ST. GEORGE — A grassroots organization founded by citizens who say they are fighting against Washington D.C.-style politics in Utah argue that the Tax Restructuring and Equalization Task Force has continuously misled taxpayers.
Utah Legislative Watch director Brett Hastings said the rise and fall of last year’s failed tax reform bill — HB 441 — concerned him and a number of other businessmen and citizens, which prompted them to form a group to actively watch and participate in the tax reform process.
Not soon after, the task force was formed with HB 495 and has since completed an eight-stop town hall listening tour around the state. Hastings said he felt the creation of the task force was a step in the right direction, adding that he hoped the task force would step back, look to see if there was a problem and get the conversation started.
When Hastings attended the first meeting in Brigham City, he said he was disappointed.
“It wasn’t really a listening tour,” Hastings said. “It was some sort of propaganda campaign to convince Utahns that we have some sort of dire problem within our tax structure, and it just isn’t true.”
Task force co-chair state Sen. Lyle Hillyard, R-District 25, has said from the beginning that now, when the state of affairs is not in crisis, is the perfect time to address future problems. It’s the rainy day fund, he argued, that has kept the current tax structure afloat.
As it stands, Hillyard says the state’s tax base will not be able to support the growing population in the next couple of years, at which time Utah will find itself unable to fund public services, such as public safety, health and human services, public employees and clean air initiatives.
“We’ve got to have a broader base for our sales taxes,” he said. “It’s not that we’re looking for more revenue, but we’ve go to have more flexibility.”
Hillyard asserted that the lack of flexibility is from a sales tax system that was meant for consumers in the 1930s and has not adapted, as the taxpayers’ needs and wants have been met by virtual businesses.
However, Hastings argues the data doesn’t support the idea that Utah’s tax system is broken and needs a radical solution. Hastings followed the task force to three more meetings, voicing his concerns at each one.
It was at one of the meetings that Hastings met David Stringfellow, the chief economist at the Utah State Auditor’s Office. Stringfellow told Hastings, the task force and the audience that the information presented during the town hall meetings was incorrect and misleading.
Hastings said Utah Legislative Watch members began to wonder where the information had come from and who produced it. HB 495 had appropriated funds to pay the lawmakers involved in the task force, but since then, no money had been set aside to produce the materials used during the listening tour.
Utah Legislative Watch submitted an information request under the Government Records Access and Management Act, hoping to reveal who had paid for the content and where it came from. The records request revealed that the Governor’s Office of Management and Budget paid for the production of materials.
Hastings said it looks like the executive branch has an agenda and gave information it produced to the legislative task force to spread to the public.
“That was really curious to me, and I think it’s troublesome,” Hastings said. “We’re seeing collusion between the executive and legislative branch to spin a dialogue in one particular way.”
He says the conversation has been “one-sided and completely unsupported by the data.” Hastings argued that Utah tax receipts are at record highs and are projected to keep rising throughout the years, especially following the recent Wayfair decision at the Supreme Court surrounding taxes on goods purchased online.
Hastings said there was a shift between consumers purchasing goods and services, but it occurred in the 1990s and has since leveled out, which was reflected in a 2017 report released by the Utah State Auditor’s Office. In that same report, it wasn’t the revenue but the earmarks that were causing a problem within the general budget.
“It was the opinion of the State Auditor that is the reason the general fund doesn’t appear to be growing as fast,” he asserted. “It’s just an illusion, because had that money all flowed into the general fund and then be used coming out of the general fund for whatever they needed, the graph would show that it’s keeping pace just fine.”
Hastings says there are “simple and elegant” ideas that are not being considered in the discussion, such as placing a tax on credit, which would be less complicated and yield the same result as potential changes that the task force is talking about.
“Any time you make tax policy that is too difficult to understand, it’s bad tax policy, in my opinion,” he said.
A good process, Hastings said, is open, transparent and welcomes ideas from both sides, adding that it concerns him that this doesn’t seem to be happening.
Task force reviews listening tour
Following the conclusion of the task force’s town hall meetings around Utah, task force members met Aug. 19 to summarize the body’s listening phase and verify the challenge. Committee staff also proposed possible reform options to consider in the future.
Political analysts Ryan Hunter and Alex Janak presented a potential policy option to members of the committee, taking a closer look at restoring full sales tax on food while creating tax credits through earned income, Social Security, military veteran’s retirement benefits and income tax.
In six states, including Utah, unprepared food is taxed at a lower rate compared to tangible personal property. Meanwhile, 32 states and the District of Columbia exempt groceries from sales tax and seven states tax groceries at the general rate.
The proposal outlined multiple options in relation to food tax, including taxing all food with the general rate, which would result in an estimated $250 million during the 2021 fiscal year.
While the tax on food would be a relatively stable revenue source, it is also regressive in nature. Hunter said lower-income households spend more of their disposable income on groceries compared to higher-income households, disproportionately impacting lower-income households that earn enough income to not qualify for federal benefits.
These effects, however, could be offset through a number of tax credits, which are being considered.
The task force is scheduled to reconvene in room 30 of the House building in Salt Lake City Sept. 5 at 4 p.m.
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