To address an imbalanced revenue structure, Utah lawmakers could ostensibly create a statewide lottery, House Minority Leader Brian King said during a Wednesday evening town hall.
Or, they could begin charging a tourism tax, allow sports gambling or eliminate exemptions that dot the sales tax code “in a Swiss cheese manner," he said.
All these ideas and others should be on the table as state lawmakers consider tax reform, with the understanding that each brings a different set of consequences and benefits, King said during the first in a series of tax-focused town halls hosted by House Democrats.
During the Capitol Hill meeting, Bill Tibbitts, associate director of Crossroads Urban Center, advocated against increasing the sales tax on grocery items.
“We should make sure that we don’t place a burden on low-income families that makes it hard for them to pay for basic necessities,” said Tibbitts, who was one of about 20 people in attendance.
Doug Macdonald, a consultant and former chief economist for the Utah State Tax Commission, suggested directing more funding to K-12 education and enacting a “tailpipe tax” that would fall heaviest on owners of polluting cars.
That idea was problematic to Robert Comstock, who argued that a tax targeting clunkers would end up being regressive.
“The people that drive dirty cars, they don’t do it by choice,” said Comstock, a Salt Lake City resident who is running for Utah Democratic Party chairman.
Through these gatherings, Democratic lawmakers are hoping to invite more participation in the state’s ongoing tax overhaul push, which ran aground in the last legislative session even though Gov. Gary Herbert and House Speaker Brad Wilson had made it a top priority. King and others have attributed the overhaul bill’s failure partly to a lack of input and buy-in from the state’s residents and businesspeople.
Frustrated by what they believe was an opaque legislative process, several local business owners have formed a group called the Utah Legislative Watch to advocate for greater transparency, Salt Lake City attorney Brett Hastings said Wednesday.
“I think the disappointment for me is that it really appeared to me that some of our Utah legislators were using some of the worst ... Washington, D.C., tactics to get this bill passed,” Hastings said.
The tax reform bill — which would’ve expanded the state’s sales tax to a host of previously untaxed services — was designed behind closed doors by a select group of legislators and executive branch officials and was only made public toward the end of the session. A loud outcry from service-oriented businesses precipitated the demise of the tax reform package, with lawmakers vowing to regroup based on feedback from Utah businesses and residents.
A tax reform task force composed of House and Senate members is expected to study various options over coming months and formulate recommendations that lawmakers could consider during a special session later this year.
The work group is supposed to coordinate a listening tour, but King said Democrats are hosting their own hearings as a sort of “belt and suspenders” tactic.
“What we are trying to do is say, ‘Let’s get as many voices heard on this as possible,’” King, a Salt Lake City Democrat, said in a Wednesday afternoon phone interview. “We sort of feel like the process in session was not the best. We never really got public input in a meaningful way.”
Creating more venues for conversation will also foster diverse opinions and creative suggestions for reforming the state’s tax structure, he said. For instance, Democrats want to make sure a carbon tax is part of the discourse.
Wednesday night’s meeting opened with a discussion about why many state leaders believe it’s time to reconsider the revenue streams that feed into government coffers.
Over time, the sales tax has covered a shrinking share of the state’s expenses, while the income tax has taken on more and more of the burden. Meanwhile, a state constitutional earmark forbids lawmakers from spending the income tax on anything other than public and higher education, meaning that that the sales tax supports most everything else — air quality projects, public safety, social services, economic development and housing initiatives.
But King said messages about the state’s revenue imbalance have been drowned out amid news of large budget surpluses. Lawmakers have been struggling to explain that the income tax accounts for the bulk of this surplus, and the state still has a problem with a fading sales tax, he said.
“It’s hard to get people in the state behind this when we keep hearing about how well the state is doing in so many different ways,” he said.
The Democrats’ next town hall meeting is scheduled for May 16 in West Valley City. Information on the times and locations of future forums are listed on the Utah House Democrats website.
