Veterinarians, car wash operators, spa owners, poverty advocates and education leaders lined up Tuesday night to object to elements of a massive tax reform proposal released last week by leaders of a legislative panel.
At the close of a five-hour hearing, members of the state’s tax reform task force voted to craft a bill based on the co-chairmen’s proposal, with minor tweaks aimed at exempting feminine hygiene products from taxation and adding an earned income tax credit to address intergenerational poverty. This draft legislation will be up for review at the next task force meeting, scheduled for Nov. 7.
The chairmen’s package, which would result in an overall tax cut of roughly $79 million, was designed to even out a growing disparity between Utah’s sales and income taxes. The proposal is still relatively undeveloped, but speakers at Tuesday’s public hearing were concerned about some of the broad strokes — namely, a significant income tax rate reduction paired with an increased tax on food and the expansion of the sales tax to gas purchases and a number of service transactions.
Veterinary services would be among those newly taxed, and a representative of the profession showed up Tuesday night to ask lawmakers to leave him and his colleagues out of their proposal. Nathan Whiting, a vet practicing in Cache and Box Elder counties, explained that keeping animals healthy helps lower the human risk of diseases such as rabies and tick-born illnesses.
“Veterinary medical care should not be treated differently than human care, as it is a partnership in keeping our state healthy and should not be singled out for this tax,” said Whiting, reading from a letter signed by Jamie Griffith, president of the Utah Veterinary Medical Association.
Katrina Long, who co-owns Summit Spa and Float in Park City and Spanish Fork, said her company and other small businesses would suffer with a tax on services. The sales tax expansion would force her to raise her rates, pay more in merchant fees and take on additional paperwork and accounting burdens, she said. And, in her view, it’s not fair that only a select few service-oriented businesses appeared on the list for potential taxation.
“I believe you’re cherrypicking services,” said Long.
The idea of increasing the sales tax on food from 1.75% to 4.85% also drew opposition, with advocates saying a such a hike would inflate grocery bills for low- to middle-income families by $172 to $252 each year.
“Simply put, sales tax on food increases hunger,” said Alex Cragun with Utahns Against Hunger, who added that the proposed increase would represent a “drastic and permanent” change to the state’s law.
However, Sen. Lyle Hillyard, who leads the task force with House Majority Leader Francis Gibson, argued that taxing food at the lower rate is a “poor way to help the poor" and noted that some of the payoff goes to tourists who visit the state’s grocery stores. Targeted income tax breaks are a better way of aiding lower-earning Utahns, he said, noting that his proposal includes tax credits to soften the blow for these families.
But the idea of increasing the sales tax on food also faced some criticism from within the task force.
Rep. Tim Quinn questioned whether this hike would do anything to update the state’s tax structure — which was the stated mission of the task force. Grocery purchases have dropped as a share of personal consumption in Utah, so if lawmakers are aiming for modernization, taxing food more heavily misses the mark, he argued.
“If this really was about looking at a change in the economy, we didn’t look at it at all in the restoration of the food tax,” said the Heber City Republican, who has pushed for eliminating the tax on groceries entirely.
The feedback Tuesday evening wasn’t all negative. Representatives of the Utah Taxpayers Association and Sutherland Institute praised many parts of the proposed tax overhaul and praised the task force for listening to input from state residents as they crafted the plan.
A financial analysis of the leadership proposal found that — assuming the income tax rate drops to 4.59% — individual Utahns would collectively save $128 million in the first year. Businesses would pay more, largely because adding the sales tax to gas purchases would cost them an estimated $74.5 million.
The co-chairmen’s proposal calls for extracting more state revenue through the sales tax while providing relief on the income tax side. In addition to lowering the overall income tax rate, it would more than quadruple the exemption for dependents and create a credit for Social Security recipients.
The co-chairmen have also recommended repealing a constitutional provision that dedicates all income tax revenue to public and higher education. Amending the state’s guiding document would require a two-thirds support by the Legislature and the approval of Utah voters.
Hillyard, R-Logan, said lawmakers are negotiating with the education community about how to “make them feel comfortable” with removing this constitutional guarantee. At the end of the hearing, the task force voted to move forward with writing a resolution in support of stripping the constitutional earmark, but they also decided to open a bill file on creating an alternative, stable funding mechanism for schools.
But while task force leaders said they intend to protect funding for schools, Heidi Matthews, president of the Utah Education Association, said key elements of the drafted plan would threaten aid for the state’s students.
“It’s going to impact our bottom-line per-pupil funding,” she testified. “And what that means for a teacher and a child is school safety and mental health supports ... and class sizes, so that our students can be known.”
Though the recommendations crafted by Hillyard and Gibson, R-Mapleton, have received the bulk of the attention so far, several other task force members have offered up alternatives. A proposal submitted on behalf of the Utah Taxpayers Association would generate a much larger tax cut by slashing the current rate to 4.5%.
A plan submitted by Senate Minority Leader Karen Mayne, D-West Valley City, would raise taxes on soda and candy and institute a more progressive tax structure by increasing rates on the wealthy. And Rep. Joel Briscoe’s alternative would create a carbon tax that would pump an additional $677 million into state coffers over the first year; the goal of the new tax would be "to encourage people to move away from things that pollute,” the Salt Lake City Democrat said during Tuesday’s meeting.
Gary Cornia, former member of the state Tax Commission and a nonvoting member of the tax task force, also released a proposal that would generate an additional $283 million in annual revenue for the state. An increased sales tax on food and a statewide property tax would be the main revenue generators under his plan.
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