The Utah legislative task force charged with drafting a tax reform proposal should be commended for its hard work. However, the final product, which was unveiled Friday, should be considered during the next regular legislative session, which begins in January, and not during a special session before then.
The plan is so vast and complicated that a special session now would feel as if the process were being hurried without adequate time for debate, amendment and, most importantly, public input.
Any tax reform plan would result in winners and losers, regardless how unintended. Lawmakers need time to assess public reaction and study the plan’s overall effects.
Most importantly, they need time to consider how the plan would affect the state’s most vulnerable residents, especially the poor and the needy. Part of the plan would restore the full state sales tax on grocery purchases. The idea would be to offset this by granting a tax credit at the end of the year for people who earn below a certain threshold.
When groceries are not subject to the full sales tax, the benefit for low-income people is immediate. An end-of-the-year tax credit, on the other hand, is so delayed as to make the benefit of little value. The reality is low- and moderate-income people would need more money for their monthly grocery budgets immediately to compensate for the extra tax, and that is troubling.
Utahns also would benefit from a hike in the exemptions allowed for dependents when filing state income tax returns, and the state’s flat income tax rate would drop by 0.25%.
What is not clear, however, is how much of this would be offset by a proposal to make gasoline purchases subject to the sales tax, effectively adding about 12 cents per gallon to a 31-cent per gallon gas tax. This, too, would hit low- and moderate-income Utahns the most.
Lawmakers acknowledge this extra tax would be a temporary fix to lagging sales and gas tax revenues. Why not find a more permanent solution now, such as an expanded variable toll system or a tax based on miles driven?
In addition, the plan would add sales taxes to a number of items, including construction materials, textbooks, alternative energy sources such as solar panels, and vending machine food. Taxis, Ubers and other for-hire driver services, as well as a slew of services ranging from wedding planning to streaming media also would be subject to a sales tax.
The plan also would ask Utah voters to remove the prohibition on using income tax funds for anything other than public and higher education, a measure that is bound to generate heated debate as educators worry about a dilution of school funding.
This is a complicated and controversial tax plan that would change the way many people do business, even as it would affect demand for certain products and services.
Impacts to the poor and to small-business owners should not be taken lightly.
Utah, like many other states, faces a gradual diminution in sales revenues compared to other tax sources. Lawmakers’ instincts are right. Shore up the sales tax by shifting it to reflect new economic realities, then free up earmarked funds to provide greater fiscal flexibility.
But impacts to the poor and to small-business owners should not be taken lightly.
Give this grand plan the scrutiny it deserves in a regular legislative session. Listen carefully to public input. Don’t hurry with something so important.