A state tax cut from $75 million to $100 million, with a flat-rate of 4.5 percent, down from the current 4.95 percent.
That is one of the new, significant changes coming to the Tax Reform Task Force in a Thursday night public hearing.
Legislative leaders tell UtahPolicy.com that the draft bill — close to 100 pages long — will be made public on the Legislature’s website by 10 a.m. Thursday so that interested parties can read it before the 4 p.m. task force meeting on Capitol Hill.
It will, of course, be complicated, and a draft three-page summary should also be available before the hearing.
As reported previously:
The task force is not looking to raise money, or have an overall tax increase. That’s the reason for the tax cut, which was set at $75 million (the amount lawmakers put aside in the 2019 general session).
But now leaders say it may be possible to give a bigger initial tax cut — up to $100 million — based on “phase-outs” of tax changes.
Leaders still want to restore the complete state sales tax on unprepared food — known as the food tax. That is set now at 1.75 percent and would go up to the sales tax whole rate of 4.85 percent.
But instead of a $100 per household member income tax rebate (or $400 for a family of four), it could be set at $125 per family member or $500 for a four-member family, UtahPolicy.com is told.
A previous crib sheet said a family making up to $60,000 a year would get the full rebate, but under the new plan, that income level would drop.
“The concern was that a “rich” family making $60,000 a year would get the full rebate, so we may lower” the phase-out, one source told UtahPolicy.com.
— Removing the state sales tax exemption from gasoline sold “at the rack,” meaning from wholesalers, is still planned according to sources.
However, some businesses that buy diesel fuel by the ton — or large consumers — would prefer increasing the diesel tax at the pump by 10 cents per gallon. “That gives the big diesel buyers more certainty on the price of fuel over time,” one source said. And so the draft bill presented Thursday night will reflect that change.
Overall, the plan is still revenue neutral.
“If we are moving taxes around” to make the sales tax fairer and broad-based, “then we need to give a tax cut. And that is what we are doing,” said one source.
While GOP legislative leaders and GOP Gov. Gary Herbert already support the direction the task force co-chairs, House Majority Leader Francis Gibson, R-Mapleton, and Sen. Lyle Hillyard, R-Logan; are going, Thursday’s draft bill is subject to amendment by task force members Thursday. In addition, changes can be made at the final Task Force meeting Nov. 21, and in a planned special legislative session in early December.
Ultimately, it will be up to the GOP caucuses in the House and Senate, and Herbert, to redefine the state’s tax structure.
In several ways, the Task Force’s work will only be set for a few years.
Still to be determined is further broadening of the sales tax base by including new services in the tax base and removing some current tax exemptions.
But the biggest changes must come in how the state’s Transportation Fund is fueled.
Cars and trucks are more fuel-efficient today — so the per-gallon gas tax at the pump is not generating even half of the fund’s needs. (The sales tax revenue is subsidizing it.)
And while electric cars are few in Utah now, within a decade or two, they could be the majority of vehicles on the road — so innovative ways must be found to get revenue from those owners, as well.
The draft bill will order the Utah Department of Transportation (UDOT) to come up with ideas or plans to “make the Transportation Fund whole,” as one leader put it — no sales tax going in at all.
One concern about the food tax is that the rebates, for the first year, won’t come until April.
But one source pointed out that if the income tax cut goes into effect Jan. 1 of next year, then in every paycheck earned the state tax withholding will be less — and so the paycheck will be bigger.
“For some (low-income) families, maybe that will (equal) what they are spending” in a higher grocery store bill.
But even if the tax deduction in the paycheck doesn’t cover the food tax paid, it will be close, and so won’t be as great a burden as some low-income advocates are saying, this source said.
