The summer-long legislative roadshow to present Utah’s tax problem to the citizenry was supposed to sharpen the focus. But the show — more PR event than listening tour — didn’t settle anything.
So now comes a new plan from the legislators who went on tour, and it’s not settling anything, either.
The tax problem is that consumers are purchasing fewer goods and more services — most of which aren’t taxed — so the money raised from sales tax isn’t keeping up. Sales tax revenue still grows, but not as fast as the cost of the government services it funds. It’s a fundamental issue that will get worse in the next decade.
So what’s the new solution? A grab bag of tweaks that add up to kicking the can down the road. There’s a handful of services that will be taxed for the first time, but none that will produce game-changing tax revenue. (Get ready to pay sales tax for veterinary services, unless the patient is a cow.)
The biggest revenue haul has nothing to do with taxing services. Under this plan Utah will go back to being one of fewer than 10 states that taxes food at the full sales tax rate. Every household will pay more because every household eats.
Meanwhile, this plan will lower the income tax rate. The idea is that lower income taxes will offset higher food taxes. For those with the lowest incomes, that won’t be true, so the plan includes some tax credits for them.
So this plan adds a sales tax that burdens every income level more or less evenly (everyone eats roughly the same amount), while reducing a tax on income, which helps higher incomes more. That is pretty much the definition of regressive tax move.
The projections say a family of four making $60,000 a year will see a tax break of $400, or $33 a month. About $100 of that will be due to quintupling the deduction for children. Those who don’t have children will see a smaller break, while those with a full minivan could see hundreds more.
But those same families will lose a little when they get to public school. The tax we would be cutting, income tax, is the one that funds the worst-funded schools in the nation. This plan also drains a little more from schools because taxes from liquor sales will no longer fund school lunches. Schools have to find that money elsewhere.
And draining even more from schools is the closest this plan comes to a longterm solution. It recommends putting a referendum on the ballot that would, if approved, end the requirement that income taxes be spent only on education. If we’re going to solve the sales tax problem by taking more from schools, then it’s safe to say we’ll never leave the nation’s education-funding basement.
Legislative leadership wants to pass the tax cut in a special session this year instead of waiting until the general session in January, and that timing is baldly political. Republican legislators want the tax cut in place for spring 2020 filers so they can tell people they cut their taxes. But the practical reality is that for all but the high rollers, it won’t be enough to change anyone’s budget.
And legislators are not — repeat, not — going to make any meaningful attempt to tax services or close loopholes in 2020, which was the original intent of this whole exercise. It’s too hot to handle when they’re running for office.
Solving a problem for the next generation? Not even close. This plan is about getting through the next election.