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Wednesday, January 25, 2006

Removing the Tax on Food

By John Valentine
President of the Senate

Before charges of "gamesmanship” get too out of hand, let me explain the Senate Majority’s position as clearly as I can.
1. The Utah Senate wants to remove sales tax from food.

2. Everyone is aware the state has many desperate needs and vital priorities, such as funding education, transportation, and economic development. All these priorities compete for dollars.

3. There is a slim chance February revenue estimates will come in higher than expected. If that happens we can re-evaluate. Given the reality of current numbers, however, we don’t see how every vital demand can be funded.

4. If the numbers don’t allow us to remove the sales tax on food this year we should - at the very LEAST - remove the sales tax on food for the poorest among us.

5. At this point, it appears that the best mechanism to accomplish this is probably a food tax refund.


Anonymous Jeff Lewis said...

Why is a refund the "best mechanism" at this point?

I'll withhold my arguments until receiving and answer... ;-)

1/25/2006 12:57 PM  
Anonymous Justin said...

I also am completely baffled by this. It would seem that the easiest way to remove the sales tax on food would be to simply remove the sales tax on food. Instead, you're thinking of adding more complication to the tax code?

The people who need this tax cut the most need it when they're at the supermarket, not when (or if) they get their state tax refund.

1/25/2006 1:18 PM  
Anonymous Diamondback Jack said...

Makes sense. Thank you for telling us what you are thinking and thank you for doing your damn homework before making promising us pie in the sky.

1/25/2006 1:33 PM  
Blogger The Senate Site said...

Jeff and Justin: We're in a meeting with House Leadership and the Governor right now - give us an hour or two to answer your questions.

Mr. Diamondback: Thanks. And watch your language, this is a family program.

1/25/2006 1:40 PM  
Blogger Kevin said...

I admit, I don't like any taxes based on who you are. I find the idea of some people walking around with special "I don't have to pay sales tax" badges. I dislke things that separate people into groups for special treatment.

I am assuming that this bill would mean that if the second wife's income is kept below poverty level, she would be able to get the food for the enclave tax free?

If we need assistance for the poor, it really might be best to do it through a direct program or by income tax credits.

1/25/2006 3:08 PM  
Anonymous Anonymous said...

The Governor supports it; the House supports it; the majority of the people in Utah support it; what's up with the Senate? Why create a complicated system of tax credits with further red tape and bureaucracy (and therefore cost for administration at the Tax Commission) when there is a simple, clear, and private sector solution to remove the sales tax on food for everyone? Simply removing the tax from unprepared food is a home run financially, socially, and politically.

1/25/2006 3:46 PM  
Blogger The Senate Site said...


Thanks for your comments. Almost everyone wants to remove the tax from food. If we can’t - or don’t - this year we can at least remove it for those who need it most. If we decide to remove that tax for those under a certain yearly income level, a food tax refund seems to be the most workable idea we’ve heard so far. One reason is that it would be much less complicated at the cash register. Also - as Kevin said (above), we should avoid “people walking around with special ‘I don't have to pay sales tax’ badges.” Keep reading...


Thanks for your comments as well.

It’s not as easy as it seems. Take the tax off and you trigger a chain reaction of unintended consequences. One is the unhinging of local government budgets statewide. Should we allow tax increases in other areas? If we instituted a tax shift, each town would be impacted differently. Towns loaded with convenience stores would take a serious hit. Towns heavy on hardware stores would reap a windfall.

Some local governments are dependant on food tax revenue to stay afloat (Moab is an example). Take away this revenue source and local governments will naturally make up the difference by increasing property tax rates.

A tax shift is not a tax cut.

There are many more complicating factors, and just as many proposed solutions. But it’s not as simple as just getting rid of a tax (and we haven’t even mentioned the bond issue).

The potential additions to the tax code don’t even approach the complication of taking food tax out of the tax code – not that the legislature isn’t up for the task. You get the picture. Simplicity is a myth, like the legend of BYU winning a National Football Championship.

Just to round out the discussion, you might also want to consider the following:

A food tax refund allows the legislature to do a surgical tax cut strike in areas where it will do the most good.

