State task force prepares for tax reform, looks to protect financial security of residents

Members of the Utah House work on the floor during a special session at the state Capitol in Salt Lake City, Utah, April 18, 2018. | Associated Press file photo by Rick Bowmer, St. George News

ST. GEORGE — The Utah Legislature has organized and appointed members to its newest working group, the Tax Restructuring and Equalization Task Force, in order to reform Utah’s tax system.

Washington County representatives Lowry Snow, R-District 74, and Walt Brooks, R-District 75, said they are thankful that the state is taking time to consider all its options and that the leadership in the House and Senate are not rushing into anything without proper due diligence.

“Every bill needs the same amount of sunlight in order to give visibility to the public,” Brooks said.

State Rep. Brooks says there were some concerns stemming from the original bill, HB441, he and others from Southern Utah were vocal in wanting to spend more time on.

He says it’s important to allow everyone to see how these proposals will change taxes and what the effects of these changes will be because there could be unintended consequences that would otherwise have been addressed if there was more time.

Brooks introduced a bill last year that would do away with the tax on Social Security. He has already filed it again this year. Brooks explained Social Security benefits are taxed as an income as opposed to considering it taxed when citizens pay into that system. If approved, that proposal could save residents between $500-$1,000 each year. He said this would especially affect those in Southern Utah because of the large retirement population.

Rep. Snow said he does not look for changes that will benefit any one area but for ways to benefit the state as a whole. He said the task force should tackle tax reform from a structural aspect, which may include amending the state constitution.

Snow says the task force should be careful when imposing and cutting taxes as it could potentially harm different areas of the state. He said in Southern Utah, for example, sales tax revenue from visitors helps fund transportation and improving roads.

He said he is concerned with imposing a sales tax on services while reducing sales tax paid by out-of-town visitors because it may create imbalance.

Task force background

Rep. Mike Schultz, R-District 12, and Sen. Daniel Hemmert, R-Orem, sponsored the task force when HB441, which promised to impose new taxes on services as a means to solve growing budget concerns and increase spending flexibility, was pulled after businesses and consumers expressed their discontent during the 2019 legislative session. The bill would have lowered Utah’s 4.85% sales tax and the state income tax, and created a tax cut of $75 million.

L-R: St. George area Sen. Don Ispon and Reps. Lowry Snow, Walt Brooks and Jon Stanard (not pictured) speak as a forum previewing the topics of the upcoming legislative session in Salt Lake City. St. George, Utah, Jan. 17, 2018 | Photo by Spencer Ricks, St. George News

Hemmert said due to the bill’s failure, the budget issue was not remedied, so he and Schultz created the task force to gather more public input and set aside time and resources that would allow representatives to come up with a solution.

A special session will be held later this year for members of the task force to meet and discuss recommendations, but the proposals for the agenda have already raised some eyebrows among residents and representatives. The agenda includes proposals to eliminate income taxes and cut government spending, among other solutions.

Sen. Karen Mayne, D-West Valley City, was named to the task force earlier this month, and said she believes every representative is going into the meetings with open minds and the same belief: that everything is on the table.

“There is not anything special, and there’s not anything that’s being ignored,” she said.

Approaching with open minds

Mayne says she and her colleagues will be looking over every possible option, including restoring the sales tax on food, increasing property tax rates, and using the taxes accumulated from alcohol sales to fund more than school lunches.

Snow, however, said it is his understanding that the task force is not going into these special sessions with preset agendas, and he believes they have been given the responsibility of listening to citizens, receiving feedback and then drafting legislation.

Tax reform has become necessary as the state and the nation become more service oriented, Mayne said. Increased online activity, especially relating to goods and services, has created a bigger need for tax reform than was necessary even a few years ago, according to Mayne.

St. George News

The task force is not only going to have to rebuild the structure, but also look to the future and assess if the newly-created system will last. She says more and more people are doing all of their shopping online and the growing online market has created a different way for people to spend their money.

Sen. Hemmert said he hopes the task force will take the opportunity to reform the state’s tax code, as well. He said there are aspects of the tax code that are grounded in the 1930s and 1960s that no longer apply.

“I would look at this as an opportunity to update our entire tax system to the modern economy and to the current needs of our state and what we project the future needs of our state will be,” Hemmert said.

The state needs money to be effectively allocated to meet the demands of Utah’s growing population, he said. In Southern Utah, for example, he says the biggest needs are water and transportation.

Hemmert also says Utah has been “more pay as you go” and hesitant to borrow money, and this has compelled the state to find other sources of funding for infrastructure investments.

He says no one is saying that the state needs more money, but they are saying the state needs to find ways to spend the money it has differently.

The goal isn’t to find a temporary solution, Mayne said, but to change the tax structure to meet the current demand.

“We’re not going to look at band-aids and moving things around,” Mayne said.

On the table

Mayne further elaborated saying the task force needs to assess how tourism plays into taxes. They use the roads and the state’s services, she said, so the task force needs to examine how to “make everyone pay for the services of the state.”

This July 24, 2018, file photo shows a portion of the 1040 U.S. Individual Income Tax Return form for 2018 in New York. (AP Photo/Mark Lennihan, File)

Taxing business services, Hemmert said, is one of the least efficient taxes. He would like to do away with the personal property tax and amend the Utah Constitution to allow the state to use collected income taxes to be spent on things other than education. Hemmert would also prefer to restore the tax on food.

Mayne said as one of two democrats assigned to the task force, there are particular issues that they are more “tender to.” A tax on food is one of those issues, she said. Mayne also says if that was a possibility, the democrats would have to look at the options and outline what they are comfortable with and what they are not.

Mayne says she wants to ensure that those in need won’t be adversely affected by any changes in the tax structure. Her priority is protecting the financial security of individuals on fixed incomes, like many of the residents in Southern Utah, she said.

Hemmert said if the state was to restore the sales tax on food, he would want to see a tax credit for low income families to safeguard residents from being harmed by the decision.

Senators named to the task force received a tentative schedule on Friday, but there has yet to be a concrete date set for the first meeting, Mayne said. The task force will most likely see a lot of sessions in July and August, and the schedule will be condensed. A more firm schedule should be available within the next week, she said.

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