This November, Utahns have the opportunity to weigh in on issues that will affect their taxes. The questions being asked have the potential to impact all three of Utah’s major taxes (sales, property and income taxes) depending on how voters react to the questions. The questions include tax increases and property tax exemptions.
The following is a rundown on the questions that will be on the ballot statewide. Positions on each tax-related questions were set by the Association’s Board of Directors. The positions were set as they were measured against the Association’s criteria for evaluating tax proposals which can be viewed by clicking here.
Constitutional Amendment A
Association position: Support Ballot
Ballot Question: Shall the Utah Constitution be amended to modify the period of time that a person in the military needs to serve out of state under an order to federal active duty in order to qualify for a property tax exemption for the military person’s residence, allowing the military person to qualify if the period of service is at least 200 days in a continuous 365-day period?
Analysis: Constitutional Amendment A amends an existing provision of the Utah Constitution that allows for a property tax exemption for the home of a person serving in the military but has been assigned out-of-state for an extended amount of time. Currently, the home or residence of an individual who serves out-of-state in the military can benefit from this exemption if the individual is living outside of the state for at least 200 days in a calendar year or 200 consecutive days. Constitutional Amendment A would change the exemption from the calendar year practice to a 365-day period. The example given by the state is if a person serves 199 days in one calendar year outside the state then takes a break but then serves another 199 days in the next calendar year, current law would not allow the exemption. If Constitutional A is approved by voters, then the military member would qualify for the exemption as long as the time served happens in a 365- day period. If approved, the change to the exemption would occur on January 1, 2019. The fiscal impact of the change is expected to save a military person, with a residence valued at $250,000 with a 1.35% property tax rate, about $1,856 per year.
Constitutional Amendment B
Association position: Support
Ballot Question: Shall the Utah Constitution be amended to authorize the creation of a property tax exemption for real property, such as land or buildings, that the state or a local government entity leases from a private owner?
Analysis: Constitutional Amendment B will change Utah’s constitution to allow for a property tax exemption when a governmental entity (state, county, city, school district etc.) leases property or land from having to pay property taxes on the land. In some cases, state and local governments lease the property they use. One example would be prior to constructing its own city hall, the city offices of Cottonwood Heights used to be leased in an office building. Under Constitutional Amendment B, if Cottonwood Heights leased the whole office building, the city would not have to pay property taxes via the lease. In turn, the owner of the property would also be exempt from property taxes if the government entity is leasing the whole building.
This change to the state constitution will align leases to what happens when a governmental entity owns a property. The government does not pay property taxes as that would only increase the amount taxpayers need to pay the government to cover the cost of the property tax. This will decrease the amount of taxpayer money needed by government to pay for leased real property. This fiscal impact of this change will result in a $1.8 million decrease entities pay in property taxes.
Non-binding Opinion Question #1
Association position: Neutral
Ballot Question: To provide additional funding for public education and local roads, should the state increase the state motor and special fuel tax rates by an equivalent of 10 cents per gallon?
Analysis: This is a poll question placed on the ballot by the Legislature. If the poll exceeds 50% it is expected (but not guaranteed) that state lawmakers will increase the gas tax by 10 cents per gallon in the 2019 General Session. Keep in mind, the Legislature is not bound by the results of this opinion question.
If the gas tax is increased, the additional revenue from the gas tax will not go towards education. Rather the new money will replace general fund dollars that the state has been subsidizing to pay for road construction. These freed up general fund dollars will then be used towards education.
Your Taxpayers Association has always supported increasing the dependency on users to pay for road construction and maintenance in Utah. An increase to the gas tax does increase the burden on the users of the roads, but the gas tax cannot be depended upon as reliantly in the long term. As vehicles become more efficient and additional alternative fuel vehicles make their way onto the roads, the gas tax will become a less efficient way to collect from road users.
Additional funding to education can be beneficial for the state but only if the money is distributed to targeted areas that have a proven track record of increasing student outcomes and teacher performance. Adding more money to the system in a non-specified way will result in a more expensive way of creating the same results our education system is already producing. It also increases the disparity between the rich, high property valued school districts in the state, like Park City School District, and the poorer school districts, like Tooele County School District.
Proposition Number 3
Association position: Oppose
Ballot Question: Shall a law be enacted to:
• Expand the state Medicaid health coverage program to include coverage, based on income, for previously ineligible low-income adults:
• Maintain the following as they existed on January 1, 2017:
o Eligibility standards, benefits, and patient costs for Medicaid and the Children’s Health Insurance Program (CHIP); and
o The payment rate for healthcare providers under Medicaid and CHIP; and
• Use the tax increase described below to pay for Medicaid and CHIP?
This initiative seeks to increase the current state sales tax rate by 0.15%, resulting in a 3.191% increase in the current tax rate.
Analysis: If voters approve of this initiative the state sales tax rate will increase from 4.7% to 4.85% and direct the revenue that comes from the increase in the rate be used to pay for Medicaid expansion in the state. The state estimates the change in the rate will result in $84 million in increased revenue.
The proposition would expand the state’s Medicaid program so that adults under 65 years of age with incomes below 138% of the federal poverty level could receive Medicaid coverage. If passed the law would also be changed to preserve the existing scope of the state’s Medicaid and CHIP programs.
In the 2018 legislative session, state lawmakers passed legislation to expand Medicaid in the state but with limitations on the expansion so the state can control costs of the program. The legislation does need a federal waiver to be implemented. Proposition 3 does not have any controls in place to put a fence around the costs the state may incur by expanding Medicaid.
Your Taxpayers Association supports the state’s efforts to expand Medicaid but in a budget and taxpayer-friendly way.
Proposition 3 would expand the Affordable Care Act (a.k.a. Obamacare) in Utah without any fences to control spending or the burden placed on the state to provide health care for those enrolled in the program.
This change could prove to be detrimental to the long-term health of the state budget. We urge voters to reject this proposal to allow the Legislature time to provide health care to those in need in a cost-efficient manner.