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Monday, October 24, 2005

Tax Reform Op-Ed

By John L. Valentine
President of the Utah Senate

Each year the Utah House and Senate wrestle with balancing multi-billion dollar budgets to meet the needs of our state. Like most families in the state, we make tough choices on what we can and cannot afford. Many of those decisions are heartbreaking.

We are also charged with maintaining a tax code that provides sufficient funding without overburdening citizens. It’s not easy work, but most legislators bring unique, helpful expertise and consider the responsibility an honor.

What we don’t have is the dubious luxury of obsession over a few points of the tax code as if they were the solitary measure of prudent policy. We have to view the budget panorama in its entirety, and make decisions based on the big picture.

In an editorial last Sunday [10/16/05], the Daily Herald waxed indignant over the fact that the Legislature’s Tax Reform Task Force recommended against adding a tax to professional services and will probably keep the sales tax on food.

It’s true that Utah taxes food. We spend millions of dollars advertising the beauties of Utah to attract visitors. Visitors buy groceries. This generates a significant source of income for the state. Moab, for example, has no need for a property tax. The tax on food - almost all of it from tourists - funds what they need to run their city.

However, it is also a fact that a tax on food may create an unfairly heavy tax burden on the poor, because the grocery budget makes up a larger percentage of their income.

I believe there is a solution to this dilemma. I strongly favor a tax credit that refunds the amount low income families spend on grocery sales tax.

This proposal was suggested by Utah Issues, a low income advocacy group, and I think it is a good, solid solution. The sales tax on food is only considered regressive because of its impact on people with low income. A grocery tax refund focuses tax relief where we need it most.

Combine this proposal with Governor Huntsman’s recommendation of a $12,000 joint filing exemption and a $4,000 per person personal exemption, and you have a workable tax reform proposal that would provide adequate funding without harming the poorest and most vulnerable among us.

We also scrutinized taxing a broader range of services. Although intelligent people disagree on this issue, our judgment was there were too many fatal complications inherent in that proposal. One difficulty was drawing clear lines between what is and isn’t a business transaction. Another was that medical, hospital and dental services would comprise over 60 percent of the new tax under this proposal. In light of the value of these services, we didn’t feel like this was a good policy choice. Florida recently expanded their tax into services but recognized the swamp into which they had stepped and retracted that tax a year later.

If you are looking for a new way to share the tax burden, you have to look at the tax system in its totality. Focusing on a few small pieces and ignoring the big picture doesn’t make for good policy decisions.

The Daily Herald Editorial last Sunday opined it is “still theoretically possible to do the right thing.” Then they said, “We’re not holding our breath,” as if they understood fully the motivations and thoughts of your elected representatives. Major proposals are on the table and we are all working diligently and sincerely to do our best to make decisions that are smart, equitable, and effective for the state of Utah.

Our state is recognized as one of the best financially managed states in the nation. We are sincerely committed to responsible fiscal management, while encouraging the kind of society and economy in which we want to live (stable homes, healthy economy, thriving religious and charitable community, etc.).

The Tax Reform Task Force is considering major changes to the Utah Tax Code. We will be taking citizen input in Provo, on Oct 26, at 6:00 p.m., at Dixon Middle School (750 West 200 North). Please visit www.senatesite.com for more information.

We encourage all to attend.

[This op-ed piece was written for and published in yesterday’s Daily Herald.]


Blogger Tyler Farrer said...

"It’s true that Utah taxes food. We spend millions of dollars advertising the beauties of Utah to attract visitors. Visitors buy groceries."

What was that? "Visitors buy groceries"? What a silly thing to say. I think visitors to Utah spend far more time in our Restaurants than at the grocery store. This, common-sense reasoning, should be at the core of our tax policy. Moab, for example, is one of the "small pieces" that disappear into the big picture when think things through.

10/25/2005 11:35 AM  
Anonymous Clark Snelson said...

I applaud Senator Valentine's position on recognizing the real cost and practical effects of removing the sales tax on food. It takes courage for an elected official to stand in favor of what is good policy when that policy conflicts with what is perceived as popular. Popular tax policy and good tax policy are often not the same thing. The arguments used in favor of eliminating the sales tax on food are most often couched in terms of relieving the burden from the poor, however proponents do not have an answer when told that the poor do not pay tax on food purchased with food stamps, and the working poor or lower income families can be provided a tax credit that would be greater than they would receive from a repeal of the sales tax for food and a fraction of the cost. It becomes clear at that point that the proponents , for all of their talk about the "poor" are really looking for a tax break they perceive will help themselves not their low income neighbors. There is nothing wrong with wanting to lower your own tax burden, however the proponents of removing the sales tax on food should be honest about the motivation that is driving the cause. If it were concern for the poor, then they would support a plan that provided a tax credit for low income families.

Proponents also fail to recognize the practical effects that removing the sales tax on food will have on local government entities that depend on that revenue to provide local services. We spend millions on inviting visitors to come to the state to ski enjoy the national parks, and our scenic wonders. Those visitors pay millions of dollars in taxes on their food purchases, dollars that would have to be made up by the states citizens if they are not collected from or visitors. The wealthy would benefit to a greater degree than the poor since their food budget is typically larger than a family on a low fixed income.

Removing the sales tax on food is a very popular idea, I dare say removing any tax would be a popular idea, that does not mean it promotes overall good, fair, tax policy. The overall cost of removing the sales tax from food is high, as much as 200 million dollars. The practical effects would be to devastate the local governments ability to provide the most basic services such as fire and police protection, garbage and sewer all of which are funded on the local, not the state level. Taking that big of a bite out of state revenue would cripple the legislatures ability to provide targeted tax relief to those who truly need it. Senator Valentine gets it, he sees the big picture, removing the sales tax from food , though popular is not in the best intrests of the state. It takes a true statesman to stand up for the intrests of the state against popular opinion.

11/04/2005 12:37 AM  

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