There is finally the political will among Republicans, the money and the timing to actually do something about the reviled sales tax on food, and what should raise its ugly head: the feared Year 2000 computer problem.
Who would believe it?Wednesday, Gov. Mike Leavitt told the Deseret News editorial board that while it is very unlikely that the sales tax on food could be completely removed all at once, giving a credit on state income taxes for part of the food tax "is very much more likely."
Later Wednesday, in a meeting of the Legislature's interim Revenue and Taxation Committee, members talked about allocating $40 million in income tax next year toward such a credit - which would amount to about $20 a year per person.
But into that discussion came the possibility that any complicated income tax changes should be avoided in 1999, maybe even in tax year 2000, because state Tax Commission computers couldn't handle the modifications at the same time they must accommodate the Year 2000 changes.
It makes sense, said Leavitt, to look at some kind of income tax reductions in 1999. That's because state income tax revenue has leaped forward in the 1990s, growing from between 5 percent and 10 percent a year, Tax Commission economist Tom Williams told legislators Wednesday afternoon.
The state income tax is now the largest revenue producer for the state, topping $1.3 billion in 1998 and expected to grow to $1.6 billion by 2000.
To keep the balanced, three-prong tax structure in state revenues - income, sales and property taxes - somewhat in place, it doesn't make sense to only cut the sales tax from food, said the governor, even if the state could afford it.
An income tax credit trims the state's fastest-growing and largest tax while at the same time gives some relief to poorer Utahns struggling to buy the most basic of needs - food.
An income tax credit for food tax paid "gives relief to those who need it most," Leavitt told the newspaper's editors.
Rep. Ray Short, R-Holladay, Revenue and Tax Committee co-chairman, said he plans to introduce a bill in the 1999 Legislature that would give an income tax credit for food tax paid.
It would come on a per person basis - the more people in a family, the greater the tax cut. Overall, $40 million in state income tax would be trimmed. That equates to between $17 and $20 per person, said Short.
Short told the Deseret News there is growing agreement among Republican leaders that some kind of tax relief should come out of the 1999 Legislature.
Since 1993, Leavitt and legislators have given $250 million in tax cuts.
But they didn't give a tax cut in the 1998 session. In fact, because of federal income tax changes, Utahns actually will pay about $8 million more in state income taxes this year. State taxes are based on federal taxable income, and federal tax cuts mean more taxable income, which translates into greater state taxes owed. The increase amounts to about $35 for the average family of four in the state.
"The question we have to ask is, does it make sense to make (the Tax Commission) make another change to their computer systems before (the) Y2K (problem is solved)?" asked Rep. John Valentine, R-Orem, a tax attorney.
"What you're saying," said Short, "is what sense does it make to give a $40 million tax cut if it costs the state $40 million in lost compliance (taxpayers not paying state income tax because they know screwed up Tax Commission computer systems can't catch them) or other problems."
Committee members voted to ask the tax commissioners to report back within a month on what kind of income tax changes they could make in 1999 and in 2000 and still keep their systems running.
To finally have some kind of food sales tax cut possible and to be foiled by computers is ironic.
Utah is one of the few states in the nation that taxes non-prepared food. Time and again, various groups have tried to get the food tax removed. In the 1990s it was mostly pushed by the minority Democrats in the House and Senate, although leading GOP lawmakers have climbed on board at various times.
Last session Sens. Mike Waddoups, R-Taylorsville, and Scott Howell, D-Granite, teamed up in sponsoring a phase-in approach. For two years citizens would get ever-increasing income tax deductions to make up for food tax paid. In the third year, the sales tax itself would come off.
The bill passed the Senate the final day of the session, but senators knew it would die in the House, and it did.
Short's proposal doesn't come close to compensating Utahns for the actual food tax paid. But it is a first step and better than nothing, he said.
For example, Short passed out material that showed a single person pays around $145 a year in food tax and under his proposal would get a $20 credit. A family of four on average pays $377 a year in food tax, and would get an $80 credit.