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Tax Reform Law Will Be Repealed, Republican Leaders Announce

Government building - lighted in the morning.
Elaine Clark
/
KUER

Updated 4:47 p.m. MST 1/23/2020

Confronted by the possibility of a referendum against a tax reform law approved in a December special session, Republican leaders announced Thursday they will repeal the controversial measure.

“When the 2020 general legislative session opens Monday, legislative leaders will introduce a bill to repeal the changes made in the special session,” Gov. Gary Herbert, House Speaker Brad Wilson and Senate President Stuart Adams wrote in a joint statement. “The intention is that the bill will be ready for the governor’s signature before the completion of the first week of the session.”

The announcement comes just two days after opponents of the law say they submitted more than 150,000 signatures against the measure in an effort to put it before voters in November.

The law was pitched as a tax cut for Utahns that would cut state spending by $160 million. It increased sales taxes on food, fuel and services while cutting the overall income tax rate and creating new tax breaks aimed at helping low- and middle-income families.

Opponents of the bill ran the political spectrum. Utahns said they opposed the sales tax hike on unprepared food, cuts to the income tax, which pays for Utah schools, and the way lawmakers approved the measure in a special session just before the holidays, among other criticisms.

At a press conference Thursday, Herbert said “the voice of the people have spoken” and encouraged lawmakers to “not only push the reset button, but maybe the pause button” on efforts to rewrite the state tax code.

“I think we’ve learned some lessons in this process,” he said. “Let’s reflect upon … what we’re trying to do and see if there’s a better way to do it.”

Herbert, who is not seeking another term, said it may be best for lawmakers to “take a breather” and return to the issue over the summer or in 2021.

Senate President Stuart Adams, R-Layton, said it was the pressure of crafting a state budget with unknown numbers that forced leaders’ hands.

“We think we did the right thing, but we have to put a budget together. In order to put the budget together, we need certainty,” he said. “We’re trying to respond to what we were hearing from the people, and we’ll go ahead and repeal.”

Still, Adams said slowing revenue from the sales tax means less money for the general fund, which means proposals like expanded mental health services and affordable housing may not be fully funded.

The Senate president said he would be fine with waiting until 2021 to try again on tax reform proposals.

"By next year, we’ll have a new governor and I think it might be a good idea to wait and see who that new governor is and have the fresh eyes,” he said. 

Still, the governor and legislative leaders say with the law’s forthcoming repeal, their original challenge still exists: restructuring the state’s tax code as revenue from the sales tax slows. 

“We will take time to reset and address this issue in the future in a way that allows all Utahns to fully understand the challenge we face, engage in the debate over the best solutions and, ultimately, enact policy that best positions Utah for decades to come,” the joint statement read. 

Declaring Victory

Opponents of the tax law celebrated the announcement and said it signaled state leaders buckling under pressure from the potential referendum.

“They underestimated how big of a hornet’s nest they kicked and hopefully they finally realized that people didn’t like the bill,” said referendum sponsor and former Republican lawmaker Fred Cox. “It’s showing that they’re starting to listen — at least, that’s what we hope for.”

However, Cox added that he still wants the referendum signatures counted and verified by county clerks. Organizers need close to 116,000 signatures from registered voters across the state in order to put the measure on the November ballot. By Thursday afternoon, the Lt. Governor’s office said more than 91,000 signatures had been verified, with more to count by the Feb. 4 deadline.

Cox said it doesn’t matter to him whether the law is repealed legislatively or through a referendum.

“That’s the result that we wanted — is for the bill not to take effect — and certainly we want the governor and the legislature to actually listen to the people,” he said.

Gubernatorial candidates also celebrated the looming repeal. Candidates from both sides of the aisle vying to replace Herbert opposed the tax reform law.

“It is always best to listen to everyday Utahns — not just when threatened with a costly referendum,” said Republican Aimee Winder Newton.

“The people of Utah have sent a strong message to the legislature and Governor’s office that they do not want this tax bill. This is Utah grassroots at its best,” said Jeff Burningham, another GOP candidate.

House Democrats, who all voted against the bill in December, also applauded the proposed repeal. 

“Now that tax reform is back on the table, we urge our colleagues not to rush the process,” the Utah House Democratic Caucus said in a statement. “While we believe Utahns understand the importance of reforming our tax system, our constituents want a fairer and simpler plan.”

Back To The Drawing Board

The announcement is the second time in less than a year that lawmakers have halted or backtracked efforts to rewrite state tax code.

During the 2019 legislative session, Republican leaders unveiled a hefty bill that would have imposed new sales taxes on services ranging from attorney fees and health care to landscaping and salon visits, while cutting the overall sales tax rate.

After loud public opposition to new sales taxes on services, leaders pulled the plug on the bill and formed a task force made up of lawmakers and tax experts to study the issue during the interim.

Over the summer, the task force held town halls and collected public input on possible ways to restructure state revenue collections. In the fall, the group held several meetings to workshop a proposal that eventually became S.B. 2001, the measure passed and signed into law in December.

While Herbert suggested the Legislature step away from the issue for now, he acknowledged that it’s ultimately up to lawmakers. 

“Who knows what the Legislature will do? My crystal ball’s a little foggy in that regard,” he said. 

Still, he applauded lawmakers for taking on the issue. “To their credit, they didn’t shrink from the challenge,” he said.

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