Is federal tax reform a windfall for Utah? Lawmakers preview tax proposals going into legislative session

The Utah Taxpayers Association hosted a conference Jan. 8 in Salt Lake City at which state legislators discussed the potential impact of federal tax reform on Utah. | Photo from Utah Taxpayers Association Facebook page, St. George News

SALT LAKE CITY (AP) — On the heels of the federal tax overhaul signed by President Donald Trump in December, Utah lawmakers are still calculating how it will affect their plans to overhaul the state’s tax system.

Utah’s tax system, like many states, is linked to the federal tax code, but legislative bookkeepers are still trying to figure out how the major rewrite at the national level will affect Utah’s coffers.

House Speaker Greg Hughes, speaking Monday at a conference hosted by the Utah Taxpayers Association, said Utah budget analysts were predicting the state might receive an extra $75 million to $115 million in tax revenues because of the changes in Washington.

But Senate President Wayne Niederhauser cautioned soon after Hughes spoke that the latest Utah estimates show the federal overhaul might not create a windfall for the state.

Hughes, Niederhauser and other legislators offered broad outlines Monday of some of the ideas they’re exploring for the upcoming legislative session, but more than two dozen tax-related bills have yet to be publicly unveiled.

A look at tax proposals in the works:

Sales tax

Utah lawmakers last year considered raising the state sales tax on groceries up to about 4.4 percent from its current rate at 1.75 percent. They backed away from the unpopular plan because it wouldn’t do enough to stabilize Utah’s sales tax collection even in the case of an economic downturn. Critics said the plan to raise taxes on food would disproportionately hurt the poor.

This year, Rep. Tim Quinn has proposed eliminating the state grocery tax entirely, though cities and counties could still impose the small share they add on. In return for cutting the grocery tax, Quinn’s bill would raise Utah’s overall sales tax rate to 4.94 percent, up from its current rate of 4.7 percent.

Income tax

Republican Sen. Howard Stephenson, of Draper, said legislators are still trying to calculate how the federal tax overhaul will change Utah’s income tax collections.

Stephenson, who co-chaired a committee last summer that studied Utah’s tax system, said the state may end up changing some of its exemptions and deductions or tweak its income tax if it appears the state will be inadvertently taxing more income. For example, Stephenson said the state could drop Utah’s income tax to 4.9 percent from its current rate of 5 percent.

Manufacturing taxes

Utah exempts equipment used in manufacturing from sales tax as long as the equipment lasts more than three years, but Stephenson said legislators plan to get rid of that three-year requirement and broaden the exemption so that all manufacturing equipment and materials won’t be subject to sales tax.

Stephenson said that sales tax for manufacturers plays a big role as businesses look at where they’ll operate, especially if they consider adding more workers and more shifts, which would wear out equipment faster.

“We basically punish you if you invest in Utah jobs, or if you have an abrasive or a caustic industry that wears equipment out,” Stephenson said.

Transportation funding

As cars have become more energy efficient and more hybrid vehicles hit the road, taxes on gasoline that pay for road improvements haven’t been able to keep up with the wear and tear that more energy-efficient vehicles cause to roadways.

Stephenson said Monday that all users of the roads should be paying their fair share, so legislators are exploring this year whether to require electric vehicle owners to pay an additional annual fee when they renew their vehicle registrations.

Stephenson said that in the years ahead, legislators may consider also charging drivers based on the miles they’ve traveled — something a handful of states have started experimenting with.

Written by MICHELLE L. PRICE, Associated Press

Email: [email protected]

Twitter: @STGnews

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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