Restoring Full Tax On Groceries On The Table For State Tax Reform

Oct 27, 2019


The state legislature’s Tax Restructuring and Equalization Task Force met for five hours Tuesday to debate tax reform policy recommendations and take public comment. 

After five months of meetings, gathering input and analyzing potential policy changes, the tax reform task force has some tangible proposals to consider. Task force Chairs Sen. Lyle Hillyard and House Majority Leader Francis Gibson’s proposal inclquudes restoring the full sales tax on food, coupled with grocery tax credits for some Utahns. Lawmakers argue the state tax structure needs to change because as consumer spending shifts from goods to services, the state’s general fund, which is largely funded through sales tax, has depleted. The general fund supports state functions such as social services and infrastructure.

Heber-based Rep. Tim Quinn, a Republican who initiated Utah’s tax reform conversation with his own legislation earlier this year, says he’s always opposed raising the food tax. Quinn unsuccessfully ran a bill in 2018 to fully remove the sales tax on unprepared foods, which is at a reduced rate of 1.75%. Quinn says he believes this proposal, which would increase that rate to 4.85%, was led by the state Senate and that it’s not really an effective long-term tax policy.

“When I first started this 18 months ago, the reason we were looking at it is because our spending habits have changed," Quinn said. "In no other area have they changed as much as they've changed in food purchases. We’re down 71% in the last 70 years in the amount of unprepared food that we buy because we eat out more. So, I told the committee we’re kind of hanging our hat on something that is a diminishing return.”

Advocacy organizations for low-income Utahns, such as Utahns Against Hunger and Voices for Utah Children, have come out against the proposal. They say raising the tax on food disproportionately hurts poor people because they spend a greater proportion of their income on food. House Minority Leader Brian King, a Democrat who represents part of Summit County, agrees.

“The most efficient way of making sure that you address the needs of food-insecure people or people who risk being food insecure is to lower the sales tax to zero on food," King said. "Not prepared food, not restaurant food, but food that is unprepared. Food that people need to really make ends meet.”

The food tax proposal comes paired with a grocery tax credit for low and middle-income Utahns, to offset the cost of the increased sales tax rate. King says, though, the tax credit only benefits people who file state income tax, and many low-income earners don’t make enough annually to report.

“If you’re making $10,000 or $15,000 a year, you think to yourself, I've got no income to report, and they'd be right," King said. "So, when you have a significant number of people who never file and never have access to the tax credit, that's a problem. The other problem is the tax credit comes in a lump sum at one time during the year, as opposed to being spread along across all your purchases for food throughout the year. That's an inefficient way of delivering economic relief.”

Restoring the full tax on food would bring in an additional $250 million to the state general fund. But given the chairs’ other policy proposals, including reducing the income tax rate; expanding sales tax to services; and adding a sales tax to gas, the state estimates it would receive $79 million less in tax revenue.

Republican leadership has expressed a desire for an end-of-year special session to pass a tax reform bill, before heading into the 2020 general session in January. The next tax task force meeting is Nov. 7.