Tax reform may be a headache, state leaders acknowledged Tuesday, but they believe the sweeping overhaul package they recently passed will pay off — unless it’s derailed by a grassroots repeal effort.
During an annual tax conference, the governor, Senate president and House speaker all argued that the difficult and divisive reform push will set up the state for continued prosperity and correct revenue imbalances that they said had threatened vital state programs. Moreover, the three Republican leaders said Utah is a model for the nation because it took action to avert a problem rather than responding only after disaster struck.
“One of the biggest threats that we had was in fact our ability to pay our bills,” House Speaker Brad Wilson, R-Kaysville, said Tuesday at the Utah Taxpayers Association breakfast. “And we have fixed it.”
Gov. Gary Herbert said he imagines there are many things state legislators would prefer to do over tackling tax policy, as they did last month in a special session.
“I would dare say that virtually everybody in the body ... would rather take a whipping than have to deal with tax reform,” Herbert told attendees. “They did it because they understand that, in Utah, we, in fact, take on difficult issues. We don’t wait for the crisis to happen.”
The effusive praise for the recent tax changes stand in sharp contrast with the criticism levied by the bipartisan group that’s attempting to topple the legislation. Members of this coalition object that the recent changes put state education funding at risk and burden families by increasing the sales tax on food.
The group is working against a Jan. 21 deadline to collect 115,689 signatures, enough to put the issue on the ballot this November and give voters a chance to repeal the tax legislation.
Former state lawmaker Fred Cox is helping lead the effort and said Tuesday that his group has collected about 10,000 signatures so far. He acknowledges the coalition has a way to go before reaching its goal but remains optimistic.
“I honestly do not believe we’re going to have an issue as long as everyone keeps working for the next two weeks,” he said.
His group argues that public sentiment is on its side. A recent UtahPolicy.com poll found that two of three Utahns surveyed voiced opposition to the major pillars of the tax reform legislation. And most of Utah’s gubernatorial candidates have endorsed the repeal effort.
Utah State Tax Commissioner Rebecca Rockwell said the referendum complicates her agency’s task of implementing the legislation, which could be put on hold if Cox’s group successfully brings the matter to a popular vote later this year.
“So how are we handling this?” she said during Tuesday’s conference. “We’re going to monitor the progress of the referendum, but in the meantime, we’re going to move forward to administer the bill according to the timeline set in statute.”
Assuming the legislation isn’t stalled, the commission will mail out rebate checks to taxpayers in coming months — some related to the expanded dependent exemption and others to a new grocery store credit designed to help low- and middle-income families.
Lawmakers included that credit to mitigate the impact of a near-tripling of the state sales tax on food, a change slated to take effect April 1. Other updates to the sales tax, such as repealing certain exemptions and expanding the tax to some service transactions, will also kick in at that point, Rockwell said.
Among other things, the bill also cuts the state’s income tax rate from 4.95% to 4.66%.
Overall, the proposal is estimated to reduce state taxes by about $160 million, although Senate President Stuart Adams, R-Layton, said the total benefit to Utahns is much greater because the plan puts more of the burden on out-of-state visitors.
However, even the legislators behind the bill have said it’s not the final word on tax reform.
Republican leaders have made clear that the general session, which starts later this month, will include changes to the way public education is funded, most likely in the form of a constitutional amendment that could repeal or dilute the earmarking of income tax revenue for school spending. Such a change would require approval by Utah voters in November.
Cox said he’s nervous about what’s coming next for tax reform.
“We’re told this is part one of three,” he said of the bill passed last month. “And I really don’t want to see part two and three.”