by Howard Stephenson
Taxpayers deflected most tax hikes at the Utah Legislature this year despite enormous pressure from the spending lobby to avoid cuts in appropriations by enacting new taxes. The combined state budget fell from $7.72 billion for FY 2003 to $7.69 billion for FY 2004. Spending for Public Education is actually budgeted to rise slightly from $2.35 billion in 2003 to $2.38 billion for 2004.
Individual and corporate income tax rates were proposed to increase as part of the “ominous” Omnibus Education Reform Package, SB 154 by Senator Tom Hatch. The proposal would have produced $90 million in higher revenues for education by hiking the 5% corporate income tax to 5.25%, and the 7% cap on individual income taxes to 7.19%. The tax hike component passed the Senate but failed in the House.
Large Utah credit unions escaped a 5% corporate income tax and a 35% competitive equity fee which was proposed through HB 162. Instead, the matter of leveling the playing field between banks and credit unions will be studied for two years by a legislative task force.
One bill, SB 213 by Senator Ed Mayne would have raised $54 million by removing significant sales tax exemptions on businesses including manufacturing equipment, vending machines, newspapers, ski resorts, airport food, and farmers produce sales. In the end, the original exemptions were kept intact, but Mayne’s bill became a vehicle for a new sales tax on cable and satellite television services, raising $14 million for state coffers.
BEER TAX HIKE REQUIRES “NEW MATH”
Beer taxes were raised by one cent per can, to produce $5 million annually. This tax hike was a real education for me, a non-drinker. It was hard for me to believe that Utahns drink 500 million cans of beer annually. I mean, that’s a lot of beer for a state full of non drinkers! If you take our 2.5 million inhabitants and subtract about ¾ million kids below drinking age, and then take away the 70% who are Mormon, you’re left with about 500,000 potential drinkers. Now, let’s assume 75% of those 500,000 actually consume alcohol, and about 2/3 of those like beer. That leaves only 250,000 Utahns left to drink the 500 million cans consumed annually in the Beehive State. That’s a whopping 2,000 cans per year or 5.5 cans per day for those who can drink “legally” or “morally.” That’s a pretty big charge for a quarter million people. Somehow, I think they get some help from illegal teenage drinkers and maybe from a few Mormons.
The legislature has also assured that drinkers will be paying more for wine and hard liquor sold by the state. In this same category, the legislature saw to it that hazardous waste fees were increased by approximately $2.5 million.
THE WORST TAX BILL OF THE SESSION
The biggest tax fiasco of the session was HB 136 which gives counties the authority to seek voter approval of a new ¼ cent local sales tax for state highways. You heard it right, a voluntary LOCAL tax to subsidize the STATE transportation fund. The bill was pushed by a few Utah County legislators who have been hammered by local mayors and county commissioners for not bringing home the bacon on state highway improvements in Utah County.
The amendments alter the use to which the previous light rail / commuter rail sales tax authority was given. Now, the rail tax can be used for state highways. The Utah County Commission hopes to get the measure approved by voters this November.
Here’s why the new tax configuration doesn’t make sense: It’s a local option tax to fund state highways. It might make sense if the new local tax were for local roads, but the sponsor of the bill, Representative Jeff Alexander, said he would pull it if it were amended for the tax to go for local roads. So Utah county taxpayers, and perhaps taxpayers in 25 other counties, may be asked to go to the polls to approve a tax to bail out the obligation for the legislature to fund state highway projects in their county. How benevolent of county commissioners to sacrifice their taxpayers for the benefit of the rest of the state!
My assessment is that this is merely a political tool for fearful legislators to avoid the heat for their failure to adequately plan for state road needs. With local taxpayers chipping in to the state transportation fund, there will surely be a cry to fund their projects first. The State Transportation Board will surely be lobbied to prioritize projects for those who are contributing local money. Consequently, other counties will be pressured to get their voters to approve the local option tax, in order to get their projects prioritized.
Based on past history with similar tax options for schools, there will be some counties where voters will simply refuse to approve the new tax. At that point there will be a complaint that it’s not fair for some counties to be contributing sales taxes for state roads so, in the name of equity, the legislature must mandate the tax on every county. It may take ten or fifteen years, but mark my words: That’s what will happen. And all because Utah County legislators didn’t advocate effectively for critical highway projects in their area.
by Howard Stephenson