The Utah Legislature Tax Restructuring and Equalization Task Force hosted a meeting at the Sevier County Fairgrounds in Richfield Friday evening to gather input from the public.
“Sales tax and the gas tax are flattening out,” said Alex Janak, policy analyst. He said while the states income tax revenue continues to grow, other areas are starting to lag.
Utah’s tax structure is designed so all income tax collected by the state goes to education, as per the state’s constitution. Property tax is generally collected for the benefit of local entities, such as school districts, counties and cities. Gas tax is reserved for transportation costs, such as road construction and maintenance.
Finally, sales tax is divided among several uses including local governments, education, transportation as well as the state’s general fund.
During the past several years, sales tax revenue has started to soften in the state, which can be attributed to several factors, including numbers indicating the economy is shifting away people purchasing goods to purchasing services, Janak said. One example would be instead of purchasing Blu-ray disks, many people opt instead to stream movies. Blu-rays are subject to sales tax, while streaming is not currently taxed.
One of the first things people suggest when revenues start to shrink is for the state to reduce its payroll, said Rep. Francis Gilbson.
“The state had 8.9 employees per 1,000 people in the state in the year 2000,” Gilbson said. “We now have 6.6.”
Gilbert said the state is continually looking to reduce manpower and be more efficient.
However, the case for tax restructuring isn’t about obtaining more revenue.
“We’re in a good spot financially,” Gibson said. “This not about how to get more money, but to diversify where it comes from.”
The meeting allowed for the audience members to make comments and ask questions.
“Our needs as a rural county are different,” said Rodney Hurd, educator. He said the task force needs to be mindful of how changes in the tax structure in Utah affects rural school districts.
“There can be very divergent ripple effects of what you do,” said Richard Barnett, Richfield City councilperson and representative of the Utah League of Cities and Towns. Several people spoke to the same point as Barnett and Hurd saying the committee needs to be mindful of rural needs as the tax system is overhauled.
Others offered suggestions for modifications to the current tax code.
“You need to look at other leakage with online services,” said Tooter Ogden, Sevier County commissioner. He said the state’s arrangement with Amazon to collect sales tax should be used as a model for collecting sales tax from other online retailers.
“If I buy something online, I still have the obligation to pay sales tax,” said Sen. Lyle Hillard, committee member. He said efforts so far to collect tax from out of state sales have been unsuccessful, but the arrangement with Amazon is encouraging. He said the U.S. Supreme Court ruling in the South Dakota vs. Wayfair case might also be helpful. In the ruling, the court held that states do have the right to charge tax on out of state purchases.
“If you reverse what we did in 2007, it may well solve the problem,” said K.L. McIff, former member of the Utah House of Representatives. He said in 2007, the Legislature lowered the sales tax on food. He said by bumping it back up, it might solve the sales tax problem as it would be a stable source of revenue.
“The state tax commission is way too lenient when it comes to centrally accessed taxes,” said Scott Nickle, CPA. He said the tax commission typically favors the large-scale businesses when approached with valuation appeals, which means companies wind up paying less in property tax while the burden is shifted to others in the counties.
The topic of implementing a tax on services was also discussed during the meeting. Nickle said the idea of a tax on services is unenforceable.
“You’ll be creating a cash economy,” said Kevin Mortensen, business owner. He said taxing services isn’t the answer, and that amending Utah’s state constitution to allow the Legislature to allocate all tax revenues to the areas where they are needed would be a better answer.
Others said they are concerned taxing services might drive up the costs of homes and cause complications with how medical and legal services are billed.
“We really appreciate your effort to help with the topics at hand,” said Sen. Lincoln Fillmore, committee member. He said the primary goal of the committee is to make sure collection in the state is equitable and fair.
For more information, as well as opportunities to provide feed back online, visit strongerfutures.utah.gov.