One of the main reasons to take the sales tax off food is its regressive nature. As a percentage of total income, the food tax soaks the poor more than it soaks middle income individuals or the rich. By returning food tax to lower income families we target a tax cut where it could be most helpful to them. Limiting the refund to a specific income level ($50K? $35K?) allows us room in the budget to consider a LOWER INCOME TAX RATE as well - which could be more helpful to upper and middle income families.

Second, a tax refund helps us avoid the Balkanization of Food. The Definition War: trying to define what exactly is, and is not, “food.” More specifically, “prepared food.” Buy a salad at the deli and you pay tax. Buy lettuce, tomatoes, and cucumbers - no tax. Buy the same ingredients as salad in a bag and you pay tax.

Multiply that times every food item for sale and you can see why some hope to consider alternatives to Bosnia in the produce aisle.

Third, sales tax on food has little impact on the transaction. Instead of saving a few cents each time we buy food, those who are eligible will receive it all at once. If the legislature were to approve an $80 refund (which is in the neighborhood of what each of us spends on food tax per year) a family of five would receive $400.00. That amount may be more helpful than a few cents here and there.

Fourth, the tax refund option would allow the legislature to provide a tax cut from either income tax or sales tax.

Utah’s Constitution requires income tax be used for schools. Sales taxes build roads. Take away all the sales tax and you can’t build infrastructure, or invest in a plethora of demands that can only come from the General Fund.


I don’t believe the legislature has considered the effect of the refund idea on any wife other than the legal one. Thanks for your comments and insight. Keep ‘em coming!

Dear “Anonymous”:

You’re a big chicken. It’s clear from your comments that you are close to the process and we probably know you. Post your name and we’ll re-read your tired, recycled rhetoric.

Once again – to summarize the summary - the Senate wants to remove the sales tax from food. So does the Governor and the House. If the numbers don’t add up – and they don’t at this point – the legislature can at least hold those with lower incomes harmless. A food tax refund may not be perfect, but it’s the best idea we’ve seen so far.

The “disagreement” between the House and Senate on what to do is a lot like two college roommates on a road trip. One looks at the gas gauge and argues we can make it to Vegas on fumes. The other is calculating past mileage, eyeing the road ahead, and insists that we better fill up in St. George.

We’ll pick up the discussion again when we get the mid-February revenue estimates. Until then, we’ll just enjoy the drive.

1/26/2006 12:20 AM  
Anonymous Anonymous said...

President Valentine is 100% right.

What we have here is Speaker Curtis and Governor Huntsman giving away the primary revenue source for many cities. Sure, to the uneducated public they look like heroes, but in reality they are taking money from the cities in order to give a tax cut for political gain.

Imagine if your Mayor could eliminate the Utah State Income Tax, and then claim all the credit....well, that is PRECISELY what is happening here.

Furthermore, Senator Valentine is a tax attorney with 30 years of experience. He actually thinks about these things at a deeper level.

Right now, Speaker Curtis has promised to make the cities "whole" despite eliminating their sales tax on food. However, Speaker Curtis has released NO details on how precisely he would do this. If anyone out there can explain to me how the Governor and Speaker would make the cities "whole" after eliminating their sales tax revenue on food, I would be most grateful.

1/26/2006 7:07 AM  
Anonymous Jeff Lewis said...

Thank you for your explanation. It may not sound like it, but I really do appreciate the work that you do and the fact that you are very open about it.

Now to continue my rant: ;-)

I don't understand all of the effects that removing the sales tax from food would have, but I believe that the sales tax on food is immoral. It was immoral to instigate it; it is immoral to allow it to continue. Other states have been through this same process and have been able to work out the issues involved. Yes, it may cause short-term hardship on some municipalities, but that doesn't change the fact that this particular tax is wrong.

By the way, is there anyway to eliminate the ability to post anonymously here? If people aren't willing to put their name down, I don't think that their comments are worth anyone's time. ;-)

1/26/2006 8:21 AM  
Blogger The Senate Site said...

