Food sales tax could be completely reinstated

It may be coming back.

A state sales tax on food that's been incrementally decreased for the past two years — and widely viewed as one that unfairly targets low-income families — could be under consideration for a complete reinstatement in the face of ongoing, large-scale revenue losses.

Members of the Utah Tax Review Commission heard testimony Thursday from advocates of the disadvantaged, grocery industry representatives, tax watchdogs and a state legislator who sponsored a failed attempt at increasing the food tax last session. This time, however, the idea may find some traction under the cloud of an upcoming state budget shortfall currently being estimated at $700 million.

Last year, Rep. Kay McIff, R-Richfield, tried to erase step-downs in the sales tax assessed on food passed by legislators in 2006 and 2007 that reduced rates from 4.75 percent to their current level of 1.75 percent. That bill never made it out of the House, and it ran counter to former Gov. Jon Huntsman Jr.'s well-publicized pledge to work toward completely removing the tax on food.

It also raised the ire of groups engaged in outreach to low-income families, who said any tax on food is regressive in nature — one that places a larger burden on low-income families who spend a bigger percentage of earnings on food.

Art Sutherland from the Coalition of Religious Communities, an advocate group for low-income Utahns, told the commission that the timing couldn't be worse for upping the tax collected on food.

"The recession has hit a lot of people in the low-income class," Sutherland said. "More than half the people asking for food at Crossroads have never had to use a social-service network before. The unemployed still need to put food on the table."

McIff has modified the approach he took in his bill last year, and this time around has a new wrinkle he says will help balance the tax disparity between lower- and upper-income groups. The idea is to create a new, targeted state earned income credit of 6 percent that he says will more than offset outlays for a tax hike.

McIff said returning the food tax rate to 4.75 percent would put 140 million new dollars into the general fund and about $16 million into earmarked accounts. The income credits would only amount to about $18 million to $20 million out of that new revenue stream.

Advocate Allison Rowland, budget and research director of Voices for Utah Children, said her group backed McIff's proposal last year, and likes the new version even more.