Herbert defends tax reform against growing criticism

Gov. Gary Herbert

Governor Gary Herbert pushed back against critics of the recently passed tax reform bill on Thursday, brushing back assertions that the process was rushed or that it hurts lower-income Utahns.

During his December KUED press conference, Herbert announced that he signed the tax reform package passed by lawmakers last week. 

“This has been talked about for many, many years,” said Herbert. “We have a changing economy that we need to reflect better with our tax policy. I find the people who want to delay it probably don’t like the tax policy itself, so no matter how much time you spend they may not be happy.”

Opponents have launched a referendum to put the tax reform bill up for a public vote in 2020. If they are able to gather more than 115,000 signatures by January 21, the entire bill will be on hold pending the vote next November. Herbert worried that if the effort is successful, it will delay the tax cuts in the bill.

“The tax cut benefits may be delayed some because of the referendum. I think we’ll know whether the referendum has any traction or whether it’s going to happen or not toward the latter part of January,” said Herbert.

One of the more controversal elements of the bill restores the state portion of the sales tax on food, which could impose a hardship on lower-income Utahns who are already struggling to make ends meet, giving rise to a narrative from critics that the tax reform had a disproportionately negative impact on the poor. Herbert pointed to the mechanism in the bill designed to offset the economic hit, which offers a refundable tax credit of $125 per household member up to $500 total. Lawmakers also added an earned income tax credit to benefit poorer Utahns.

“Over three times more money now is going to be redirected into helping the poor,” said Herbert. “Not only the money, but we have the ability to put programs in place through our workforce services to help them get education, training and to get off government assistance to have a better job.”

Still on the tax reform to-do list is changing the way education is funded. The Utah Constitution mandates that all income taxes go exclusively toward public and higher education. Lawmakers are expected to place a proposal to change that on the November 2020 ballot. Some say that will lead to Utah decreasing funding for education, and the state is already at or near the bottom in funding for schools. Herbert says education advocates have nothing to worry about.

“I know there’s a trust factor involved here with the stakeholders of education where we continue to have that kind of commitment in the future,” said Herbert. “I will roll out my budget in the next month and you’ll see there’s a robust increase in education funding. By the way, in the last four years, we’ve given over one billion dollars of new ongoing money into public education. Two-thirds of the discretionary funds in the state go to public education.”

It is worth pointing out that Herbert’s forthcoming budget proposal will be made under the current rules requiring income taxes go to schools, so his pledge is a bit disingenuous. However, Herbert says the change in how schools are funded is something that should be done sooner rather than later because income taxes are a volatile source of vital money for education. 

“You need to have more stability and predictability in the long term for education funding. That’s what’s driven a lot of this idea of having some changes in our tax policy,” he said.

Last week’s tax reform bill contained a massive $160 million tax cut, one of the largest in the history of Utah. That was propelled by an expected income tax surplus of more than $100 million next year. Herbert bristled at the assertion that the tax cuts disproportionately benefit wealthier Utahns.

“Our median income in Utah is about $85,000. The vast majority of money we receive comes from those making over $85,000 a year. They certainly will get some relief with this income tax cut, but they also are going to be paying the full board when it comes to sales tax on food. $80 million of the tax cut goes to lower-income and lower-middle-income people. So it’s not the rich getting the big breaks. Most of it is directed to lower-income levels. So, overall, I think we’re in a good place. This is not an easy thing,” he said.