Buckle up, Utah taxpayers: Legislative leaders are considering tax hikes — plus changes that might cost some middle- and low-income individuals more but help industries create jobs.
Proposals ranging from keeping the windfall the state may receive from new federal income tax changes to hiking the gasoline tax were discussed Monday by lawmakers at a conference sponsored by the Utah Taxpayers Association.
Talk of tax increases comes even though the state projects an extra $382 million in ongoing revenue next year — 72 percent of which Gov. Gary Herbert has proposed to spend on education. The state also projects $102 million extra in one-time money.
But Senate budget chairman Jerry Stevenson, R-Layton, warned all of that money and more essentially has been previously committed — to cover school enrollment growth and, in part, to replenish so-called “rainy-day funds” used in emergencies.
So even with that extra money, the way he figures it, the state faces a deficit.
“We’re underwater by about $21 million,” Stevenson said.
House Speaker Greg Hughes says lawmakers might also look to keep some of a potential $75 million to $150 million windfall created by the new federal tax reform just passed by Congress. He said the state could receive that much if it chooses not to tweak portions of its own income tax system that mirror federal definitions.
“We need it. We’ve got schools, we’ve got roads, we’ve got water” needs, he said. “We’ve got ways we could find to spend $150 million and probably move the needle in a good way.”
Hughes, R-Draper, predicted lawmakers will likely keep a portion of the windfall and return some to taxpayers — but said legislative caucuses have yet to discuss that.
Senate President Wayne Niederhauser, R-Sandy, says he questions whether such a windfall will come. While early discussions indicated it was likely, he said more recent figuring shows, “It’s a mixed bag. They don’t know what it’s going to be. They are still working on it.”
Utah State Tax Commission Chairman John Valentine told the conference that his team has calculated how federal changes might change state taxes of some individuals — unless the state makes changes to its own code.
He said an “average Joe” — married with three kids using standard deductions with an adjusted federal gross income of $70,000 per year — would see his state income tax rise about 9 percent, from $2,500 a year to $2,733.
A “less-than-average Joe” with federal adjusted gross income of $30,000 would go from paying no state income tax to owing $63. And an “above-average Joe” who tops out on tax brackets would see his Utah tax remain the same, Valentine said.
Niederhauser said among other tax changes he would like to see in the upcoming session that begins on Jan. 22 is possibly raising the state’s gasoline tax. That would decrease how much of the sales tax and general fund are diverted to transportation.
“Gas tax is still the way we address roads, and it is still a good user fee,” he told reporters. He acknowledged raising it, or any tax hike, could be difficult in an election year.
Niederhauser and Hughes said the Legislature will also continue to look at ways to force electric and other vehicles that now escape gas tax to share more of the cost of roads, perhaps through higher registration fees or a tax charged on miles driven.
Also, Sen. Howard Stephenson, R-Draper, and Rep. Steve Eliason, R-Sandy, chairmen of the Interim Tax and Revenue Committee, made pitches for changes that could decrease taxes for some industries. They say it would help Utah compete with other states that have lower taxes.
Examples include exempting from sales tax for some goods bought by manufacturers that are used or wear out within three years, and a change in definitions for multistate companies that could simplify and lower how they pay taxes here.
Utah House Democratic leader Brian King attacked such changes as an attempt to help the rich, saying lawmakers should aim instead to help ordinary consumers who he says create jobs when they can afford to buy more.