There is no such thing as a boring moment at the Utah capitol. The session is short - fast and furious - but there are pivotal moments that stand out more than others.
HB441: The Tax Equalization and Reduction Act includes provisions to decrease the Utah corporate tax rate, decrease the personal income tax rate, decrease sales tax on some goods, and increase taxes on most services. The paradigm shifting aspects of HB441 are signficant.
Some of my concerns about this bill:
- Cutting the income tax rate means cutting the amount of money that our state has to fund public education.
- The fact that a vast number of service-based jobs are held by our working class which means their services are more expensive. The law of economics dictates that when price goes up, demand goes down.
- The additional burden, especially on small businesses, in assessing consumers the correct amount for services could be crippling.
- The bill has blatant preferences for some industries over others, demonstrating that powerful special interests have undue sway in determining which service industries would be exempt from a sales tax.
I received emails and phone calls from hundreds of constituents about HB441, and the vast majority were in opposition. Proponents of this policy, however, are correct in assertions that our state's tax structure is in need of reform. As a total percentage of economic output, our spending habits in purchasing goods has changed significantly in the decades since our current system was adopted. I recognize that changes should be made to accommodate for that. I vehemently disagree, though, that corporations should receive an even larger tax reduction than they already receive, and cutting the income tax rate when our state is already drastically underfunding education is folly.
My academic heart finds this bill particularly concerning because there are too many inputs to come to a reasonable conclusion about the true effects of the policy on our economy. Legislative leaders insist that the gradual ramp-up of a sales tax on services would allow the state to determine and measure the true economic effects of implementation. This bill creates too many factors that would change consumer behavior for us to ever know what the effects of each piece of the policy are. Changes in income tax, we know, change consumer behavior, so conclusions about the effects of a concurrent change in sales tax structure cannot be measured with any accuracy. Why is that significant? Because if it causes economic stress and decline, there is no sure way to determine if the stress is caused by one or more of those policy changes or how to fix it when things go awry. We have to be able to control for the effects of all inputs, and this complex policy leaves no ability to accomplish that.
Offering some points of discussion about the tax reform conversation in Utah:
Our fiscal structure may be headed toward a breaking point. I'm not trying to be alarmist, but I believe that there is merit to the argument that our current system is not sustainable for the long term, and I think that some kind of tax reform is needed. Regarding the decrease in the income tax, which has the direct effect of decreasing funding for education, House leadership and proponents of the tax bill have argued that under the proposed plan, that funding for public education would stabilize or even increase under the new plan because funding for higher education could be fully provided out of the General Fund due to increased tax revenue under a reformed system. It's a laudable goal - one of the worst decisions - I believe - made by previous legislatures, was allowing the public education fund to be used for higher education. What is wholly uncertain, though, is if the newly proposed tax structure would accomplish that goal. Considering the gravity of the consequences, this is not a law that we can simply pass and then hope it all works out. Tax reform must be careful, measured and implemented over several years. Too often we have seen sweeping tax reform measures implemented and chaos ensue.
Punch line: the discord around the proposed tax reform was insurmountable, so Republican leadership held a press conference announcing that the effort would be shelved for this legislative session, with a likely special session on the horizon. The conversation is far from over. I am hoping that the process going forward will be more inclusive and transparent.
Another hot button issue arose in the past week: a follow-up bill to last year's Inland Port legislation. HB433 adds more power and potential for an added 15 years (to the current 25) that the Port Authority may authorize itself to keep tax revenues from the activity at the Port, denying Salt Lake City proper authority over commerce that occurs entirely within its city boundaries. The bill passed out of the House with a vote of 61-11 (three people were absent for the vote).
A highly most surreal moment of the week was a Republican legislator claiming disenfranchisement in Utah. HB93 sought to allow portions of counties to split off into their own new county, but allowed for that activity to proceed only with the vote of the people within the newly proposed county, effectively silencing the voice of every person in the county left behind with no vote. Arguments made by the Representative running the bill is that she feels voiceless in Salt Lake County - not represented by the county's governing council. It would be prudent to note, of course, that Salt Lake County is represented by a majority 5-4 Republican council. As a Democrat in gerrymandered Utah, I might have a little insight to offer the sponsor about being disenfranchised and politically marginalized in our state.
Finally, I'm very disappointed in some of my legislative colleagues' efforts to undermine and sabotage efforts by Rep. Craig Hall and advocates to outlaw the torturous and horrendous practice of conversion therapy on children in our state. This practice is roundly disavowed by psychologists and therapists nation-wide. While time is of the essence, this effort is only the first of as many as it will take until this policy is passed and conversion therapy is illegal in our state. HB399 is dead for this session but this effort will continue.