At least four other tax reform proposals have been submitted for a Utah legislative task force to consider, including everything from limiting the restoration of the full sales tax on food just to soda and candy, to imposing a statewide property tax that would bring in some $100 million.
Last week, the co-chairman of the Tax Restructuring and Equalization Task Force unveiled their plan to fix Utah’s shrinking sales tax base that includes imposing new sales taxes on food, gas and a list of services including those provided by veterinarians and tour operators, while cutting the income tax rate by at least 0.25%.
But four members of the task force — Senate Minority Leader Karen Mayne, D-West Valley City; Sen. Lincoln Fillmore, R-South Jordan; and two of the three appointed tax experts, Gary Cornia and Keith Prescott — have submitted alternative proposals.
The proposal from the task force’s co-chairman, House Majority Leader Francis Gibson, R-Mapleton, and Sen. Lyle Hillyard, R-Logan, would reduce tax collections by $75 million overall, estimated to save a family of four earning $60,000 about $400 a year.
Their plan would restore the full sales tax on food from the current 1.75% and impose sales taxes on fuel purchases on top of the state’s 31-cents-a-gallon gas tax under the proposal at the distributor level, adding about 12 cents a gallon to the cost of filling up when gas is priced at $2.50 a gallon.
Mayne is proposing the biggest tax shift, which would bring in approximately an additional $200 million to state coffers, replacing Utah’s 4.95% income tax rate with a progressive rate structure that would raise taxes on incomes of more than $250,000 to as high as 5.5%
The Democratic Senate leader also is calling for exempting feminine hygiene products from sales tax and restoring the full 4.85% state sales tax only on soda and candy, but not adding sales tax to fuel purchases. Mayne also seeks to require in statute that public education funding grows at least 3% annually excluding student growth.
It’s Cornia who would add a statewide property tax of .035% to generate some $100 million in revenue to be used to fund transportation and infrastructure needs. He said Utah’s property tax burden is in the bottom fifth of all states.
Like the proposal from the task force co-chairmen, Cornia, a former dean of BYU’s Marriott School of Management, said the Utah Constitution should be amended to remove the restriction on spending income tax revenue for anything other than public or higher education.
Income tax collections are outpacing those of the state’s other major revenue source, sales taxes, as consumer spending shifts from goods to services. Lifting the earmark on income taxes is seen by proponents as giving much-needed budget flexibility, but opponents fear it will mean less money for schools.
Cornia said public education should continue to be funded at least at the current level and called for the creation of an alternative funding mechanism for K-12. In a separate paper, he said increasing the proportion of property tax that goes to public schools would improve funding stability.
He also said the full sales tax rate should be imposed on food, noting the reduced rate is costing the state about $225 million a year in lost revenue and “it is important to keep in mind that there is no free lunch. Omitting the tax on food means there will be less public services offered by the state” that benefit low-income residents.
Prescott, who submitted a pair of papers in lieu of a more formal proposal, also favored putting the full sales tax back on food but only if “it is offset by meaningful cuts to the income tax, which would mitigate the effects on household income to those who would be most impacted.”
He said additional relief could come from a grocery credit on state income taxes, something included in the co-chairmen’s proposal, and opposed a sales tax on gasoline in favor of finding a more permanent solution. The co-chairmen have said the sales tax on gas would be a stopgap while alternative funding sources are developed.
Fillmore said the proposal bearing his name actually came from the Utah Taxpayers Association, a pro-business group. He said he wants the proposal, which would give Utahns an overall $420 million tax cut, to be “a full part of the conversation” by the task force.
The taxpayers association wants to see the income tax rate drop even further than legislative leaders have discussed, to 4.5%, Fillmore said, and aren’t backing putting sales tax on gasoline but are supporting restoring the full sales tax on food.
The task force is set to meet Tuesday at 4:30 p.m at the state Capitol. Two additional task force meetings are scheduled in November and leaders of the Republican-controlled Legislature have said they hope to hold a special legislative session before the end of the year to approve a plan so an income tax cut will be in effect in January.
Public comment is expected to be accepted at the task force meetings going forward. Although the group, formed after the failure of a House bill boosting sales taxes on services last session, held town hall meetings on tax reform over the summer, they have not allowed public testimony at their subsequent meetings.
Hillyard said all of the proposals filed with the task force and available online “will be considered, but we are still working on the agendas for the next three meetings, so the exact process is unsettled.” He said how much consideration each will receive also remains to be seen.
“That will be decided by the committee,” Hillyard said. “In talking to the sponsors, I don’t think they expect equal consideration.”