It should probably come as no surprise that the single biggest piece of legislation for the 2019 session — a mammoth sales and income tax overhaul — disintegrated before our eyes last week.
Sure, it was the top priority of legislative leaders and Gov. Gary Herbert, and key members of the House and Senate had worked long hours to cobble together some compromise.
So what happened? Well, part of it was the tsunami of lobbyists unleashed by well-funded and well-connected business interests that could have been required to collect sales taxes if the bill had passed.
Part of it was that the House and Senate simply weren’t able to find common ground on significant pieces of the plan.
But part of it also could have been that the bill would likely have meant a fundamental shift for some key industries that employ the very same lawmakers being asked to vote on the measure.
In fact, nearly two-thirds of legislators work in fields or retired from professions that would have been directly impacted by passage of HB441, according to a review of financial disclosures.
Fifty lawmakers work as lawyers, accountants, real estate developers, various consultants, bankers or in other fields that don’t pay taxes now, but would have had to under the legislation introduced by Rep. Tim Quinn, R-Heber City.
Sixteen more are current or former educators, who would have seen as much as $300 million in revenue cut from the education fund, thanks to a proposed reduction in the state income tax. The Utah Education Association, which represents thousands of Utah teachers, opposed the proposal.
It’s a phenomenon I’ve called Gehrke’s Law: No bill gets more intense scrutiny from the Legislature than one that directly affects legislators.
To be clear, I’m not suggesting that all these lawmakers were acting out of self-interest. Rep. Robert Spendlove, for example, was involved in crafting the bill and works for Zions Bank. Zions, in particular, and bankers generally opposed the measure because of its complexity and because it would tax many of the financial services that banks offer.
And not all legislators would be directly impacted. An attorney, for example, in private practice would have had to pay sales tax under the bill, while one who works in-house for a company or for a county prosecutor office would not. But the Utah Bar Association and several attorneys spoke against the bill when it was heard in committee.
Lawmakers will dissect every piece of any tax proposal that hits so close to home. And the number of people doing the dissecting in this case signals how difficult it might be to cobble together the critical mass of support needed to pass such sweeping legislation when there are certain to be winners and losers.
That was evident in the quick pivot made by the Salt Lake Chamber, the leading business group in the state. The chamber took a somewhat surprising stance of backing Quinn’s tax bill when it was first released.
On Feb. 28, Chamber CEO Derek Miller put out a statement saying the chamber “supports the Utah Legislature taking bold action to implement an updated, balanced approach to Utah’s tax policy. … HB441 is a monumental step forward in ensuring Utah continues to lead the nation in economic growth.”
When the bill cleared its first hurdle in the House Revenue and Taxation committee the next day, Abby Osborne, the lobbyist for the chamber, testified in favor of the concept.
But there was a backlash from many of the chamber’s members whose industries aren’t taxed now but would be under the proposal. By the time legislative leaders and the governor pulled the bill off life support — for the session, at least — the chamber’s spin was decidedly different: “State elected leaders agree to Salt Lake Chamber’s call for more deliberation on tax modernization,” was the headline on the news release.
Punting on the issue — for now, at least — was the right move and, by the way, what I suggested a month ago would probably happen. Passing a half-baked piece of legislation hitting such a huge swath of the economy could have been disastrous.
Now the Legislature has time to listen, to delve into the data and to refine the final product. It won’t be rushed, but that doesn’t mean it will be easy. Because when the rubber meets the road, there’s a good chance it will be going over the top of someone’s business (possibly even the business of some legislators) and they won’t go down without a fight.
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