Utah’s Tax Reform Task Force begins its public hearings Tuesday night in Brigham City.
The meeting starts with a 6 p.m. meet-and-greet with the formal agenda beginning at 7 p.m., in the multipurpose room at the USU Brigham Campus, 989 S. Main Street.
The 10-member legislative committee, as reported previously in UtahPolicy.com, will hold hearings throughout the state through July and then get down to work in proposing to the whole Legislature how to restructure the state’s tax system – especially the sales tax.
By October or November legislative leaders hope to call a special session where the House and Senate, with GOP Gov. Gary Herbert’s approval, will try to deal with the financial threat of the “shrinking” state General Fund, which is fueled mainly through the state sales tax.
While the GOP task force leaders claim they have made no decisions yet – and look forward to citizens and special interests testifying in the statewide public hearings – several things are already clear:
The majority Republicans don’t want to tax business “inputs” – which are generally defined as wholesale products that go into a final product, taxed.
While some GOP senators favor putting the sales tax back on unprepared food, Democrats and some House Republicans are against that move.
As are citizens, a recent UtahPolicy.com/Dan Jones & Associates survey finds most Utahns, while amenable to tax restructuring, don’t want the state portion of the sales tax back on most grocery store items.
There’s a growing belief in the Legislature that the current constitutional restrictions on the personal and corporate income tax – only for public and higher education – should be removed.
That would give more flexibility to legislative budgeters in setting the annual state spending plan.
Because the sales tax – now mostly applied to only purchases of hard goods, like cars and furniture – is not growing like the state income taxes are, this may be the last year that the General Fund can adequately fund non-education programs.
If the tax structure is not “reformed,” legislative leaders and Herbert say, while education budgets can keep up with growing needs, other state programs – paid for by the lagging sales tax – will suffer.
The options, legislative budget staff say, are to raise the sales tax rate, cut back on growth in General Fund programs, or spend one-time monies now in various state saving pots, like the Rainy Day Fund, for ongoing General Fund programs – like public safety, corrections, courts, health and human services.
Politically speaking, the problem Herbert et al. will have is that the Utah government has been running substantial revenue surpluses in recent years — $500 million this past year and likely half that this year.
Already some conservative politicians NOT in the Legislature – like state auditor John Dougall and Salt Lake County Councilman Richard Snelgrove — have been complaining online about any tax “reform” that could lead to higher taxes later.
Acutely aware of that, Herbert and GOP legislative leaders have built in a tax cut of around $100 million that will come with reform. They promise that sales tax revenue will go up in the future, but there won’t be a big sticker shock with extending the sales tax on more services since the overall sales tax rate will be cut accordingly to make the reform revenue neutral.
