SALT LAKE CITY — There's going to be a $75 million cut in the state sales tax rate in the massive tax reform bill that's now being revised, House Speaker Brad Wilson said Tuesday.
"It's complex. I understand that," Wilson, R-Kaysville, told House Democrats during their midday caucus about HB441, sponsored by Rep. Tim Quinn, R-Heber City, calling the bill "the right fix" for what is seen as a structural imbalance in the budget.
A House vote on Quinn's bill is expected Thursday, once a new version is drafted to cut the current 4.7 percent state sales tax rate over three years starting in 2020 while extending sales taxes to a wide range of services.
There will be separate rates through 2022 in the bill — higher for the existing tax base, made up almost entirely of goods, and lower for the new sales taxes on everything from haircuts to lawn care and legal services.
By 2022, both goods and services would be taxed at the same rate, 3.1 percent in the original bill. Quinn estimated the $75 million cut could drop the rate by 0.1 percent in the first year of the phased-in reductions.
Just what those reductions would be each year is still being calculated, he said.
As an example, Quinn told House Democrats the rate on the existing tax base could start at 4.1 percent in 2020 and drop to 3.7 percent in 2021, while the rate on newly taxed services could start at 1 percent and climb to 2 percent in 2021.
However, issues surrounding what's called tax "pyramiding" may drive that number up rather than down. Lawmakers are looking for a way to avoid stacking taxes on top of taxes on services.
The bill still includes a reduction in the state income tax rate from 4.95 percent to 4.75 percent, as well as targeted tax changes to help families, the poor and the elderly.
Quinn acknowledged his bill is getting more complicated but said lawmakers will have time to work on it before the income tax changes take effect Jan. 1, 2020, and the first sales tax cut and the expansion to services begin on April 1, 2020.
"There’s so many moving parts. I mean, (the bill is) 257 pages. There’s so much complexity to this that it's boggling," he said. "We want to make sure that we see as many unintended consequences as we can and make adjustments."
The announcement of just how much of a tax cut is being proposed comes after lawmakers learned what was a $1.3 billion budget surplus had fallen by about $200 million.
Wilson had called for a $225 million tax cut in his opening address to lawmakers at the start of the 45-day session that ends March 14, up from the $200 million originally sought by Gov. Gary Herbert.
But with the decrease in revenue growth, the size of a tax cut has been up in the air.
Asked about the proposed $75 million cut, the governor's deputy chief of staff, Paul Edwards, said "it would be unfair to comment on specific pieces of the package in isolation. We are, however, pleased with the overall direction of their work."
"Seventy-five million is probably realistic with our current budget," Senate President Stuart Adams, R-Layton, said. "I'm more concerned about the policy in the bill than I am the tax cut."
Adams said the Senate hopes to see the bill passed out of the House by the end of the week. "We would like to give it a committee hearing and our committees end next Monday," he said.
Senate Republicans have not talked yet about a $75 million tax cut, but House Republicans hashed out that and other new details in the bill in a closed-door session that stretched an hour longer than scheduled.
"I think our caucus was receptive to that. Do we want it to be more? Absolutely. But we have to be realistic with our budget," House Majority Leader Francis Gibson, R-Mapleton, said.
Gibson said the speaker, Quinn and others involved in the tax reform effort are responding to concerns raised about the bill. "There's no doubt about it, it's a change. And with a change comes consternation, debate, struggles," he said.
Asked if the caucus was behind the bill, Gibson said he was not going to speak for his fellow House Republicans.
"I think everyone can see the progress we're making," he said. "I think people are going to have to understand that we're here to do big stuff. And sometimes big stuff is hard decisions. I'm not saying we're not there."
House Democrats have received plenty of attention from the GOP leaders behind the tax reform bill since it was introduced just last week, with visits from Quinn, House Majority Whip Mike Schultz, R-Hooper, and on Tuesday, the House speaker.
House Minority Leader Brian King, D-Salt Lake, said Wilson's pitch to the Democrats "suggests there's a lot of uncertainty. I think it suggests that the supermajority caucus is not consolidated, is not 100 percent behind this."
One of the biggest concerns raised by Democrats about the tax reform bill has been the impact on public education of any income tax cut. Tuesday's caucus was no different.
The speaker told the Democrats the income tax is more volatile and, "when the bad times come, you want to have general fund money in education." He said the bill will "help whipsaw education a lot less."13 comments on this story
Under the Utah Constitution, state income tax revenues must be used for schools, including higher education. General fund revenues, made up largely of sales taxes, have been used to help pay for higher education.
But the sales tax base is shrinking as consumers spend more on services than they do on goods. So the governor and GOP legislative leaders have been working to broaden the sales tax base to services while lowering the rate.
Wilson promised the Democrats the state will work over the summer to educate the public about the tax reform plan and help businesses that would be subject to collecting and remitting sales taxes.