Food-tax foes hit snag

That's compared to $230 million in tax cuts endorsed by the House Republican caucus even before the session started, and $60 million in tax cuts that the governor included in his proposed $9.6 billion budget.

Valentine said a bill offering an income tax credit for food purchases is being drafted, even though it could be some time before the Senate caucus comes to a decision on the additional details. One proposal discussed is giving the break only to Utahns earning less than $40,000.

Huntsman, however, is "still very confident we will be able to move forward in getting the sales tax off food this session," said Mike Mower, the governor's deputy chief of staff and spokesman.

Mower said changes in the state's tax system had been discussed for many months and should not have come as a surprise to anyone. "We've been very public in our support of this," he said.

Chris Bleak, the chief of staff for Curtis, said that the way HB109 is drafted, cities and counties are "minimally" affected because of increases in the local option sales tax, so their bonds should not be affected. But the bonds issued by political subdivisions could be a significant enough problem that it could result in many tax reforms that change the sales tax structure, which include the food tax and business input taxes.

The good news, however, is that the bond counsel told them there was a way to fix the problems, although they did not explain those solutions in depth, Bleak said. But legislators have come up with one solution: no more bonds, at least until they find other ways to fix the problems.

"The concern is if the state's hands are tied in regards to any changes to the sales tax," he said. "That's why the moratorium is being proposed — because if our hands are tied, then these bonds should not be used."

House Minority Leader Ralph Becker, D-Salt Lake, said that doing something as drastic as a moratorium on sales tax revenue bonds is probably unnecessary until it is clear what will happen with the sales tax on food.

"It's being a bit premature to be pushing legislation that asks governments to forestall future business before we've decided what we're actually doing," Becker said. It's also too early to be warning "that local government bonds are in trouble" without a firm idea of the details of the tax's removal.

Members of the state's Tax Reform Task Force heard comments over the summer about potential problems with bonds issued by local governments, the Utah Transit Authority and other entities that use the sales tax.