That’s the political issue the 2013 Legislature will see.
For it’s clear that a number of leading GOP senators favor a bill that would raise the state’s share of sales tax on food from 1.75 percent to 4.75 percent – the state sale tax rate on all other purchases.
Reducing the food tax was a top priority of former Gov. Jon Huntsman. It took Huntsman several years – and some record-setting state tax surpluses – to get the GOP-controlled Legislature to go along with him.
And a few state Republican senators have been grousing about that tax cut for the low-income ever since.
Along came the Great Recession of 2008-2009, and state revenues declined severely.
Lawmakers had to cut budgets and almost drain the state’s Rainy Day Fund. But they got through the financial crisis without raising taxes, as many other state governments did.
Over the last several years hundreds of millions of extra tax dollars have poured into Utah coffers as the state recovered from the recession – and recovered better than most other states.
Now a number of state GOP senators say the sales tax on food should be re-imposed, mainly because it’s good tax policy to have a broader base and lower rate, and because the state sales tax was more volatile during the recession because unprepared food was exempted from much of the tax base.
It’s true that taxes are best levied over a broad base and at a lower rate.
And it may be true that taking the sales tax off food led to greater swings in sales tax falls and increases.
But do legislative Republicans really want to place the sales tax back on unprepared food?
Admittedly, a bill prepared to do this allows for low-income Utahns to apply for an income tax credit to offset what they may have paid in higher food tax during the previous 12 months. The average would be about $80 a year, analysts say.
And, claim GOP senators, the increase in the food sales tax will be offset by reductions in other areas – no overall tax increase will be seen.
Still, it will certainly be a tax increase for Utah’s poorer residents during the first year of the new food tax hike.
And many lower-income families may never apply for the tax rebate, so the food tax hike will not be offset by a refund and become a permanent tax increase for them.
It may well be up to House Republicans to stop the Senate’s determined food tax hike.
Just one political problem for the legislative Republicans who want to impose the higher food tax:
-- State economists say there will be a $300 million tax revenue jump in fiscal 2013-14 – the budget lawmakers and Herbert will set in the January-March general session.
About $210 million will come through greater personal and corporate income tax collections.
About $90 million will come through greater sales tax collections.
So, Republicans are going to get $90 million more in sales tax.
And they want to tell Utahns that they still need to increase the tax on food from 1.75 percent to 4.75 percent – a 171 percent increase.
You can see the headlines now: “Legislature hikes poor folks’ food tax by 171 percent.”
The legislative Democrats – who will vote against such a change – would already have their 2014 legislative campaign slogans and platforms.
One wonders if secretly legislative Democrats – at their lowest numbers since the mid-1980s – might really wish Republicans do this, just so they can see huge gains in seats come 2014.
(An historical note here: Legislative Democrats hit their low in 1984. In the 1986 elections House Democrats gained 13 seats. That’s right, they nearly doubled their numbers in one election.)
It’s tradition – and smart politics – to never raise a tax in an election year.
That means the 2013 Legislature must raise the food tax, or serious debate about it will wait until 2015.
House Speaker Becky Lockhart, R-Provo – who may have eyes on the 2016 governor’s race – has already been cautious about raising the food sales tax next year.
She recently said: “This is not a tax increase Legislature.”
Contacted Tuesday, Lockhart told UtahPolicy that she voted to remove the sales on food when it passed before.
"I don't see the need" to put it back on again, she said. "It is a tax increase on someone, be it middle income or the rich and I don't see our caucus voting for any tax increase."
House Majority Whip Greg Hughes, R-Draper, said he’s willing to look at a plan that lowered the sales tax overall rate of 4.75 percent and broadened the base by placing the whole sales tax on unprepared food.
“But no overall sales tax increase, period.”
House GOP leadership has not discussed the Senate’s food tax plan, said Hughes, and he doesn’t feel comfortable trying to now gage the new 61-member GOP House caucus’ feel for the proposal.
Another House Republican, who asked not to be named, told UtahPolicy that he feels uncertain about the “complicated” rebate and write-down alternatives now being talked about in the Senate.
Many low-income Utahns don’t pay state income taxes, and might not file a return just to get their food tax rebate, he said.
“The sales tax on food is regressive, especially for lower-income families,” this Republican said. “At the same time, I wonder just how harmful the food tax is on any family – considering on the choices they make in their purchases.”
But trying to defend a 171 percent increase in the sales tax on food could also prove embarrassing to some legislative Republicans.
“In general, like many of us, I favor on any level broadening a tax base and lowering the rate,” said Hughes. Whether that will really be the case in putting the state sales tax back on food must wait to be seen.
House Republicans will discuss the food tax and other taxing issues at their annual pre-legislative, day-long caucus, held this year on Dec. 18.