Taxes on services remain unpopular in Utah as a legislative task force looks to expand the state’s revenue base by adding sales taxes on new things. That includes a range of services, from home repairs and tutoring to streaming media like Netflix.
Several small business owners and representatives turned out to oppose those new taxes Tuesday night during the first of three public hearings scheduled for tax reform drafts.
A proposal calling for new taxes on services “adds more to an overflowing plate of responsibilities” of small business owners, said Katrina Long, who owns Summit Spa & Float, which has locations in Spanish Fork and Park City.
“It forces me to raise my rates, incur more costs in merchant fees. It adds more paperwork, accounting and decreased profitability,” she said.
Long and others accused lawmakers on the task force of “cherry-picking” services to tax. A controversial bill that failed earlier this year included attorney and realtor fees, which are not part of any new proposals.
Others at the five-hour hearing opposed adding new taxes on touring companies, private lessons for music and sports and veterinarian visits. Lawmakers are also proposing a cut to the income tax, which pays for public education. That has some advocates worried about less money for schools.
The recommendation put forward last week by the task force co-chairs would also raise the grocery tax to meet the regular 4.85% sales tax and repeal a number of current tax exemptions.
State leaders say growth from the sales tax has not been keeping pace with other economic growth in the state, and they want to restructure the state tax code to stabilize revenues. The legislative task force spearheading the issue was created earlier this year after a tax reform effort failed in the final days of the general legislative session.
Separate counter-proposals by the two Democratic members of the task force would leave the state grocery tax at its current 1.75% but raise taxes for candy and soda.
“People need to eat to live,” Sen. Karen Mayne, D-West Valley City, said in defense of keeping the grocery tax low. “I will not give up my Diet Coke or my Milk Duds, but those are an optional thing that I choose.”
Her draft also calls for exemption of sales taxes on feminine hygiene products, which task force co-chairs signaled that they will continue to consider in coming conversations.
A proposal by Rep. Joel Briscoe, D-Salt Lake City, to impose a carbon tax on energy and fuel use was met with skepticism by several Republicans on the task force who worried that high costs would force businesses out of state and cost consumers. Briscoe said some of the more than $670 million raised through the carbon tax could be given back to taxpayers through tax credits or dividends.
At the end of the hearing, Republicans on the task force voted to open a bill file for a resolution to remove the constitutional earmark on income taxes for education funding. House Majority Leader Francis Gibson, R-Mapleton, said there are ongoing negotiations about how to keep education funding stable if that change is implemented. To do so would require a majority vote from lawmakers in both chambers and approval from voters.
Co-chairs of the task force say they will take public comment from the first meeting to refine their proposals and release a new version before the next public hearing on Nov. 7.
Gibson has previously said he is pushing for a special session in December to pass what would likely be a package of bills, though after the hearing Tuesday he acknowledged that there is “so much water to go under the bridge before then.”
