A proposal to more than double the state sales tax on food would likely be able to pass the Senate, according to the body’s incoming president, Wayne Neiderhauser.
But the sponsor, Sen. John Valentine, R-Orem, said he isn’t pushing ahead with his proposal, at least until he sees what happens in Congress with the so-called fiscal cliff, which could create havoc with Utah’s budget outlook.
Valentine’s proposal would raise the state’s sales tax on food from 1.75 percent to 4.75 percent, reversing a cut enacted several years ago. Low-income Utahns could qualify for a refundable income tax break or direct payment that Valentine says would more than offset the increased tax burden.
Many low-income advocates oppose such a change, saying it would shift more burden to the needy.
His proposal, which would lower the overall sales tax rate slightly on all retail purchases, would not bring any new tax dollars into the state budget, but future revenue would be less prone to fluctuation because of the change.
Valentine said there was support for the concept but concern about making the change when the economy is still recovering. He also pointed to uncertainty surrounding the impacts of the fiscal cliff — which would impose major federal tax hikes and spending cuts if a budget deal isn’t reached in Congress — and with implementing the Affordable Care Act, also known as Obamacare.
“It seemed like the uncertainty was causing concern about trying to implement something like this at this time,” he said.
Neiderhauser said he thought the bill could pass the Senate. It’s fate in the House would be uncertain.
Republican senators, who met in their all-day caucus Wednesday, also decided to support Gov. Gary Herbert in his effort to persuade the U.S. Department of Health to allow Utah to operate its existing health insurance exchange instead of placing it under federal control to meet requirements under Obamacare. If the feds decline, then Utah would let the federal government run the exchange.
There was also general opposition to expanding Medicaid coverage under Obamacare. Neiderhauser said there were concerns about how much it would cost the state and how the program would increase the federal deficit.