Utah contemplates tax changes in wake of federal overhaul
By MICHELLE L. PRICE
Jan. 08, 2018
SALT LAKE CITY (AP) — On the heels of the federal tax overhaul signed by President Donald Trump in December, Utah lawmakers are still calculating how it will affect their plans to overhaul the state's tax system.
Utah's tax system, like many states, is linked to the federal tax code, but legislative bookkeepers are still trying to figure out how the major rewrite at the national level will affect Utah's coffers.
House Speaker Greg Hughes, speaking Monday at a conference hosted by the Utah Taxpayer's Association, said Utah budget analysts were predicting the state might receive an extra $75 million to $115 million in tax revenues because of the changes in Washington.
But Senate President Wayne Niederhauser cautioned soon after that Hughes spoke that the latest Utah estimates show the federal overhaul might not create a windfall for the state.
Hughes, Niederhauser and other legislators offered broad outlines Monday of some of the ideas they're exploring for the upcoming legislative session, but more than two dozen tax-related bills have yet to be publicly unveiled.
A look at tax proposals in the works:
Utah lawmakers last year considered raising the state sales tax on groceries up to about 4.4 percent from its current rate at 1.75 percent. They backed away from the unpopular plan because it wouldn't do enough to stabilize Utah's sales tax collection even in the case of an economic downturn. Critics said the plan to raise taxes on food would disproportionately hurt the poor. This year, Rep. Tim Quinn has proposed eliminating the state grocery tax entirely, though cities and counties could still imposing the small share they add on. In return for cutting the grocery tax, Quinn's bill would raise Utah's overall sales tax rate to 4.94 percent, up from its current rate of 4.7 percent.
Republican Sen. Howard Stephenson, of Draper, said legislators are still trying to calculate how the federal tax overhaul will change Utah's income tax collections. Stephenson, who co-chaired a committee this summer that studied Utah's tax system, said Utah may end up changing some of its exemptions and deductions or tweak its income tax if it appears the state will be inadvertently taxing more income. For example, Stephenson said the state could drop Utah's income tax to 4.9 percent from its current rate of 5 percent.
Utah exempts equipment used in manufacturing from sales tax as long as the equipment lasts more than three years, but Stephenson said legislators plan to get rid of that three year requirement and broaden the exemption so that all manufacturing equipment and materials won't be subject to sales tax. Stephenson said that sales tax for manufacturers plays a big role as businesses look at where they'll operate, especially if they consider adding more workers and more shifts, which would wear out equipment faster.
"We basically punish you if you invest in Utah jobs, or if you have an abrasive or a caustic industry that wears equipment out," Stephenson said.
As cars have become more energy efficient and more hybrid vehicles hit the road, taxes on gasoline that pay for road improvements haven't been able to keep up with the wear and tear that more energy-efficient vehicles cause to roadways. Stephenson said Monday that all users of the roads should be paying their fair share, so legislators are exploring this year whether to require electric vehicle owners to pay an additional annual fee when they renew their vehicle registrations. Stephenson said that in the years ahead, legislators may consider also charging drivers based on the miles they've traveled — something a handful of states have started experimenting with.