Tax Reform Takes Shape In Latest Draft — Minus Alternatives For Education Funding
Friday night, a legislative task force released its third and likely final proposal for restructuring the state’s tax code. It comes ahead of a public hearing scheduled for 5 p.m. Monday.
Similar to previous versions, the 195-page draft bill would raise taxes on food and gasoline — while imposing the state’s 4.85% sales tax on new services. Following public opposition in recent hearings, that list has been significantly whittled down since the first proposal was released.
Services including home repairs, veterinarian visits and fitness classes would continue to be untaxed. Laundry machines and car washes paid for with cash or coins would also remain exempt.
The proposal also includes a tax exemption for feminine hygiene products, a longtime goal of some Democratic lawmakers.
But the leaders of the task force seem set on adding sales taxes to services including ridesharing, parking fees, pet boarding, and streamed media like Netflix.
Under the draft bill, Utah’s corporate and income tax rate would fall from 4.95% to 4.64% — slightly higher than the 4.58% previously proposed.
The new version shifts funding for higher education and the school lunch program from the education fund to the general fund. It does not include any major changes to funding models for public schools, though that could show up in a separate bill. The topic is on the agenda for Monday’s hearing.
Some lawmakers have complained that the constitutional earmark on income taxes for education has limited the legislature’s spending flexibility. Earlier this week, Speaker Brad Wilson, R-Kaysville, suggested districts should lean on local property taxes, which help fund school districts. Wilson said negotiations with the education community over funding options are ongoing.
Hidden deep in the bill is a provision that would limit vehicles in the carpool lane to those carrying three or more people beginning in 2023. After that, single- and double-occupant cars would have to pay a toll in the HOV lane. Currently, cars carrying two or more people are allowed, along with single drivers who pay a toll. On Wednesday, Wilson said that provision would be stripped out of the bill, but it is in the most recent draft — it just has a later effective date.
For more than a year, legislative leaders have grumbled that maintaining Utah’s roads costs $600 million a year on top of revenues raised by the gasoline tax. Some have called for “road user fees” as an option to offset road costs.
Lawmakers have said they want to pass a tax reform package in a December special session to implement an income tax cut by 2020. In order for a bill to take immediate effect, it requires approval from at least two-thirds of lawmakers in both chambers, which could be a close vote.
Despite proposed grocery and earned income tax credits, the proposal to impose the full sales tax on unprepared food has drawn criticism from Democratic and some Republican lawmakers. Additionally, removing the earmark for education funding could be a sticking point for some in Utah’s House and Senate. It would also require approval from voters.