Lawmakers eye plan to end food sales tax — but only if voters remove constitutional earmark for education

The Utah Legislature has been hesitant to remove the sales tax on food as it provides a revenue source that is much more stable than other taxes.

Legislative leaders are expressing optimism about a plan to eliminate the state sales tax on food, but only if voters approve removing a provision in Utah’s Constitution that guarantees funding for education. However, there are still several significant hurdles in the way, and time is running short.

Under the state constitution, income taxes can only pay for public and higher education. In 2020, voters expanded that earmark to include some social services for children and disabled residents. Sales and gas taxes pay for everything else in the budget.

Republican leaders have long complained that restriction unnecessarily hampers their ability to set the budget. Asking voters to change it could be a tough sell politically, especially since Utah’s public education system is chronically at or near the bottom nationwide for funding. Getting education stakeholders on board with the change would make that pitch much easier.

Friday morning, House Speaker Brad Wilson, R-Kaysville, said they’d made some headway in discussions involving several groups from the education community.

“I would hesitate to make any kind of guarantees at this point, other than we’re going to guarantee we’re going to keep working really hard on it, and the education community and their stakeholders have been very collaborative,” Wilson said.

With just three weeks to go, there’s not much time remaining in the 2023 session to find common ground. Education stakeholders have characterized discussions with lawmakers as productive but stress there is still a long way to go.

In 2020, lawmakers wanted to create more flexibility in the budget by using about $600 million in education funding to pay for some social services. To get teachers on board with the idea, they passed legislation to guarantee annual funding increases to cover inflation and student population growth. That bill also created a dedicated account they can tap to prevent budget cuts in case of an economic downturn.

This time around, the education community may be less willing to play ball after Republicans railroaded through a law to provide taxpayer funding to private schools last month. Several stakeholders, including the state’s largest teachers union, opposed that measure, even though it also contained a pay increase for public school teachers.

Lawmakers have been hesitant to remove the sales tax on food as it provides a revenue source that is much more stable than other taxes. Income tax collections can fluctuate wildly depending on the economy, while sales tax is more or less consistent.

Rep. Judy Weeks Rohner, R-West Valley City, is proposing to completely remove the 1.75% state sales tax on food, which will cost $198 million annually. Another bill from Rep. Rosemary Lesser, D-Ogden, takes that sales tax off everything except for candy, which will cost $191 million per year. Senate Minority Leader Luz Escamilla, D-Salt Lake City, is backing a much more modest proposal to exempt SNAP and WIC items from sales taxes, which carries a $34 million price tag.

Much depends on the new revenue projections due later this month, which will be used to set next year’s budget. Right now, there’s an extra $2 billion to spend, but most of the surplus revenue comes from income taxes, which will not impact the food tax debate.