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Scott G Winterton, Deseret News
Codee Carle shops for snacks at Wingar's in Bountiful. Senate leaders say education funding initiative makes restoring state sales tax on food a more 'palatable' option to bring in more taxes on Tuesday, Feb. 14, 2017.

SALT LAKE CITY — Restoring the full state sales tax on food purchases remains an option this session to counter a proposed education funding initiative, even though tax exemptions will likely be studied over the interim, Senate leaders said Tuesday.

"There might be a surprise. We might come out with something. Or it might be, we end up doing nothing. We're actually working on some things," Senate President Wayne Niederhauser, R-Sandy, told reporters.

That includes looking at passing a "more incremental" tax increase before the 2017 Legislature ends next month to raise more money for schools, such as collecting the full state sales tax on food, Niederhauser said.

"That's a broadening of the base and potentially a lowering of the rate so that is on table. It's something we're discussing," he said. "I say it's still a possibility. How probable it is, is still up for debate."

Since 2008, the state sales tax rate on food has been 1.75 percent, compared with 4.75 percent for other purchases. Cities have the option of collecting an additional 1 percent, and counties .25 percent on food sales.

There have been several unsuccessful attempts to do away with the lower rate for food, part of a series of tax cuts made under former Gov. Jon Huntsman Jr. that also included eliminating the graduated income tax rate capped at 7 percent in favor of a single rate.

Senate Minority Whip Karen Mayne, D-West Valley City, wasn't so sure about raising the food tax.

"Everyone needs to eat," said Mayne, who described the issue as a "tender" one with her constituents. She said increasing that tax wouldn't be their first choice — or hers.

"I think they know it's a fair tax when everybody pays it. But I think we have to be really careful about what we do because wages in our state, they aren't where I think they should be," she said, calling for going after online sales taxes instead.

The reason putting the full sales tax back on food is being talked about now, Niederhauser said, is the proposed ballot initiative that would increase Utah's now 5 percent state income tax rate by seven-eighths of 1 percent to raise $750 million for schools.

"I know that that's a big discussion, a concern with many legislators. I think that's changed the whole dynamic of discussing this issue," he said. "Without the initiative, I think it would have no chance like it's had in the past."

The Senate president said lawmakers are also looking at a gas tax increase, freezing the state basic property tax rate rather than lowering it as housing values go up, or removing the sales tax earmark for transportation to free up dollars for schools.

"We're not closing the door on anything and saying we're just going to deal with it next year," Niederhauser said.

Lawmakers have been working quietly to identify additional revenue sources in the wake of the Our Schools Now proposed initiative, backed by business and community leaders including Utah Jazz owner Gail Miller.

The initiative supporters have testified this session that they're willing to work with lawmakers. But they are also making preparations to begin gathering voter signatures later this year to qualify for the 2018 general election ballot.

"We've been through numerous studies in the last few years. The conclusion is that our schools need greater investment," Austin Cox, campaign manager for Our Schools Now, said in a statement.

Cox said Our Schools Now is "pleased to hear the Legislature is looking at funding options, but the time is now to increase student outcomes, and that requires additional funding."

Niederhauser made it clear Tuesday that whatever is put forward won't add up to $750 million.

"I'm going to say that's not going to happen this session. It's just politically impossible for our Legislature to do that unless we're hearing from our constituents that this is the absolute best thing and most important thing they want us to deal with. And we're not hearing that," he said.

What lawmakers are willing to do, Niederhauser said, is "restructuring" to create a broader based, lower-rate tax structure that could "spark economic activity" and generate more revenue over time.

He said it may take more time to review the long list of tax exemptions and credits, something that will be referred to a legislative interim committee to study and come back with recommendations for the 2018 Legislature.

"It's very difficult on the fly for us to get into the details of those, and it's probably best for an interim study," the Senate president said. "I think we're going to have the revenue and taxation committee have a really deep look at all those."