Monday afternoon, in reality, there may not be some big changes, as previously believed.
For example, said Hughes, he doubts there will be changes in the state sales tax – including trying to repeal the current food tax – and little, if anything, done on the personal income tax.
Even Sen. Howard Stephenson’s Truth in Taxation bill – not yet filed – that will deal with allowing property taxes to rise by up to 2 percent a year WITHOUT school district boards having to go through TinT could face real problems.
After all, says Hughes, 2018 is an election year for all 75 House seats and 15 seats in the 29-member Senate.
Stephenson’s bill “is, in reality, a tax hike,” said Hughes.
That’s because while it would still be up to individual school districts to take that 2 percent property tax growth, since it would be the Legislature giving that TinT growth cap to public schools, most likely all districts would routinely take that tax hike, since they won’t have to hold specific TinT hearings, with notifications to residents and all that goes with TinT.
Will GOP lawmakers want to approve such a property tax hike in this election year?
“We’ll have to gage that” as the session goes on, said Hughes.
In addition, early on last year it was assumed that tax reform in this session could come in one or two big bills, dealing with a number of reforms.
However, Hughes said he and Senate President Wayne Niederhauser, R-Sandy, have decided to let each reform come in an individual bill – with more of a chance that some reforms will be voted down, as one big reform bill would be more likely to pass as lawmakers see one or more reform in the big bill that they want.
Niederhauser said lawmakers really won't be sure what kind of changes to the tax code they will be able to do until they fully understand the impact of the federal tax overhaul.
"We don't know where we're going to go or how we're going to get there, yet," said Niederhauser. "It's going to be difficult for us to do it, but this is our best opportunity to address this issue in several decades."
So far, it looks like Utah will be getting a budgetary windfall from the federal tax reform. Sen. Jerry Stevenson, R-Layton, told UtahPolicy.com on Monday that estimates are somewhere between $25-80 million.
That extra cash will give lawmakers some flexibility as they set the budget for 2018.
"Our biggest problem right now is we've got $600 million coming out of the general fund every year to help pay for transportation. If we can find a way to put that money back, then our problems will be solved," said Niederhauser.
That big hole means the gas tax is out of balance and not providing enough money to pay for Utah's pressing infrastructure needs. Niederhauser acknowledges political reality that they won't be able to solve that problem this year.
"Politically, we can't get anywhere near $600 million. But, in the next 10-12 years, 10% of the vehicles on the road will be non-gas. We've gotta figure out a way to fix that. It might be toll roads, or maybe something nobody has ever thought of. It's a huge problem ahead of us."
Sen. Gene Davis, D-Salt Lake City, says budgetary pressures are coming that lawmakers won't be able to avoid.
"Everything can't be revenue neutral anymore," he said. "We're going to have to find new sources of revenue to fund the government sometime soon."
There are a few tax reforms coming that are technical in nature, said Hughes.
And while important to those businesses or individuals directly affected by those changes, by and large, the general public wouldn’t care.
For example, there appears to be a need, says Hughes, for the corporate tax to modified the “single sales factor.”
In fact, there may be three or more ways to make those changes, says Hughes.
But the speaker, who has watched tax reform carefully, was hard put to even explain to a dimwitted reporter how the single sales tax factor worked, or the implications of any possible changes.
Here is a site that attempts to explain Utah’s corporate single sales tax factor. Good luck with it.
Overall, said Hughes, he fears “there has been a lot of hype about tax reform” coming in the 2018 Legislature, while this may not be the real case.