While GOP legislators are moving toward a small income tax cut this session, and a deal to amend the Utah Constitution to add the “disabled” and “children” programs to an income tax earmark, Republican Gov. Gary Herbert told reporters Thursday afternoon he’s not yet ready to check off on either of those plans.
Herbert may well come around. But for now, especially on the income tax earmark for only higher and K-12 education, he wants to see more.
“I think they can get there,” Herbert said about the education compromise, first reported by UtahPoliy.com on Tuesday.
Concerning a small income tax cut in this Legislature, Herbert threw a new item into the mix: He wants something done about the state gasoline tax -- which was raised several years ago and indexed to inflation, but which Herbert pointed out to reporters has NOT been fully adjusted for inflation over the 20 years BEFORE the gasoline tax indexing was initiated.
Herbert said it doesn’t make sense to him to now give a small income tax cut -- taking money away from education -- while doing nothing on tax reform and/or dealing with the dwindling road fund revenues (now made up partly of the struggling gasoline tax and the state sales tax, which also is not keeping up with General Fund needs.)
Why give a tax cut now, said Herbert, only then need to raise some tax in the coming tax reform and have nothing to offset that tax hike?
It might be best to save all of the income tax surpluses now, and then deal with a tax cut in the 2021 Legislature along with a renewed effort at tax reform, the governor said. Herbert won’t be around for that, he’s retiring the end of this year.
If there is an income tax cut, Herbert said there seems to be “general consensus” that it come not in a straight rate reduction -- as some House Republicans are talking about -- but in restoring all of the child dependent exemption which was taken away from Utahns in the 2017 Trump administration federal tax overhaul.
Rep. Tim Quinn, R-Heber, has HB260, which would increase that dependent exemption. That would cost $51 million in income tax revenue.
Thursday, Rep. Travis Seegmiller, R-St. George, unveiled a change to his HB427, which would drop the current 4.95 percent individual and corporate state income tax rate to 4.89 percent, and eat up the $80 million that lawmakers in 2019 put aside for a possible income tax cut to accompany last year’s tax reform.
Well, we know that tax reform was repealed the second day of this Legislature after a voter revolt loomed -- along with a $160 million income tax cut.
So that money is out there, still being fought over.
And a Y2 Analytics poll obtained by UtahPolicy.com shows that three-fourths of Utahns want a tax cut NOW, with 91 percent of those who said they are “very conservative” wanting a tax cut now from the GOP-controlled Legislature. Tough to go against those numbers when all of the 75-member House is up for election this year, and half of the 29-member Senate.
Herbert will get a say in a tax cut -- it must come in a bill that he can veto or sign.
But he doesn’t have an official say in a state constitutional amendment, which is now moving in the state Senate with only seven working days left in the Legislature, which adjourns next Thursday at midnight. Any change in the Constitution must pass each house by two-thirds and then be approved by a majority of voters in a general election.
Herbert said all “stakeholders” must buy into removing the constitutional education earmark, which now says all income tax can only go to public universities and public schools.
And he specifically mentions teachers -- they must agree as well.
But as UtahPolicy.com has reported, the Utah Education Association, the largest teacher union, was not directly involved in the compromises reported.
And if the UEA says no, it doesn’t now appear the governor is on board. Of course, since he won’t be in office over the next two years when the sales tax fueled General Fund actually runs out of money (if somehow the income tax isn’t funneled into non-education programs), then that won’t be Herbert’s problem, but a future governor and Legislature.