Utah’s 45-day legislative session came to a close last week. Although lawmakers won’t begin another general session until next January, discussion on important issues hasn’t stopped.
“The big one that is still hanging over us is tax reform,” Rep. Val Potter, R-North Logan, said.
The need to address tax reform is something Reps. Casey Snider and Dan Johnson, as well as Sen. Lyle Hillyard all echoed.
“We have a fundamental structure problem when it comes to our tax system that we are still going to have to address,” Snider said. “That is a conversation that needs a lot more time and thought than what we were able to give it in a short amount of time. I look forward to that dialogue.”
The issue of tax reform was identified by legislative leadership as one of the main goals for the 2019 session. However, the bill outlining the specifics was released just a few weeks before the session came to a close. Because of this, there was not enough time to work through the concerns of both lawmakers and members of the public.
Potter said this is one of the reasons he doesn’t think reform was accomplished this session.
“We released it to the public prematurely,” Potter said. “We, as a legislature, didn’t have a chance to discuss it among ourselves. Then we should have released it to the public so that they understood it.”
According to Potter, lawmakers should have worked to help people understand why tax reform is needed and asked for public input before moving forward with plan.
“We didn’t handle it properly with the public,” Potter said. “Many people were caught off guard with what we were proposing.”
The need to reform the state’s tax structure comes from the issue that while income tax is growing, sales tax is shrinking as the economy shifts from goods to services.
Utah’s constitution requires state income tax to go to education. This means that sales tax makes up the general fund that essentially pays for everything else.
Because services are not taxed, when people spend more on services than goods, the general fund shrinks.
“Fundamentally, the system that we have had established in place for some time, the world that it was established for, has changed,” Snider said.
Snider and other state lawmakers have said the solution for this is broadening the base while lowering the rate.
The issue that then arises is how to tax these new items in a way that is equitable to the community. Lawmakers have said that the plan would include lowering the income tax so that state taxes remain revenue-neutral despite the new service taxes.
However, as services are taxed that have never been taxed before, it may not feel so “revenue-neutral” to the public.
“You have to be more thoughtful in what you do,” Hillyard said. “It is a very complicated area.”
Snider pointed out that this could lead to the inadvertent layering of taxes, which he does not believe is an equitable way to address the issue.
To help think of creative ways to move forward with taxing services as well as learn what is important to the citizens of the state, meetings will be held to listen to constituents.
“We are going to hold town halls right here in Northern Utah and right in Logan,” Johnson said. “We are going to get specific ourselves and meet with people. So I think that is going to be a huge step forward.”
Currently there is talk from legislative leadership about hosting these meetings and developing a tax reform plan all before July when the Legislature could meet in special session to vote on the issues. Hillyard said he thinks that is optimistic.
“I think they are not very realistic to think they are going to get it done between now and July,” Hillyard said.