The night earlier this month when the Utah legislature passed a sweeping tax reform bill, former Republican state Rep. Fred Cox was watching intently on his phone.
“It went to the House, they didn’t get their two thirds. And I thought, ‘Yes! This is subject to referendum,’” Cox said.
Cox started calling his political allies, both Republican and Democrat, to start work on a referendum for the 2020 ballot that would overturn the newly passed bill.
The law cuts the state income tax while raising taxes on groceries, fuel, and a range of services like ride sharing and streaming services.
“They need to throw the whole thing out and start over,” Cox said. “There really isn't much in here to keep. We’re raising the fuel costs for people driving around town. They’re walking into the store with less money. They’re walking out of the store with less food.”
A number of candidates for Utah governor — Democratic and Republican — are backing Cox’s proposed referendum to repeal the new law, signed by Gov. Gary Herbert last week.
Low-income people get a tax rebate designed to offset higher taxes on groceries. But supporters of the referendum argue families will still be hurt.
“Sometimes as government leaders, we think we know what’s best for people,” said Republican candidate for governor Aimee Winder Newton. “But sitting down with them and even showing them the math on what this increase would be versus what that annual grocery credit would be, it was eye opening to me that they still said that the tax increase on food would be a negative impact.”
Backers of the law say it will fix an imbalance in the budget: New income tax revenue is projected to be more than 10 times higher than that of the sales tax, which has slowed in recent years as Utah shifts to a more service-based economy. Income tax revenue funds education in the state, while sales tax money goes to the General Fund. Cutting the income tax amounts to a cut in education funding, which supporters of the law say can get worked out in the 2020 legislative session.
“As our economy has grown and changed, taxes collected from the sale of goods and services are not keeping pace with the needs of our state,” Gov. Herbert wrote in a blog post on his website, which was originally published as an op-ed in the Deseret News. “The truth is, unless changes are made to how we collect taxes, we run the risk of eroding funding for the aforementioned purposes. This creates untenable vulnerabilities for the people of our great state and for all sectors of our healthy, vibrant economy.”
But Republican candidate for governor Jeff Burningham says the state should have looked at its spending more closely before passing this law.
“There is no revenue problem,” Burningham said. “I’m worried we have a spending problem. So I’ve been calling for a top to bottom audit of the state government. I think it’s time for a fresh perspective and a fresh set of eyes in the governor’s office and to look where we can be more efficient.”
The tax reform law amounts to a $160 million overall tax cut, with further one-time cuts.
“When it’s a bipartisan group like this,” said Zachary Moses, the lone Democrat running for governor, “that’s when you realize that the legislators that voted for this were not listening to their constituents.”
Fred Cox said he doesn’t yet know how many signatures have been collected for the referendum, but points to a Facebook group he created with roughly 12,000 members as evidence of support for the referendum. It needs 115,000 signatures by the end of January to qualify for the 2020 ballot.