SALT LAKE CITY – Utah Governor Gary Herbert is expected to sign a tax overhaul bill into law that makes major changes to Utah’s tax code.
SB2001 was voted on shortly before 10 p.m. Thursday night in a special legislative session after lawmakers spent several hours debating the proposal and making last minute changes.
Utahn’s with dependents will see a one-time check for as much as $200 early next year. The bill includes a $160 million cut in income taxes, while raising sales taxes on gas and a number of previously un-taxed services. A tax on unprepared food will increase from 1.75% to 4.85%.
The food tax prompted some Republican lawmakers to join the Democrats in the House and Senate in voting against the bill, saying it would greatly impact lower income households.
Sen Lyle Hillyard, R-Logan, said the tax reform plan includes giving a grocery tax credit and is a “more efficient” way to help the poor.
In a statement sent to the media after the vote, Utahns Against Hunger said the new tax structure would be harmful to Utahns.
“Low-income Utahns feel the pinch of low-wages on every front, from increases in rent, increases in the price of gas, restricted access to health care, and now an increase to their groceries,” according to the statement.
Senate President Stuart Adams, R-Layton, said tax credits will be available to low-income families.
“We have a $125 food credit, we put back the Earned Income Tax Credit, removed the tax on social security and we’ve increased the exemptions,” stated Adams, during a press briefing after the vote. “We not only increased the exemptions, we actually kick started them with a pre-bate and I think when you look at all that – when people see the deductions on their income taxes, I think they’ll see we’ve done the right thing.”
Hillyard, who supported the bill, said he was disappointed the list of new services being taxed wasn’t longer.
“It’s not what I wanted,” said Hillyard. “I would make different changes to it. But the legislative process is a compromise. There’s a lot of negotiations, not only with Democrats, but Republicans.”
Gov. Gary Herbert praised passage of the bill in a statement following the close of the special session.
“I commend the Legislature for their courage and forward thinking in working to address the difficult issue of tax reform,” he said. “The bill they passed this evening takes measurable steps toward improving the stability and equity of our tax system. We have meaningful work yet remaining. However, these steps will improve the future of our state and its people. I look forward to signing it.”
The tax reform effort has been in the works for more than nine months after the 2019 Legislature failed to pass a bill that would have imposed new sales taxes on a wide range of services. A tax reform task force was created to come up with an alternative.
Tax reform is seen as necessary because income tax revenue is outpacing sales tax revenue, as consumer spending shifts from goods to services. The Utah Constitution directs income tax revenue only to education while sales taxes pay for much of the rest of state government.
SB2001 failed to pass by a two-thirds vote. By law, that means it won’t take effect for 60 days.