Editorial in today's Deseret News: Food tax removal a must

Re: Jeff's question, above. The blog program we're using allows three routes to those who wish to comment: 1. Log on as a fellow-blogger, 2. Give your name (and website if you choose), and 3. Post anonymously.

We've opted to enable all three routes. We put up with the occasional anonymous sniper in order to encourage participation, healthy discussion and information flow.

Naturally, your real name combined with a thoughtful posting carries the most weight in a forum like this.

1/26/2006 1:34 PM  
Anonymous Nathan Daniels said...

Thanks for providing a forum for citizens to provide their 2 cents on these issues and I sincerely hope that the legislators are paying attention to the more insightful arguments on here. Although a moderator calling someone a "chicken" in the above post does cause me some concern to the validity of this forum, I will post my thoughts none the less in the hopes that it is either taken to heart, or at least spurs thoughtful discussion with the other politically concerned folks who read and post here.

There are a few important points that I think should be made and I will try to keep them very brief.

#1 Utah is not a casino - The federal government has taken a partisan stance that cutting taxes will encourage consumer spending, which will improve the economy, generate more jobs, and thus more taxes to replace those that were cut. So far they have not been proven wrong, but there is certainly no established economic theory to support this which makes it a rather interesting macro-economic gamble. Personally, if I don't make my mortgage payment or car payment, then bad things are going to happen. Taking that money to wendover may be exciting and make the people I lose it to at the poker table like me more, but at some point the bills are going to come due. Here in Utah we have a massive transportation problem. I've seen numbers that range from $4.5B to $16B shortfalls over the next 15 to 25 years and there is even other legislation in this session to explore other ways to pay for this problem. Some may try to say that the state budget is not so simple. I'll pose a simple example that may argue that it's not that complex. What does it matter to me if I save $10 in taxes on my weekly grocery outing if I'm just pumping that $10 into my gas tank to make up for the ever increasing length of my evening commute due to congestion on I-15 and no current viable alternative. I would say that we still have some real bills to pay here Senators...and the transportation problem is just one of them.

#2 Definition of food - OK. I'll accept this as a reasonable challenge that makes us afraid to move forward. Except that food has been tax free on military bases for longer than I've been alive. If you would like a list of items that have already passes the test of time being considered food, just contact the Defence Commissary Agency for assistance.

#3 How do we replace the money? - Hmmm...seems to me there are things that are commonly taxed that Utah is a little light on. Compared to other states we seem to take it pretty easy on the smokers at the cash registers. I'm far more in favor of taxing a recreational product that is potentially harmful to the citezens of this state in order to ease the price of basic food items. And all it takes is a brief walk outside and a deep breath of the polluted air to get someone fired up about taxing things that contribute to it. One could also count the number of Utah plates in the parking lots of Liquor stores in Evanston and Casinos in Wendover to see where other tax dollars are going due to laws that were outdated by easy access to transportation and the internet.

1/26/2006 2:43 PM  
Anonymous The Senate Site said...

Today's AP story on KSL: House Votes in Favor of Removing Sales Tax on Food

It will probably be several more weeks before the Senate takes any action on Newbold's bill. Valentine said the Senate will wait for new revenue estimates.

"We'll start arm wrestling (with the House) after February 15," he said.

Most of the opposition Newbold faced in the House came from representatives who said there are too many other priorities that need to be funded, such as highway construction, education and health services, that would be put in jeopardy if her bill passed. Others expressed concern about creating a tax shift.

"It's shifting (taxes) from my Twinkies to my toothpaste," said Rep. Gordon Snow, R-Roosevelt.

1/26/2006 8:28 PM  
Blogger The Senate Site said...

Audio: Listen to the House of Representatives debate.

1/26/2006 10:28 PM  
Anonymous Anonymous said...

If you don't want people to leave Anonymous comments on your blog, why do you continue to leave "Anonymous" as an option? People may want to leave anonymous input to avoid the inevitable political retribution that would be foisted through the Legislature if you didn't like what they had to say.

2/03/2006 12:15 PM  
Blogger The Senate Site said...

I understand that concern. All we were saying is that an authentic person with something thoughtful to add tends to have more credibility in Senate policy discussions.

2/03/2006 7:07 PM  

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