Utah Gov. Gary Herbert addressed what he believes are myths about the recent tax reform at the Utah Taxpayers Association legislative preview Tuesday.
The Utah Legislature passed a new tax law in a special session in December. The legislation cut the income tax rate; added income tax credits; and raised or added sales tax to groceries, gas and some services. The policy change results in a net tax cut of $160 million.
Utah Gov. Gary Herbert signed the bill into law shortly after. On Tuesday, he praised legislators’ initiative on tax reform.
“We don’t wait for the crisis to happen and say, oh well, it'll be easy now because the public at large is aware of the crisis, so now let's act and react to the crisis," Herbert said. "That's how they do it in Washington D.C.--it's not how we do it in Utah. We try to be proactive and avoid having those kinds of pitfalls.”
One aspect of the tax law Herbert addressed was the increased state sales tax rate on food, from 1.75% to 4.85%. Critics of the policy have called the tax regressive, saying it will disproportionately impact poor Utahns. Herbert feels, with new grocery income tax credits, that’s not correct.
“For the Democrats in the room, this is more progressive because anybody below $75,000 annual income will get some kind of a break under the new system," Herbert said. "We're going to raise about $250 million in sales tax off of food, the increasing rate, and those who are above $75,000 will not get anything.”
As for education, Herbert says funding has increased over the last 10 years. This year, Herbert is proposing $4.9 billion in education funding in his soon-to-be-released budget. With the big income tax cuts, advocates worry about where the tax bill has left education, since income tax revenue is constitutionally required to be used for public education. Legislators will likely propose a constitutional amendment to remove that requirement. Herbert says income tax is too volatile to rely on for education funding.
“Sales tax dollars spend every bit as good as income tax dollars, and I expect that the legislature will continue to fund, in a robust way, our education system,” Herbert said.
An effort by Utah voters is underway to overturn the new tax law with a citizen referendum. Referendum supporters have until Jan. 21 to collect 116,000 signatures to put the referendum on the November ballot. Utah State Tax Commissioner Rebecca Rockwood says the tax commission is preparing to implement the new tax law, but the process could be disrupted if the referendum receives enough signatures.