All of the momentum in the Utah Legislature is pointing toward an income-tax cut next year, with Social Security tax relief and a possible earned income tax credit added to top off the package. But two of the most junior members of the House are joining forces hoping they can convince their colleagues to repeal the state portion of the sales tax on groceries instead.
Reps. Judy Weeks Rohner, R-West Valley City, and Rosemary Lesser, D-Ogden, announced Tuesday they were combining their bills to repeal the 1.75% sales tax the state imposes on unprepared food.
“The effects of rising prices are felt by all of us, but especially on Utahns on fixed incomes and people living paycheck to paycheck,” Lesser said. “This is something that speaks to all of us.”
Legislative leaders decided before the 2022 session began to move toward tax relief and quickly settled on a 0.1% decrease in Utah’s income tax rate from 4.95% to 4.85%. That reduction equals about $100 for the average family earning $72,000 per year, or $8 per month.
After criticism that reduction does not do enough for low-income Utahns, there is a push to add another $40 million to expand a tax credit for Utahns on Social Security and an earned income tax credit.
Rohner says eliminating the food tax would immediately impact low-income Utahns, who typically spend a more significant portion of their income on food.
“This allows low-income families to receive the benefit immediately at the register. That small amount can make the difference between putting food back at the checkout counter in front of their children, which is an embarrassing thing to do,” Lesser said.
The Rohner/Lesser proposal carries a price tag of $142 million in the 2023 fiscal year and $172 million in 2024. The income tax reduction in SB59 costs $189 million in 2023 and $171 million in 2024. Adding the Social Security tax expansion and earned income credit will increase those numbers by about $40 million.
Since the two tax bills cost about the same, why not swap one for the other? It’s not that easy because of Utah’s unique budgeting system.
Income taxes are constitutionally mandated to go toward public and higher education and services for disabled Utahns. Sales taxes go into the General Fund instead of the Education Fund, so it is not an equal comparison.
Any income tax reduction has to come from ongoing revenue rather than one-time money. Before the 2022 session, the General Fund had more than $1.2 billion in excess revenue, but only $219 million was ongoing. That number should grow some when the consensus revenue numbers are released later this month. The repeal of the food tax would eat up nearly all of the available ongoing excess revenue, leaving very little for other proposals.
“The list of needs on this side of the ledger is great. Things like social services and public safety. We have some really important issues, so we have to be responsible and fund other things in state government,” Senate Majority Whip Ann Millner, R-Ogden, said Tuesday.
The House gets the next move in the tax reduction debate since the Senate passed the income tax reduction bill last week.
Tuesday afternoon, House Speaker Brad Wilson released polling results from Dan Jones and Associates showing Utahns were split on the path to tax reduction: 33% favored cutting the sales tax on food, while 32% wanted an income tax cut. According to the poll, 17% said they want to see an across-the-board sales tax deduction, and 15% want an income tax credit on food based on income.
Take those poll results with a grain of salt as Wilson’s office did not provide crosstabs or demographic data, only saying the poll was conducted at the first of January among 814 Utahns of “varying ages, genders, political leanings and backgrounds.”
Those inconclusive results suggest the GOP-controlled legislature won’t suffer any political consequences if they move ahead with the income tax reduction, the path they’re already headed down.
The political reality is there is minimal appetite to do away with the food tax this session. Senate Republicans have repeatedly said there is no support in their caucus for the issue this year, which likely means the proposal will wither on the legislative vine.
Rohner questioned the motives of her colleagues in opting for an income-tax cut instead of eliminating the food tax.
“I think they’re listening to big businesses and corporations, and I want them to listen to the common man,” Rohner said.
Rohner led the referendum effort in 2019 to put the income tax overhaul passed by lawmakers up for a public vote. Lawmakers repealed the bill rather than risk defeat at the polls. Rohner threatened that could happen again if the GOP-controlled legislature opts for an income-tax cut over her proposal.
“We need to make sure they hear us. Nobody wants to see any type of referendum or anything like that again,” Rohner said.
Rohner could only make good on her threat if the income tax cut passes with less than two-thirds support in both houses. That seems unlikely as it sailed through the Senate with one more vote than needed. House Republicans control 58 seats but only need 50 to extinguish any referendum threat.