It never did add up.
Day after day during this legislative session, Senate leaders told the media how restoring the full sales tax on food would stabilize sales taxes overall. When times are bad, people no longer buy furniture or cars, they said, but everyone has to buy food.
Taxing food would help the state weather bad times, and it would help shore up a general fund that seems to be stagnating even in the best of times.
But the experts said restoring the food tax would bring in about $175 million per year, and that seemed so paltry compared to a general fund of more than $2 billion, and especially against an overall state budget that totals more than $15 billion this fiscal year.
It seemed especially paltry when compared to the cost to the state’s poorest residents. True, the rich also benefit from a state sales tax that is only 1.75 percent on groceries. But raising that tax to the full
| || |
4.7 percent rate would hurt the poor more than anyone else.
And even reducing the overall state sales tax to 4.4 percent, as had been discussed, would have benefitted the rich more than any other segment, as the price of furniture and cars would drop.
So why did lawmakers spend so much time trying to go after such a measly sum?
The first answer is that they didn’t fully realize how small it was until, as Senate President Wayne Niederhauser told reporters, they did the math and found food sales are just 11 percent of all sales taxes.
But the larger answer is that the tax structure, not just in Utah but nationwide, is becoming less and less effective in a 21st century economy, and no one seems to have any answers.
Lawmakers will readily tell you the state is losing millions in sales taxes because people are shopping online more than in traditional stores, which, if you hadn’t noticed, are dying from coast to coast. Utah has contemplated various ways to capture this lost money through proposed laws, but Congress is the only body capable of forcing online companies to collect sales taxes for each state, and it has so far refused to act.
So Utah has begun negotiating agreements with individual online companies. The biggest of these is Amazon, but the state won’t know until this summer how much revenue that will provide.
The negotiating tactic has a larger philosophical problem. It removes the public a step away from the process, which is not good public policy when dealing with taxes.
Lawmakers have a similar problem with gasoline taxes. People drive efficient vehicles in the 21st century. A lot of folks are buying hybrid, electric or natural gas powered cars.
A bill quickly moving through the closing days of the Legislature would change the formula used to calculate the gas tax, surely resulting in higher pump prices in coming years.
But legislative leaders acknowledge they are chasing a disappearing pool of money. The nation’s sudden increase in fuel production is keeping prices low. People need less gas to drive the same distance they did a few years ago, and drivers of alternative-fuel vehicles aren’t paying at all.
Senate Majority Leader Ralph Okerlund told me lawmakers are aware of this and are watching other states to see if they find solutions. Oregon, for example, has experimented with charging people a tax per mile driven, rather than a tax on gallons purchased.
In a recent interview with Quartz, Bill Gates said lawmakers might want to begin thinking of ways to tax robots. He was speaking of solutions for the way computers and robots are beginning to take jobs from humans. That trend will result in less income tax revenue.
The only tax that seems reliable for the future is the property tax, but it also typically is the least popular.
Low-income people in Utah can rest a little easier knowing taxes on groceries won’t rise any time soon. Next year is an election year, which will make tax hikes even harder to enact.
But groceries never were going to solve government’s 21st century problems. Real tax reform will be much harder than that.