Failed tax reform push takes center stage in several state legislative races

As a referendum to repeal a sweeping tax reform bill gained steam late last year, Rich Cunningham says he sat in every Harmons grocery store in the Senate district where he lives, talking to his neighbors about their frustration with the recently enacted changes and asking for their signatures to help reverse it.

The Utah Legislature would later vote to overturn that tax reform, which included cuts to income taxes and hikes to the sales taxes on food, services, gasoline and other transactions — after it became clear the grassroots referendum had secured enough signatures to qualify for the November ballot.

But with all House members and half the state senators up for election this year, the potential political fallout from the unpopular bill is far from over.

Cunningham, a former state lawmaker, is one of several signature-gatherers-turned-legislative-candidates now seeking to unseat lawmakers who were supportive of the original bill. And he believes the issue could be a “game changer” in his June primary election contest against Sen. Lincoln Fillmore, a South Jordan Republican who voted for the legislation.

“This week I put 10 signs in people’s homes that voted for Lincoln Fillmore four years ago that are not voting for him” now because of that legislation, Cunningham said in a recent interview.

The South Jordan Republican and financial service entrepreneur, who ran and lost against Fillmore in 2016, is specifically targeting his campaign literature to people in District 10 who signed the tax referendum. And he’s highlighting his own record of opposing certain tax increases when he served in the Legislature from 2013 to 2016.

“I’m committed to not raising taxes” if elected again, he said. “I don’t think we have to. I think we have to get back to base budgeting and financial planning. That’s what I do for a living every day with families and major corporations and helping them with their budgets.”

Fillmore, whom the Utah Taxpayers Association presented with its 2020 “Tax Advocate of the Year” award Friday, told The Salt Lake Tribune that the totality of his record speaks for itself. And while he said he’s open to debate on his voting history, he doesn’t feel his opponent is engaging in an “honest discussion” on the issue in painting Fillmore as a proponent of tax increases.

“While there’s always room for disagreement and I know there are issues on which we differ,” he said, “I do believe voters deserve an honest debate.”

The tax reform bill was “a package of increases and decreases,” he added. “When it came up for a vote, I voted for it because I thought the good outweighed the bad.”

After it became clear that his constituents felt otherwise, the candidate noted that he supported repealing the bill.

While Fillmore said the issue has come up rarely in his conversations on the campaign trail, criticism over incumbents’ support for tax reform has played out prominently not only on some candidates’ websites and campaign literature during this election cycle, but has also been featured in recent candidate forums.

Is anyone listening?

At a virtual debate earlier this month, Republican candidate Chris Wilson argued that the tax reform bill his opponent, Sen. Lyle Hillyard, had sponsored was “rushed through.”

“I felt that the taxpayers were not listened to” during that process, he said, noting that many Utahns seemed particularly averse to portions of the proposal that would have hiked the tax on food and slapped a sales tax on gasoline.

Hillyard, R-Logan and the longest-serving member of the Legislature, expressed frustration that the tax reform plan was misunderstood.

“I feel like I’m speaking in the wind because nobody listens,” said Hillyard, who co-chaired the legislative task force charged with crafting the reform plan. “The purpose of tax reform was not to raise money. We had plenty of money.”

The problem, he said, is that so much of the state’s revenue is specifically designated for public education, making it unavailable for use across the rest of government. The failed overhaul bill wouldn’t have increased taxes overall but would have rebalanced revenue streams so legislators had more flexibility to spend the funds, he added.

In the months leading up to the Legislature’s passage of the tax reform bill, leaders went around the state pitching the need to update Utah’s tax code, balance the state’s revenue streams, and ease the overall tax burden.

The proposed overhaul was projected to cut overall tax collections by $160 million — largely through a reduction in the income tax rate, an expansion of the per-child dependent exemption, and the creation of new tax credits — while also raising sales tax revenue through the new taxes.

Groups quickly coalesced to push back on some of the changes, organizing a referendum effort that attracted a group of grassroots advocates and community organizations from across the political spectrum.

