Not only will there be no general tax cut this session, it now looks like lawmakers may hike state sales taxes before the 2008 Legislature adjourns next Wednesday.
Both House and Senate Republicans are backing a 0.05 percent sales tax increase to fix congested highways, a proposal they insisted Thursday was actually a tax shift.
The increase would boost the state sales tax rate to 4.7 percent but would not be applied to food purchases. It is expected to raise some $20 million for transportation projects aimed at relieving “choke points,” primarily on state roads where small road fixes could make a big difference in congestion problems.
While all Utahns would pay more in sales taxes, leaders of the Legislature’s Republican majority said the extra revenue raised would, in effect, be offset by more than $20 million in tax cuts for targeted groups.
The biggest tax break, $18 million, would go to the 70,000 or so self-employed Utahns who buy their own health insurance. Another $250,000 in tax credits would be available to Utahns who build solar energy projects, while Delta Air Lines would be the chief beneficiary of a $50,000 tax break.
Gov. Jon Huntsman Jr. has not signed off on the proposal, his spokeswoman, Lisa Roskelley, said Thursday.
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“The governor is definitely concerned about transportation funding and he’s going to look at the logistics of any option,” she said. Earlier in the day, Huntsman told the Deseret Morning News he “would be against a net tax increase” but not what he called “re-balancing” taxes.
“It’s really rather straightforward,” said House Speaker Greg Curtis, R-Sandy. “Philosophically I can look at it and say I made a philosophical decision that it’s not a tax increase. It’s a tax shift.”
Other options for transportation funding are available, including a reduction on other state programs. However, most other programs, such as education, are also not getting the type of money they anticipated at the beginning of the session.
Senate President John Valentine, R-Orem, also called the proposal “a tax shift a very, very small increase” that amounted to “pennies” that would go a long way toward easing traffic congestion throughout the state.
It’s an election year for all of the House and half of the Senate. Earlier in the session, GOP lawmakers had talked about giving Utahns a $100 million property tax cut. But ever since the latest revenue estimates fell short, the search has been on for money, especially for transportation and education.
Valentine said implementing what many will see as a tax hike could be difficult this year. But he said he believed voters would “recognize transportation and education are the two most important things we do up here. We were hoping we’d be able to do all these things with cash and still give a tax cut.”
Senate Republicans agreed to support the proposal during a three-hour closed-door caucus Thursday, Valentine said. House Republicans, however, debated the proposal publicly for two hours during their caucus, where concerns were raised.
Some GOP House members said they were worried how the proposal would be perceived given this year’s record surplus, the third highest the state has ever had despite a $340 million decrease in anticipated revenues last week.
“I won’t argue tax cut or no tax cut,” Rep. Carl Wimmer, R- Herriman, said. “I’m just wondering how we got to the point where we had to be so creative in a year of plenty to come up with money for transportation.”
Rep. Jim Dunnigan, R-Taylorsville, said he also struggled with the idea.
“It’s a year of plenty and I’m wondering if we’re going to raise taxes, are we not better to hold that in reserve for a year we actually have a downturn?” he asked.
House Democrats, on the other hand, said they were surprised by the proposal and it wasn’t a priority to them. Senate Democrats didn’t say whether they would endorse the deal, but acknowledged it is a tax increase.
“They’re shifting money and raising taxes,” said Senate Minority Whip Gene Davis, D-Salt Lake.
As for the actual road projects, Utah Department of Transportation spokesman Nile Easton said they would work with the state Transportation Commission to determine what projects got the money. Some “choke point” projects funded in past years include the addition of two lanes along a stretch of 5600 West in Salt Lake County where the road had narrowed from four lanes to two, then increased back to four.
At present, the tax hike would be among the only new dollars UDOT receives this year from the Legislature.
“Any money toward transportation needs will help us address the growing problem of congestion in the state and we’re grateful to the Legislature for addressing those needs,” Easton said.
E-mail: nwarburton@desnews.com; lisa@desnews.com
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