No one denies it is a regressive tax. The very poorest of Utahns qualify for food stamps or other programs, but those on the edge — struggling families or retirees — pay the most as a percentage of their income. Normally, sales taxes are fair because they are voluntary. If you don’t want to pay it, don’t buy the item you’re looking at, or find it at a lower price somewhere else.
Now, Utah lawmakers may finally be on the verge of eliminating the state’s portion of sales taxes on groceries. That tax is 1.75%. Lawmakers lowered it in 2007, under the urging of Gov. Jon Huntsman, Jr. But that last little bit, like a baked on stain, won’t come off so easily.
HB101 and SJR10 would take it all away, but with a catch. It disappears only if voters in the fall of 2024 agree to remove the Utah constitution’s requirement that nearly all income tax collections go to fund public and higher education.
Lawmakers don’t have the greatest track record when it comes to predicting how voters will act. Five years ago, they were sure people would vote to raise the gas tax by 10 cents if it meant funneling more money to education. They didn’t. On Question 1, as it was known, 65.45% voted no.
Now, reports say a deal is being cut in which the law would guarantee schools get top-priority funding from the income tax, after which other programs would get to fight over the rest. KSL said the deal has to be approved by the state Board of Education and, of course, by the Legislature.
Oh, and then it needs voter approval. Which means you shouldn’t count on a lower grocery bill just yet.
As far as deals go, however, this one isn’t bad. Lawmakers have been arguing for a while that the state’s books are lopsided. In an op-ed for the Deseret News last year, House Speaker Brad Wilson said income tax revenues are growing twice as fast as sales tax revenues.
He and others see the requirement to use income taxes solely for education (and a few social service programs) is a governmental straitjacket. Open it up and you can better fund everything from roads to water projects, and you also can take the tax of food.
Sure, that last bit is a little hard to swallow. The Tax Commission told lawmakers grocery related sales taxes bring in about $198 million a year. That’s almost a rounding error in a $25 billion budget. The state has run surpluses for many years now that dwarf that amount.
And even though the latest revenue estimate was “flat,” according to state officials, sales tax estimates were revised upward by $103 million in ongoing funds.
It’s worth noting that income tax receipts were revised in the other direction — down by $115 million; also, that lawmakers are working to cut the income tax rate.
When she introduced the food tax elimination bill to the House Revenue and Taxation Committee, the sponsor, Rep. Judy Weeks Rohner, R-West Valley City, said Utahns have made it clear that removing the food tax is a top priority, especially given inflation.
It would be hard to argue against that based on evidence. Just before the 2019 regular legislative session, lawmakers decided that, instead of eliminating the food tax, they would raise it to 4.85% as part of a broader tax reform package. Within days, more than 150,000 people had signed petitions that ended up forcing lawmakers to do an about-face.
That was quite a swing, considering voters twice — in 1980 and 1990 — rejected ballot measures that would have eliminated the tax.
Many Utah lawmakers dislike the income tax on principle. It is a tax on earnings, the thing that incentivizes businesses and people. The old adage that you get less of something the more you tax it means this tax is bad for prosperity.
Sales taxes, on the other hand, target consumption. Perhaps if people see less of it applied to groceries, they will buy more of them. Or maybe they will spend their extra funds elsewhere. Either way, the state of Utah is likely to get back some of what it expects to lose by leveling the baskets for everyone in the game.