Another general session has come and gone. Here are some of the passed bills highlights (captions in green) and, unfortunately, lowlights (captions in red) from the 2020 General Session.
HB 356 – Railroad Amendments (Ferry)
The Utah Taxpayers Association has long stood on the philosophy that eliminating sales taxes on business inputs is sound tax policy. By removing these sales taxes, Utah works to end tax pyramiding. By ending this practice, the consumer will generally pay a lower cost since there aren’t layers of taxes built into the final price. In addition, economic activity is incentivized when there is less taxation on inputs. That provides fuel to the economic engine and produces even more consumption- which is taxed- in the long run.
Removing tax pyramiding is good business practice, and strongly affects how a state’s economy performs. Utah’s legislatures have followed your Taxpayers Association stance on eliminating taxes on business inputs and Utah’s families and businesses have benefited.
HB 356 seeks to undo part of the major work that has been done to keep Utah #1 for Best Economic Outlook for 12 years running. The bill will remove the sales tax exemption on fuel for locomotives in an effort to build pedestrian and road travel crossways over railroad tracks.
While this may sound altruistic, raising costs to the railroads will ripple throughout Utah’s economic system. It is classic tax pyramiding at its finest. Increased taxes on railroads can mean greater costs on items shipped into and around the state, whether that be housing materials, fuel, or perhaps even items purchased online.
Your Taxpayers Association was strongly opposed to this bill, and are truly appreciative to the Governor for vetoing this extremely harmful legislation. At publication time we are working to prevent a veto override.
We hope the legislature will look more broadly at legitimate solutions to critical railroad crossings where they exist throughout the state.
Strengthening Truth-in-Taxation through the Property Tax Notice (HB 164)
Utah is unique in the nation when it comes to property tax laws, specifically with our Truth-in-Taxation (TNT) law. TNT requires that entities that look to exceed their certified tax rate (collecting more property tax revenue than the prior year, excluding new growth) advertise the impact of the proposed increase and hold a public hearing to allow their taxpayers to provide input on the proposed tax increase. Utah’s property tax system is based on revenue, rather than a static rate, like other states.
Utah’s Truth-in-Taxation law is regularly praised by national organizations, and is actively modeled in other states, including Iowa. But since first taking effect in 1986, your Taxpayers Association continues to refine Truth-in-Taxation to provide even more transparency to taxpayers.
HB 164, sponsored by Rep. Jeff Moss, requires additional information be included on the property tax notice, mailed by the counties each year.
Following the passage of HB 293 in the 2018 Session which froze the statewide uniform school tax rate, the Legislature did not put in place a transparent method of showing an increase to the property owner. While taxes for the property owner increased, the change year-over-year was shown as zero on the mailed notice. HB 164 will change this to reflect the true change in taxes for the statewide basic levy.
In addition, the deadline to appeal a property’s valuation, information about residential exemption, and the total taxable value of the property will also be required on the property tax notice under HB 164.
Your Taxpayers Association initiated this important legislation and are pleased to see the governor sign it into law.
SJR 9 – Proposal to Amend Utah Constitution – Use of Income Tax Revenue (McCay)
Utah’s tax reform process over 2019 was tumultuous and 8% of voters didn’t find the Legislature’s solution appropriate and stopped it through a referendum. (Learn more about that proposal and the Association’s position here.) Following the repeal of that proposal, Utah still has a spending flexibility problem.
All of Utah’s income tax is dedicated toward education funding, and cannot be used for other purposes. The general fund (primarily driven by sales tax revenue) has more demands on it than ever before, as social services costs, such as Medicaid, continue to increase. Utah’s demand for transportation also continues to increase, which puts additional strain on the general fund. While Utah’s income tax revenue climbs higher with massive surpluses, the general fund does not grow to the same extent.
SJR 9 tries to help alleviate some of the pressure by expanding the constitutional earmark on income tax to also be used for children’s health programs and people with disabilities.
This greater flexibility frees up more general fund money to be used on helping those in need and expanding programs to ensure Utah’s indigent population is taken care of.
This resolution, as a Constitutional amendment, would require a vote of the people in order to take effect.
The bill will bring the issue before the voters in November, and we encourage their support.
HB 357 – Public Education Funding Stabilization (Millner)
Utah’s rainy day funds (both general and education), are generally funded with one-time end-of-year surplus money. In the event that Utah has “excess” funds, the Legislature will often deposit money into these funds in preparation for a rainy day. But again, these are one-time revenue sources.
HB 357 creates a funding source for a savings account for education that is funded with ongoing funding, meaning the state can expect that revenue to continue.
The bill creates a formula and a separate savings account for public education that will set aside surplus revenue, and then distribute it based on calculations from the Office of the Legislative Fiscal Analyst and the Governor’s Office.
This bill is tied to the passage of the constitutional amendment created from SJR 9 and will only go into effect if the constitutional amendment is approved by voters.
SB 130 – 911 Communications Amendments (Harper)
The Utah Taxpayers Association has followed the Utah Communications Authority for years as a quasi-government agency, charged with providing emergency service communications around the state.
The UCA, following a blazing audit several years ago, has been undergoing some reforms. According to legislative audits, positive changes have been made. One of the recommendations made, however, was to reduce its large network capacity that was not being adequately used.
SB 130, in part, allows UCA to sell excess capacity in their network, such as broadband internet, to government agencies like school districts or libraries. This is a blatant example of using public funding to compete with the private sector.
We remain opposed to this process and will continue to monitor UCA’s activities closely.
SB 239 – Refinery Sales Tax Exemption (Okerlund)
Several years ago, the Utah Legislature passed a bill that created a sales tax exemption for business inputs for refineries that would convert to Tier 3 fuel, which creates far less pollution than “older” fuels. That exemption was set to expire.
SB 239 expands the sunset for the exemption for an additional 18 months. While we support any move to exempt business inputs since it stimulates economic activity as well as drives costs down, we want to see this exemption made permanent.
SB 239 is supported by your Taxpayers Association and will be a great benefit to all Utahns as pollutant levels drop as Tier 3 fuel adoption increases and refineries continue to move in this direction.
SB 150 – Transportation Governance and Funding Amendments (Harper)
Utah’s transportation system is subsidized by the general fund to the tune of hundreds of millions of dollars a year. This is due to the diminishing power of the gas tax, which has begun to flatten as vehicles become more efficient and the state’s population continues to grow.
Your Taxpayers Association believes that a road usage charge (RUC) is the solution. RUC, essentially, has a driver pay for the miles they use. Eventually, the RUC would replace the gas tax as the primary funding solution for Utah’s transportation system.
SB 150 requires that UDOT submit a written proposal in 2021 to implement the RUC. We’d like to thank Sen. Harper for being a champion on this issue.
SB 114 – Sales and Use Tax Exemption Amendments (Cullimore)
We’ve talked about the benefits of exempting sales taxes on business inputs earlier in this article, and SB 114 continues to make progress in this effort.
SB 114 not only sets into statute a clarification on exempting sales taxes on business inputs for data centers, but also clarifies when sales taxes must be paid when a provider offers a lesson in addition to tangible products.
In some circumstances, some businesses are audited and penalized for not collecting sales taxes on lessons, despite documentation from the Utah State Tax Commission stating that lessons are not subject to sales taxes. These painful audits and penalties can put businesses on the brink of closure.
This bill clarifies that lessons are not subject to the sales tax as part of an admission fee.
To view our entire Watchlist of more than 70 bills with which your Taxpayers Association has been engaged this year, click here. Also, to see how your legislator protected your tax dollars, click here to view our Legislative Scorecard.