I’ve sat through several really interesting meetings of the special Tax Reform Task Force over the last month or so.
And while this is a vast generalization (I love those, don’t you?), it appears to me state legislators are looking to rebalance, or reform, the state revenue problems by suggesting, or making, several local entities raise their tax rates as a way to help the state’s General Fund and Education Fund.
And, they will look to areas — like state road “user” fees, like the gas tax and taking away some current sales tax exemptions.
Why?
Because, ironically, over the last 20 years the Utah Legislature has raided the state General Fund sales tax — one of the three state and local government tax revenue sources, along with income and property taxes — to pay for roads and water.
Thursday evening, the task force held a public “study” session and heard about how former legislators “earmarked” the state sales tax to take sales tax money out of the General Fund and put those monies into roads and water.
Currently, around $650 million in sales tax goes into roads each year.
And around $43 million sales tax goes into water development.
So much sales tax money has been going into roads, in fact, that if it were all taken out at one time, more than half of all money spent on roads would be lost.
Now, three years ago the Legislature raised the per-gallon state gasoline tax and tied annual automatic increases to inflation.
But even with that, the gas tax woefully doesn’t cover the annual cost of new road construction and maintenance.
Legislative budget director Jonathan Ball told the task force that a year ago, after voters rejected Question 1 on the ballot, legislative budget staff figured talk of raising the gasoline tax soon was off the table.
No longer, he added.
You may recall that Question 1 was a convoluted effort to get citizens to raise the gas tax for education — when in fact if the gas tax rate went up (it didn’t) then the same amount of sales tax money would be taken out of roads and go to the General Fund, and in turn the same amount of sales tax would go to higher education, and public schools would get that much more of the income tax.
Confused? You should be. And that was one reason voters didn’t approve Question 1.
But now with more than half of the road money coming from sales tax, the original idea of people driving the roads paying for the roads via gas tax — or a user fee — is gone, gone, gone.
So, if legislators and GOP Gov. Gary Herbert want to get more sales tax money into the General Fund, one easy way to do that would be to increase gas tax/car-related fees for roads.
Of course, another way (reported previously) is to make local school districts increase their property tax rates — take more responsibility with local funding than getting more money from the Legislature.
And, as you’ve heard before, extend the sales tax to services.
Also discussed Thursday evening is taking away some current sales tax exemptions — and guess what?
The largest sales tax exemption now given is not putting the state sales tax on motor fuel sales, either at the pump or at the “rack” — the wholesale price at the refinery.
Of course, drivers don’t care if they pay a higher per-gallon gas tax or pay sales tax on their gasoline purchase, either way they are paying more for motor fuel.
And a recent UtahPolicy.com/Y2 Analytics poll found that most Utah voters DON’T want to raise the gas tax as a way around the state’s revenue balancing problem.
The politics of this is clear: If legislators have to raise the gasoline tax, or make local water districts increase their water fees, or make school districts increase their local property taxes, who gets blamed at the ballot box?
Herbert isn’t running for re-election next year, so he gets a pass on voter-anger.
But his lieutenant governor, Spencer Cox, is — and so could voters take it out on him?
All 75 House members are up in 2020 and half of the 29-member Senate.
The goal is still to have the task force have tax reform recommendations by the end of October, with a November special legislative session to act before the 2020 Legislature — and elections next year.
Some big decisions remain. And the politics of tax reform will only get more difficult.
