House and Senate leaders have agreed to a deal that will take more than $300 million in ongoing obligations and fund them with one-time money in next year’s budget.
In an interview with UtahPolicy.com, House Speaker Brad Wilson and Majority Leader Frances Gibson said that the key to the solution is an “elegant” move that shifts one-time money into ongoing expenditures.
HB441 is “dead,” UtahPolicy was told. That is the massive bill that would have extended most services into the sales tax base, and lowered the sales tax rate dramatically.
Wilson guesses that when a special task force – reported previously by UtahPolicy – reports back in August, extending the state sales tax to services will be part of the overall “structural imbalance” fix.
However, anything and everything will be looked at, including:
Restoring the state portion of the sales tax on unprepared food.
Property tax reform.
Constitutional amendments allowing more income taxes to be used beyond public and higher education, or a flow between the sales tax and the income tax earmarks.
A user tax in transportation ($600 million in sales tax currently goes into the Transportation Fund, which is supposed to be self-sufficient with the per-gallon gasoline tax.)
There is $75 million in ongoing surplus revenues put aside for tax cuts, said Wilson.
“I feel bad” that tax cuts won’t come in the budget that will be passed Tuesday night or Wednesday, said Wilson.
But at some point this year, he hopes, perhaps in a special session after the task force reports in August, that tax relief can be solidified.
GOP Gov. Gary Herbert recommended a $200 million tax cut in December. With Wilson suggesting a $225 million cut in his opening day remarks.
But when the $1.3 billion tax surplus dropped to $1.1 billion in February revenue updates, and with growing needs in education, Medicaid and other programs, that big tax cut started to dwindle.
The new budget deal – with the new task force study – basically puts off the talked about May or June special session. Which up until Tuesday was aimed at adopting, in some form, HB441, the sales tax reform plan.
But Wilson said that the structural imbalance between the General Fund, fueled by sales taxes, and the Education Fund, fueled by income taxes, is more important — and bigger — than just sales tax reform.
A fall special session may be called to take up these “big lifts” of reforming the state’s tax structure.
Or all this could even wait until the 2020 regular general session.