The co-chairmen of a legislative task force have recommended a $75 million tax cut, combining a higher sales tax on groceries with a lower state income tax rate in order to smooth out a growing disparity between Utah’s sales and income tax revenues.
But some individual members of the task force have elected to submit their own tax recommendations — ranging from a $420 million tax cut to a $283 million tax hike — calling for new levies on soda and candy, the imposition of a statewide property tax or a significant increase to the per-child income tax deduction.
Sen. Lincoln Fillmore, R-South Jordan, said his alternate proposal is intended to generate additional information for debate and consideration. And he said he expects any recommendations adopted by the task force to undergo amendment and revision.
“My guess would be that whatever the task force comes up with will be at least slightly different from any proposal that currently exists,” he said.
The task force meets Tuesday at the state Capitol, with another two hearings scheduled Nov. 7 and Nov. 21.
The Fillmore plan
Fillmore said that while there is a tax proposal submitted under his name, it’s not necessarily his preferred option for reform. The Utah Taxpayers Association had issued its own recommendations — calling for a much larger tax cut than the task force chairmen’s $75 million plan — and Fillmore said he was interested in seeing a formal analysis of the lobbying group’s suggestions.
“Here’s my beef with the chairs’ proposal,” Fillmore said. “I don’t think that the tax cut is large enough. I would prefer to see a larger overall decrease in taxes.”
The proposal under Fillmore’s name differs from the chairmen’s recommendations in two key areas: it suggests cutting the income tax rate from the current 4.95% to 4.5% (instead of 4.7%), and it suggests a more than five-fold increase in the per-child income tax deduction from the current $564 to $3,113 (the chairmen suggested $2,500 per child).
Those and other changes would translate to a combined tax cut of $420 million. And while the impact on a hypothetical family of four making $60,000 per year would be roughly in line with the chairmen’s recommendations — an annual tax cut of $450 or $400, respectively — the Fillmore proposal is considerably more regressive, with the largest benefit going to higher-income Utahns and with some low-income residents facing a tax increase.
Fillmore said he’s encouraged by the next phase of the task force’s work, which follows a statewide listening tour during the summer months and then a round of discussions at the state Capitol where public comment was not permitted.
He said he’s looking forward to hearing from constituents about the merits of specific proposals, as the summer hearings largely focused on the now-abandoned HB441, an attempt at tax reform that collapsed during the most recent legislative session.
“There’s no problem with a listening phase, but the problem with the listening phase is that there was no proposal,” Fillmore said. “What we heard in the listening phase was people talking about old proposals that were no longer being considered.”
The Mayne plan
Another proposal floated by Senate Minority Leader Karen Mayne, D-West Valley City, and other members of her caucus would hike income taxes on the wealthy and increase the sales tax on soda and candy.
Overall, the alternative released by Mayne would raise taxes for Utahns by about $200 million, although it does include relief to targeted groups. The state would stop charging a sales tax on feminine hygiene products under Mayne’s plan. It would also provide an earned income tax credit for low- to middle-income Utahns and would create an income tax credit for Social Security recipients.
“The goal, I think, for us and the state is to give all the citizens the tools they need to be productive,” Mayne said.
Mayne and her fellow Senate Democrats advised increasing income taxes on particular wage brackets — those making more than $250,000 — but leaving the current 4.95% income tax rate in place for all but the highest earners.
The Legislature shouldn’t touch the constitutional earmark that dedicates income tax funds to education, Mayne and her caucus colleagues have suggested. Instead, lawmakers should enact a requirement that state funding for schools must keep pace with student growth, plus a 3% inflationary factor. There should be a similar mandate for funding the school lunch program, according to the Democratic plan.
The proposal also would preserve the reduced tax on groceries.
Mayne said there are “many good things” in the proposal released by the task force chairmen, such as expanding sales taxes on some service transactions and the rollback of some tax exemptions.
She hopes legislative leaders will consider incorporating elements of her caucus’ alternative.
“We picked out ... proposals that are dear to us and things we hope they will reconsider,” she said.
The Cornia plan
Gary Cornia, former member of the state Tax Commission and a nonvoting member of the tax task force, released a proposal that would generate an additional $283 million in annual revenue for the state. An increased sales tax on food and a statewide property tax would be the main revenue generators under his plan.
The statewide property tax would yield about $100 million annually, money that could be spent on transportation projects, parks and school construction, according to Cornia’s proposal.
"As an economist, I will tell you that the property tax is the tax that creates the least amount of distortion in the economy and is the most stable," said Cornia, former president of the National Tax Association. "And infrastructure investment is highly correlated with increases in property value."
While he is open to amending the state Constitution to remove the education earmark, lawmakers should first identify a stable funding stream for public schools, he said.
“Before we remove the earmark, K-12 students, school teachers, school administrators and parents need to understand what the alternative funding is going to be,” he said.