A Salt Lake Tribune poll conducted by Suffolk University around that time showed that 60% of Utahns opposed the tax reform plan, while 25% supported it.

Anti-tax reform advocates hated the sales tax increase on food, which they worried would impact some of the state’s most vulnerable people. They hated the tax on gasoline, which voters had shot down as part of a nonbinding ballot question the previous year. And they loathed the timing of the special session, which happened during the busy holiday season.

In response to criticism, several lawmakers argued the public just didn’t understand the bill, which they noted would actually cut taxes in many areas.

But West Jordan resident Karen Hyatt, who gathered signatures for the referendum and is now challenging Sen. Wayne Harper as a Republican candidate for Senate District 6, said it goes deeper than that.

“They’re unhappy with what the Legislature did before Christmas,” she said of her conversations with voters. “Some of them were unhappy that it was done during a special session. Almost everyone I talk to prefers to keep the food tax down. They don’t want their food tax raised.”

Enter the coronavirus

While tax reform was a major point of discussion early this year, the political landscape has changed dramatically since then, with all eyes turned now to the coronavirus pandemic and recent protests against police brutality.

North Logan resident Mike Petersen, a Republican who gathered signatures for the referendum and is now running to unseat Rep. Val Potter in House District 3, said the issue of tax reform has come up frequently in his conversations with voters over the past few months — though “not as much as I thought it would.”

“I thought it would be the highlight,” he said, “but tax reform and this constitutional rights thing [related to coronavirus restrictions], they’re both huge.”

Petersen said he supports tax reform but opposed the Legislature’s “overly complex” approach and decision to tax certain services over others, which he felt was done arbitrarily.

And he’s expressed disappointment on his website that his representative supported legislation that was “vigorously opposed by Utah voters.”

Potter, R-North Logan, said that while his opponent has attempted to paint him as a proponent of tax increases, the reality is just the opposite. He points out that he maintains the support of the Utah Taxpayers Association and says he voted for the tax reform bill because it was the “largest tax cut in the history of the state.”

(The Taxpayers Association identifies a $200 million cut in 2007 as the state’s largest.)

“To say I’m a tax increase guy is a lie. It’s not right,” he said. “And I don’t mind a challenger. Let the voters decide. But when misinformation is being spread, that’s when I have a problem.”

Potter noted that several of his colleagues in the Legislature are facing similar challenges in addressing the tax reform issue as they run for reelection this year.

“They’re being picked apart because the statement is, ‘We love tax increases and we’re taxers; as conservative Republicans, we love tax increases,’” he said. “Tax reform was not a tax increase. It was the right thing for the state and to say anything other than that is wrong.”

While the conversations about tax reform are playing out in several intraparty legislative races ahead of the June primary, the issue is unlikely to go away after those ballots have been counted, since several Democrats are also campaigning on it as they challenge Republicans who supported the bill.

Among those candidates is Riverton resident Wendy Garvin, who gathered signatures for the referendum and is running as a Democrat for House District 41 against Rep. Mark Strong, R-Bluffdale. Her opposition to tax reform was one of the major reasons she decided to enter the race, she said.

“There’s no need for people to get taxed on their income and again on their food and gas and taxed again on the same businesses, the same small businesses we should be supporting,” Garvin argued.

Reflecting the bipartisan support for the referendum, the candidate says her campaign team is made up of three people from the tax referendum, two of whom she describes as “pretty hardcore Republicans.” And she hopes the tax issue could be weighty enough to sway voters in her election who are usually hesitant to cross party lines.

While it’s clear some candidates will continue to make tax reform a talking point on their websites, in debates and on the campaign trail for the next few months, the June primary election will present the first test of whether frustration over the issue remains high enough to actually oust anyone from office.

“We’ll see really when the election results come in at the end of June how much effect your voting record has,” Cunningham said, and “whether people will really get out and vote.”

— Tribune reporter Bethany Rodgers contributed to this report.