Utah officials have held up their ongoing tax reform effort as a generational opportunity to revamp the state’s revenue structure so it can keep government coffers well-supplied for years to come.
But as a legislative tax task force turns to potential solutions, one of its leaders is sounding a different note about the endeavor, which has already consumed a good deal of time and political capital.
“I don’t think that whatever solution we come to now is going to be the 20-year solution,” House Majority Leader Francis Gibson said on a recent “Trib Talk” podcast. “It may require us to continue to study to move forward.”
During the same interview, Gibson explained that reinstating the full sales tax on food or eliminating sales-tax exemptions could “buy us more time” for this type of review.
Gibson is one of two lawmakers who are co-chairmen of the state’s tax reform task force, a body charged with figuring out if Utah is approaching a fiscal cliff and exploring options for a course-correction. On Monday, the panel composed of 10 lawmakers and other nonvoting members held its first meeting since wrapping up a statewide listening tour to gather input from residents, businesspeople and local leaders.
The task force is now entering its “study phase,” during which it will hold a series of sessions to review the range of options for the Legislature. During Monday’s three-hour meeting, the group explored the pros and cons of imposing the full 4.85% sales tax on food, which the state currently taxes at a 1.75% rate.
Hiking the rate could generate an additional $250 million in annual revenue for the state, legislative analysts said, but would place a heavier burden on low-income individuals who spend a greater share of their earnings on food. Utah is one of only 13 states to tax groceries, according to a staff report.
To offset the regressivity of a food tax, the Legislature could create a grocery tax credit that could be targeted to lower-income individuals or available to anyone, the analysts said.
Legislative staff also reviewed options for creating an earned income tax credit, Social Security benefits income tax credit and a tax credit for military retirement income. An overall income tax rate cut could form another part of the package.
Gibson, R-Mapleton, and Sen. Lyle Hillyard, who is co-chairman of the task force, said they’re opposed to increasing the tax burden on Utahns and are hoping their ultimate proposal will deliver an overall tax reduction while providing lawmakers with greater budgetary flexibility.
Rep. Joel Briscoe, one of two Democratic lawmakers on the task force, raised concerns about how schools would fare if the state cuts the income tax, which is constitutionally earmarked to support public and higher education.
“I can’t take this seriously until it gets linked with a concomitant discussion about what you’re going to do to make sure we don’t harm schools,” the Salt Lake City lawmaker said.
This year’s first attempt to modernize the tax system — a bill that would’ve expanded the sales tax to a variety of service transactions — backfired after affected industries accused legislators of trying to ram the proposal through the Legislature. Following the collapse of that measure, HB441, lawmakers shifted to a slower and more deliberative approach by assigning a task force to spend several months analyzing potential solutions and building public support for them.
In the lead-up to a June and July listening tour, the task force launched a website called Stronger Futures and other informational materials suggesting the group’s goal was to find a long-term solution.
“Utah was built with the pioneer spirit of working together to solve challenges,” said the narrator in an informational video posted to the group’s website. “And because we’ve always had the foresight to build for tomorrow, our state has always been at the forefront of economic stability. Let’s continue that tradition and come together to create a stronger future.”
But Gibson last week said he doesn’t expect the task force will come up with an enduring fix in coming months, comparing the group’s work to that of a state health care reform panel that has spent years poring over issues related to insurance requirements and Medicaid expansion.
Over coming weeks, the task force will continue going over ideas for reforming the state’s tax structure or giving the Legislature more sway over the budget.
Some lawmakers say it’s worth considering a constitutional amendment that would unlock income tax funds currently reserved for education, empowering them to spend this money as they saw fit. Such a change would need voter approval, and Gibson suggested that lawmakers would be wise to have a fallback plan in case Utahns deny lawmakers this “ultimate flexibility” over the budget.
After the task force completes its series of study meetings, Hillyard said he and Gibson will have private discussions with their colleagues about which options belong in the group’s final proposal. The task force will then publish recommendations and hold a public hearing on them before presenting them to the full Legislature, he said.
Hillyard, R-Logan, said the Legislature could take up the recommendations in a special session or in next year’s regular session.