Board backs reinstating 4.7% state food tax

A plan to reinstate the full state sales tax on food received the endorsement of a tax advisory board Thursday and is on its way to the Legislature and governor's office.

The idea to repeal tax cuts levied in the 2006 and 2007 legislative sessions that led to the current food tax rate of 1.75 percent has met with mixed reviews from both legislators, who are facing an $850 million budget shortfall in the coming session, and advocates for low-income Utahns who say an unprecedented number of residents are struggling to make ends meet in the dire economy. Raising the tax is estimated to bring some $145 million in new revenue.

Rep. Kay McIff, R-Richfield, is proposing legislation to take the food tax back to the full state rate of 4.7 percent while seeking to balance its impact on low-income families with a targeted tax break. That credit, he said, offsets the regressive nature of a food tax that places a proportionally bigger financial burden on those who earn lower incomes.

"From the outset, the bill that I proposed has always had a provision to address the regressivity problem," McIff said. "We could provide a sales tax credit that would take them back to ground zero, or better off than they are now."

Bringing back the full food tax— an idea McIff tried unsuccessfully to pas last session — has received some positive responses as the 2010 legislative session approaches, including from the Utah Tax Review Commission. The advisory board that includes lawmakers, business leaders and academicians, voted 7-5 Thursday to recommend the state raise the food tax to the previous rate.

Rep. Christine Johnson, D-Salt Lake, a commission member, is not among the supporters. She voted against the recommendation, saying the increased tax puts an unfair and unnecessary strain on the state's disadvantaged.

"I find the whole proposal very disconcerting," Johnson said. "I feel like it's imperative that we look at other options, instead of targeting a population that will be unfairly bearing the burden."

The commission extensively debated how that burden might be eased. While McIff's bill calls for using the federal earned-income tax credit as a matrix for granting a state tax break to offset raising the food tax, commission member Larry Walters said it would leave out many disadvantaged people, including those who earn less than $10,000 a year.