While the state’s General Fund is basically one big glob of sales tax revenue -- used to fund many state programs -- the complicated Tax Reform Task Force draft bill, in trying to blend many needs with many solutions, appears to order that some future sales tax from unprepared food will go to building new state roads.
If so, the earmark is a political gift to the dozens of low-income advocacy groups/individuals who are now opposing the Legislature and GOP Gov. Gary Herbert’s idea of putting the full state sales tax back on food.
The top of page 4 for the new, revised “summary” of the draft bill’s main tax reform changes says:
“Because the transportation earmark that funds the Transit Transportation Investment Fund (TTIF) is repealed, an equivalent earmark is enacted to fund the TTIF beginning in FY 2022 with 50% of the growth in new revenue from the sales tax on food above the $250M of estimated initial revenue from the increased rate.”
Currently, the food tax exemption costs the state about $250 million a year.
The task force wants to do away with that exemption, and begin collecting the full 4.85 percent sales tax on unprepared food -- exempted more than a decade ago by the then-Legislature and former GOP Gov. Jon Huntsman.
To make up for having to pay the sales tax on food, the task force proposes giving low-income Utahns a $125-per-person refundable state income tax credit -- or $500 for a family of four making less than $35,535 a year.
Even if you pay no state personal income tax, you could apply for that refundable credit -- so a family of four would pay no income tax and, if they apply, get a $500 check in the mail from the state every April. That’s a pretty good deal since it’s unlikely a low-income family would pay $500 in food sales tax annually anyway.
However, some low-income advocacy groups (and others, including Democratic legislators) are still against the task force’s plan on putting the full state sales tax on food.
And now they can apparently argue that it is wrong for the food tax revenue to go to roads -- which in theory are supposed to be paid for by the gasoline tax and other taxes and user fees directly associated with operating vehicles.
Now, GOP state bosses can counter that the General Fund, which gets its revenue from the sales tax (and some other minor sources, like mineral lease monies, liquor profits and tobacco sales) is a jumble.
And using the 50 percent figure of increased food tax sales monies may not, in reality, mean any food tax at all is going into roads -- the sales tax is poured into the big bucket, and some money is ladled out into the Transportation Fund.
Still, it is a bad look politically to be connecting any food purchase sales tax with building and maintaining roads.
Think back to November 2018.
The pro-education group Our Schools Now -- backed by some Utah big hitters -- gave up on their sales/income tax hike for public schools citizen initiative petition (which had real support in the polls) for a legislative-imposed referendum question on the ballot that would raise the gasoline tax, with an equal amount of new money going into schools.
Voters were confused. Why raise the gas tax for students? And the referendum question failed.
Now the Legislature and Herbert propose raising the food tax and putting some of it into roads?
When you break out all of the components in the draft tax reform bill, you are just putting different pots of sales tax money into different pots of the budget -- and more than $600 million in sales tax money ALREADY goes into roads.
But it is the public perception of what’s happening that we’re talking about.
In any case, the Tax Reform Task Force met Monday night, and all of these issues will be discussed further, with likely the members making motions to change the draft bill in some manner.
UtahPolicy.com reported Sunday that lawmakers would meet Dec. 12 in special session to take up the task force’s recommendations.
And in a special session, the majority Republicans can still change tax reform as they see fit.