From Deseret News archives:

Food tax removal a must

Published: Wednesday, Jan. 25, 2006 10:41 p.m. MST
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A wrench has gotten stuck in the effort to remove the sales tax on food in Utah. Despite widespread political support to wipe out the food tax at the cash register, the state's bond counsel has warned that eliminating it or phasing it out "presents significant legal issues and financial concerns" for bonds backed by sales-tax revenues.

The Utah Legislature, wisely, is weighing its options.

But we hope these cautions are not a deal killer. There is widespread agreement that the hated food tax needs to go. Lawmakers and others need to come up with some creative solutions to close the deal without harming the state's bond rating and enabling municipalities and other entities that rely on sales tax revenues for bonds, transit or so-called boutique initiatives.

There's nothing stopping the Legislature from permitting municipalities to raise the nonfood portion of cities' and counties' sales taxes. Lawmakers also could redo the distribution formula to protect small towns that get a vast majority of their sales tax revenue from one or two grocery stores.

HB109, sponsored by Rep. Merlynn Newbold, R-South Jordan, provides a possible solution. Her bill would remove the state's 4.75 percent sales tax on food at the cash register, while raising the current 1 percent local city sales tax to 1.1 percent to make up for lost revenue. It also would boost the quarter-cent county option sales tax to 0.28 percent.

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This option has particular merit because it gives food shoppers what they want most, relief at the cash register.

Another option, backed by Senate President John Valentine, who is a tax attorney, is an income tax credit. Valentine, in Deseret Morning News reports, has described the income tax credit as "the most elegant solution" to the issue. On Tuesday, Senate Republicans announced a proposal that would twin a flat tax with an income tax credit for sales taxes paid on food purchases, which is about $75 a year. The details of this proposal still are being written, although preliminary discussions have suggested extending the tax credit only to people with lower incomes. But some people with low incomes do not have to pay income taxes because their incomes are so low, so it is unclear how they would benefit from the credit. Since the bill is still being drafted, it is difficult to opine further on its possible effects.

Again, Utah is on the cusp of a revolutionary change in its tax policy. Aside from a concrete proposal as to how to do it and hold harmless cities, counties and other political subdivisions that rely on voter-approved sales tax revenues, there is great political will to removed this hated tax. Legislators, the governor and locally elected officials need to ride that wave of momentum and devise a solution to remove sales tax from food once and for all.

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