The governor's plan suggests wiping out the tax breaks - on everything from electricity for ski lifts and amusement parks to hay and airline food - and replacing them with a single exemption for business capital assets. The proposal also calls for a reduction in the statewide rate, from 4.75 percent to 3.75 percent.
But that idea means dozens of popular sales tax cuts could be on the chopping block.
Walker tax adviser Bruce Johnson, a Utah tax commissioner, said cutting most of the nearly 60 exemptions and giving only corporations a break on machinery or other products used in the course of business will make Utah's tax structure more fair and eliminate cascading, duplicative sales taxes that are passed on to consumers anyway.
For example, the coin laundry industry saves more than $250,000 a year in sales tax breaks. Under the governor's plan, business owners would be able to buy washing machines and dryers without paying sales tax. But the $1.25 wash load that comes out of the machine would be subject to sales tax.
"It's just a conceptual framework at this point," Johnson said. "We haven't gone through and identified every exemption."
Year after year, Democratic lawmakers have suggested cutting the sales tax exemptions, which cost the state $469 million last year in lost revenue. But their Republican colleagues have balked.
"We've been adding a few sales tax exemptions - it seems a few every year - just based on whoever comes to us that year and says they need one," said House Minority Leader-elect Ralph Becker. "Some of them are worthwhile. But we can't seem to address the ones that are no longer of value or haven't shown their value to the state."
The problem is the exemptions benefit some of the most powerful corporations in Utah, including the airline and ski industry. At the same time, some of the tax exemptions benefit Utah's lowest-income families and seniors on fixed incomes - vulnerable populations lawmakers do not want to seem to step on.
Walker said Utahns who use food stamps or families on the WIC (Women, Infants and Children) food program still would be able to buy food without paying sales tax. But if the governor's plan is implemented, sales tax exemptions on prescription drugs, hospital stays and doctor's visits, oxygen, home medical equipment and hearing aids could be lifted.
Mike Littlefield, who owns Littlefield Hearing Aids in Sugar House and Midvale with his two brothers, says lawmakers should leave in place the tax break on hearing aids they adopted during the late 1990s. Littlefield says hearing aids range from $500 to $3,500. Sales taxes can add $150 to $170 to that price tag. He figures reimposing the tax will hurt his business, driving customers to the Internet or to stores in other states.
"It can amount to a sizeable amount of money for elderly people to pay that additional nearly 7 percent," he said.
Other possible tax targets include plumbing and other household repairs, carpet cleaning, house painting and lawn care; hair care, nails and massages; and professional services such as attorneys' fees, accounting services and all types of medical care.
Becker agrees not every tax exemption should be eliminated. But he hopes Gov.-elect Jon Huntsman Jr. will back Walker's concept. "We've never had the backing of a governor before," Becker said. "Without a doubt, it would make a difference."
Huntsman Chief of Staff Jason Chaffetz says the governor-elect is reviewing Walker's plan with state lawmakers, building consensus in an attempt to get tax reform passed this year. Chaffetz would not discuss specific portions of the governor's proposal, but said Huntsman supports the concept of reform.
"We believe very strongly in the tax experts that were used to formulate this plan. It's a good starting place," Chaffetz said. "If we're going to get anything meaningful passed, we're going to have to work with the Legislature. We're going to try hard to see what we can get done this year."
