Legislative Task Force Moves Into Policy Study Phase Of State Tax Reform Efforts

Aug 22, 2019

Credit upr.org

After hosting eight town halls across the state to hear questions, concerns and comments from approximately 1,500 Utahns, the state’s Tax Restructuring and Equalization Task Force has moved into the next phase of its attempt to address a revenue imbalance between the education and general fund. 

The task force met Monday to present findings from the group’s summer listening tour. Two hundred people spoke during the public comment portions of the town halls, and the task force received more than 300 written comments. Utahns expressed common themes, such as an opposition to increasing taxes and concerns about expanding sales tax to services, like Rep. Tim Quinn’s 2019 House Bill 441 outlined.

At Monday’s meeting, legislative analysts presented on the possibility of increasing the sales tax on unprepared food from 1.75% to match the statewide sales tax of 4.85%. Analysts estimate doing so would bring $250 million to the state’s general fund by 2021. Nationally, six states—including Utah—have a reduced tax on food; seven have a full tax; and 32 don’t have any tax on groceries at all.

Although considered a very stable tax—even in recessions, people need to buy food—analysts pointed out that a tax on food disproportionately affects lower-income families and individuals, as they spend a greater portion of their income on groceries. To offset that, analysts presented another policy—instituting a grocery tax credit for those who qualify, based on income or other factors.

The task force also discussed a series of tax credits and exemptions to mitigate impacts of tax reform on certain taxpayers, including an earned income tax credit, a social security income credit and a military retirement income exemption.

The last policy explored was an income tax rate reduction, which would apply to taxpayers at all income levels. Utah’s income tax rate is essentially flat, at 4.95%. Per Utah’s constitution, income tax revenue can only be used to fund public education.

At the end of the meeting, Quinn, who says he spent months working on tax reform before unveiling the ultimately scrapped HB 441, expressed a sense of awe at the gravity of the task.

“Every time we opened the door, there were 20 more doors that appeared," Quinn said. "This is incredibly, way more complex than I ever thought it would be. I'm starting to just appreciate the magnitude that is before us.”

It hasn’t yet been determined whether the legislature will vote on tax policy in a special session this year or during the 2020 general session—or perhaps later than that—but tax task force co-chair and House Majority Leader Francis Gibson remarked that something needs to happen soon.

"It's easy to sit here and say, 'you know, we don't have problems, let’s not touch it, let's not do anything,'" Gibson said. "I wholeheartedly believe that it is time to start looking forward in seeing what's going on. Can we get another year? Maybe. Maybe get two, but is the discussion going to be any easier now, or in two years from now, or a year from now than it would be now? I don't think the discussion is ever going to get any easier—it gets more difficult."

The task force will discuss other options, such as removing the constitutional earmark on income tax and expanding the sales tax base to include services, at future meetings before holding a public hearing on its findings. The task force is still taking public input at its website strongerfutures.utah.gov.