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Utah State Legislature passes tax overhaul bill in special session

Posted at 9:20 PM, Dec 12, 2019

SALT LAKE CITY - The Utah State Legislature has passed a bill that overhauls the tax code in a special session.

The Utah State Senate voted 20 to 7 in support of the bill, with two Republicans joining Democrats in opposing it.  The House of Representatives voted 43 to 27. On a concurrence vote, one lawmaker left and the Senate lost its two-thirds majority with a 19-7 vote.

The lack of a two-thirds majority means the bill could be subject to a citizen referendum.

Speaking to reporters after the special session, House Speaker Brad Wilson, R-Kaysville, said he did not believe that anyone would seek to undo it -- not with roughly $240 million in tax cuts offered to Utahns.

"I'm glad we fixed our structural imbalance. We provided a sizable tax cut to the citizens," he said.

The Speaker said Governor Gary Herbert has signaled he will sign the bill, with tax cuts slated to begin January 1.

The bill includes:

  • A $160 million income tax cut
  • A sales tax on some services, including streaming media, dating services, ride shares, towing and parking lots, pet boarding and grooming, college sports tickets, etc.
  • Restoring the earned income tax credit
  • Hiking the sales tax on food and groceries (but repealing the tax on feminine hygiene products)
  • Offering "pre-bates" for low-income people on the grocery tax, and adding a dependent credit
  • Raising some taxes on fuel
  • An income tax credit on Social Security

Overall, Utahns would see an income tax decrease under the Republican-led plan. For example, a family of four making $60,000 would see about a $400 decrease in their income taxes. However, the plan has faced significant public pushback because of the hike on food, gas and services.

"No tax credit, check or any other disbursement will alleviate the anxiety of purchasing the exact amount of groceries your family can afford. No credit system will provide the relief to families that a simple grocery exemption provides. We remain opposed to the sales tax on food," said Alex Cragun of Utahns Against Hunger.

GOP leaders on Utah's Capitol Hill have long argued that tax reform was necessary to address imbalances and fund essential government services before it hits a crisis stage. Sales taxes, which have been declining as people purchase more services and fewer tangible goods, go into the state's general fund that pays for things like infrastructure, health care, etc.

But the plan has never been popular. Lawmakers have reported overwhelming constituent opposition to the plan, especially over the idea of a special session to pass the bill.

Still, many lawmakers said they were swayed by the credits offered to those in need and the income tax cut. Some declared it the single largest tax cut in state history.

"I don't think I can go back to my constituents and look them in the eye and say I voted no on the largest tax cut the state has ever seen," said Rep. Jeff Stenquist, R-Draper.

Lawmakers attempted earlier this year to introduce a broader bill, but it imploded in the face of public pushback over imposing a sales tax on a long list services. Then, legislators spent the summer traveling the state to pitch residents on the need for a tax overhaul.

In recent versions of the bill, the sales tax on services was scaled back. But hiking the tax on food remained a source of anger, as did the idea of removing the earmark on the income tax for education.

Groups on the right and left united against the bill. So did all the candidates for governor, including Lt. Governor Spencer Cox, who broke with Gov. Herbert.

Democrats in the House and Senate sought to amend the bill to remove the food tax hike or preserve funding for education.

"It’s not good public policy. I know for some individuals, a dollar or two means nothing, but for families in our community that is a difference between a gallon of milk and diapers for babies," said Sen. Luz Escamilla, D-Salt Lake City.

Lawmakers will not address the idea of removing the earmark on the income tax for education until at least the 2020 general session. Even then, they may face a significant fight from education and teacher's associations. Because that's in the Utah State Constitution, that requires voter approval.

Senate President Stuart Adams, R-Layton, suggested it may be later than that. Speaker Wilson said he would like to meet with education groups before pursuing it.

The Senate President insisted this is a good thing for Utahns, arguing that they have listened to public input and the bill has evolved.

"We’re doing the right thing. And anybody who studies it understands we’re doing the right thing. We’re actually again, stabilizing our revenue sources and fixing structural imbalances and we’re targeting, giving much more benefit to that low income population than they would ever get from the sales tax coming off of food," he told FOX 13. "And when you do the right thing, you’ve got the votes."

Also in the special session, lawmakers approved spending $3.9 million on behavioral health services statewide. The Utah Department of Human Services said it was related to Medicaid services, as the federal government had rejected Utah's request for a financial match and enrollment had declined.