SALT LAKE CITY — Senate leaders readied legislation to restore the full state sales tax on food after the House's efforts on tax reform faltered last week, but now want to see the issue taken up by a new legislative task force.
"It was too late," Senate Majority Whip Dan Hemmert, R-Orem, said Wednesday of the bill he was having drafted to boost sales tax revenues while dropping income tax collections, in part through a food tax credit for some Utahns.
"I liked this because it was simple. People could understand it. It could get close to the same outcome," Hemmert said. "The con was we had four days left. … So it was just too little, too late."
The 45-day legislative session ends at midnight Thursday. The decision to give up on the House tax reform bill, HB441, resulted in an impasse over completing the $19 billion budget that wasn't resolved until Wednesday.
Part of the deal made by Republican House and Senate leaders calls for the formation of a tax reform task force charged with making recommendations for a possible special legislative session this summer.
There's already been talk of going beyond extending sales taxes to a wide variety of services while lowering the state sales and income tax rates, as HB441 would have done, to offset lagging growth in sales tax revenues.
Among the options that have come up is imposing a statewide property tax, seen as an even tougher sell than expanding the shrinking sales tax base as consumer spending shifts from goods to services.
Raising the 1.75 percent sales tax on food to the full 4.7 percent state rate could be difficult, too. The reduction was made during former Gov. Jon Huntsman Jr.'s administration at the same time there was a major income tax cut.
Gov. Gary Herbert told the Deseret News Wednesday that "nothing should be taboo" when it comes to tax reform, including restoring the sales tax on food. "Whether that's going to fly or not remains to be seen."
Herbert, who served as Huntsman's lieutenant governor, said the House "seems to be very opposed to it." The governor said he prefers "a more targeted approach," such as food stamps and other assistance programs.
The Senate has long supported treating food the same as other goods to stabilize the sales tax base, while the House passed a bill removing the sales tax on food entirely as recently as last year. That bill failed in a Senate committee.
Hemmert said he "got really excited" about taking the issue on again once he realized it would add just about the same amount, $240 million, to the state's general fund that's made up largely of sales taxes, as HB441.
The legislation he had prepared but never introduced would have included a $75 per-person income tax credit to offset taxes paid on grocery store purchases. The $60 million credit is aimed at families earning up to $65,000.
"They will actually be money ahead," he said. "You can give them more money than that tax differential will cost them through a targeted tax credit. They would have to file a tax return."
Utahns who don't file a tax return likely already have a low-enough income to qualify for food stamps so their grocery store purchases are already exempt from sales taxes, Hemmert said.
His bill would also have reduced the 4.95 percent state income tax rate to 4.79 percent, including the $75 million tax cut proposed for HB441, and a $55 million child tax credit to help families impacted by federal income tax changes.
Hemmert said he'd like to see the bill used to help "jump-start" discussions about tax reform in the new Tax Restructuring and Equalization Task Force created as part of the budget deal worked out between House and Senate Republican leadership.
The legislative task force is expected to make an initial report in June and final recommendations in early August after hearing from the public. One of the knocks against HB441 is that it didn't surface until late in the session.
Those opposed to restoring the food tax will have the chance to be heard, Hemmert said. "That’s the whole point of this. One of the reasons we’re doing this is so many people said, ‘You surprised us.’"
The governor said he hopes everyday Utahns will "help us find the solution" to rebalancing state revenues.
"It's not over. We're kind of going into extra innings," Herbert said. "I think there will be a significant outreach to the public across the state to give them an opportunity to look at what the situation is (and) understand the problem."
In his $19 billion budget released last December, the governor recommended what he called tax modernization, broadening the sales tax base to include a wide range of services while lowering the rate and giving Utahns a $200 million tax cut.9 comments on this story
Last week, the governor, along with House Speaker Brad Wilson, R-Kaysville, and Senate President Stuart Adams, R-Layton, announced work on tax reform would wait until after this session.
Asked about the deal reached by Wilson and Adams to use $320 million in one-time money to fund ongoing programs to pressure work on tax reform, Herbert said that wasn't the only option, but it "did get the budget done" before the session ends.
"I think we have to do tax reform," the governor said. "This keeps everybody focused."