Tax increases looming for Utahns

Utah has been named the best-managed state in America. And to keep the state running well, Utah taxpayers may see a $100 million tax hike early next year.

No budget decisions for the next fiscal year, which starts July 1, have been made, political leaders emphasize.

But a tobacco tax increase is a "done deal" in the Senate, says Senate President Michael Waddoups, R-Taylorsville, as a way to lessen another round of deep budget cuts to vital state programs.

House Speaker David Clark, R-Santa Clara, says all kinds of "options" are on the table to close an anticipated $700 million budget shortfall. Those options were discussed "in broad terms" in a meeting last week with Gov. Gary Herbert and GOP legislative leaders.

This is the first time a tax hike number — $100 million — has been put forward as a partial solution to financial problems in fiscal 2010-11.

"From my personal point of view, absolutely there is every intent to close the gap" in next year's budget by looking at targeted tax increases, like the tobacco and alcohol taxes, Clark said Monday.

Waddoups said, "In (the Senate) I see no resistance" to a tobacco tax hike.

Some senators are also talking about an increase in the gasoline tax and/or re-imposing some of the state sales tax on unprepared food, Waddoups said, although he personally can't support a fuel tax hike.

"I think the tobacco tax must be done," Waddoups said. "Surrounding states are raising their tobacco tax, also" — blunting the possibility of bootlegging cigarettes into Utah.

"And this is a health issue. Each time you raise that tax, tobacco use goes down. So it plays a lot easier" politically with Utahns to increase the tobacco tax, he added.

Rep. Paul Ray, R-Clearfield, says he wants Utah's tobacco tax pegged at 1 cent per pack above the national state average. The current Utah rate is 69.5 cents per pack. Ray's bill would increase that to $1.31 per pack, bringing in an extra $30 million a year. Other state lawmakers have talked about a $3 per pack Utah tax.

Clark said one way to make up the much-discussed $700 million budget gap between this year's spending and next year's balanced budget comes like this:

 Take $200 million from the current $419 million Rainy Day fund.

 Take $100 million in one-time surplus left in the public education fund.

 Increase several "targeted" taxes by $100 million.

 Make another round of program/budget cuts totaling at least $300 million.