Lawmakers got their first opportunity to talk about removing the sales tax from food during a House committee hearing Monday. And talk was all they did.
Members of the House Revenue and Taxation Committee did not vote on any of the five bills they heard. Committee Chairman Frank Knowlton, R-Layton, said no action would likely be taken until an estimate of the cost of each of the bills is available later this week.Two of the bills discussed were identical. The two bills, introduced by Rep. Blaze Wharton, D-Salt Lake, and Rep. Pat Nix, R-Orem, would remove the sales tax from food as of July 1.
This is the legislation sought by advocates of the three failed tax initiatives, and it drew the most attention at the hearing.
Wharton described taxing food as "horrible" and said it is the tax that hurts the poor most.
"It's a tax break we can give all the people, all at once," he said, noting that it is also the most visible way to share the state's surplus with taxpayers.
Gov. Norm Bangerter has already proposed giving taxpayers a $19 million break out of the state's projected surplus of between $84 million and $106 million.
Neither the governor nor any of the legislative leadership has committed to exactly where the tax cut should be made, although as of late last week, Republicans were leaning toward a reduction in property tax and Democrats still appeared to favor looking at sales tax.
A plan to restore the percentage of federal income taxes paid that can be deducted from state returns from the current one-third to one-half seems to have lost support, with GOP lawmakers fearing it will be seen as a tax break for the wealthy.
The party split was not as evident at Monday's hearing, with two Democrat-sponsored bills being considered alongside three Republican-sponsored bills.
Much of the discussion on the immediate elimination of sales tax on food, which the Utah State Tax Commission estimated would cost $90 million in lost sales tax revenue, centered on the effect it would have on local governments.
Local governments receive roughly one cent of the sales tax, with another one-quarter cent collected along the Wasatch Front for the Utah Transit Authority. Smaller communities, Rep. Lee Allen, R-Tremonton, said, are especially dependent on the sales tax collected by local grocery stores.
Allen read a letter from the mayor of Tooele that warned the community would lose an estimated $250,000 annually if the sales tax is removed from food, about one-third of the total sales tax collected.
Other lawmakers challenged Wharton's assessment of taxing food. Rep. Jeril Wilson, R-Provo, said removing the sales tax from food is "a popular and emotional issue" but asked where the state's budget should be cut to make up for the lost revenue.
Among the suggestions made were eliminating some of the many sales tax exemptions given to businesses and even disallowing any deduction on state income tax returns for federal income taxes paid.
Other bills considered were less controversial. One, by Rep. Ted Lewis, D-Salt Lake, would give families up to three credits of $25 each toward sales taxes paid annually on food and non-prescription medicines.
Lewis said his bill would avoid any of the problems associated with removing sales tax on food while still helping the poor pay their food bills. He said the money could be returned to families too poor to file state income tax returns.
Another bill, introduced by Knowlton, would reduce the overall sales tax rate by one-half cent as of Jan. 1, 1990. That would help taxpayers with all necessary expenses, not just food, he said, and make up for the one-half cent increase that lawmakers had passed to pay for flood damage and never removed.
Rep. Jed Wadsen, R-Salt Lake, also spoke of his bill, which would gradually reduce the sales tax on food to zero over a three-year period. His bill was opposed by the Utah Retail Grocers Association because of the confusion it would cause at the checkstand.
Merrill Cook, who ran for governor on a platform of supporting the tax initiatives, told the committee that his survey shows that the majority of Utahns want the sales tax removed from food oppose cuts in property or income taxes. He spoke on behalf of the Tax Limitation Coalition, the group behind the tax initiatives.
Howard Stephenson, representing the Utah Taxpayers Association, said their membership prefers a full restoration of the deduction for federal income taxes paid.