Utah Gov. Gary Herbert's proposed sales tax cut 'not going to happen,' lawmaker says

SALT LAKE CITY — Gov. Gary Herbert's plan to slash the state sales tax rate to just 1.75 percent was shot down Thursday by the lawmaker working on what's expected to be the GOP legislative leadership's tax package.

"That 1.75 percent you heard is not a reality. The math does not add up," Rep. Tim Quinn, R-Heber City, told members of the House Republican caucus Thursday during an update on his efforts. "That 1.75 percent is not going to happen."

House Majority Leader Francis Gibson, R-Mapleton, told the supermajority Republicans that it's the governor's "job to paint a portrait. It's our job to fund the reality. … Bless his heart."

The governor offered new specifics in his State of the State speech Wednesday evening about the plan outlined in his proposed budget to broaden the shrinking sales tax base by imposing new taxes on some services while reducing the rate.

In his budget, Herbert said only that the rate could go from what will be 4.85 percent after April 1 to below 3.9 percent with the help of $200 million set aside for a tax cut.

But in his annual address, the governor agreed to the higher, $225 million tax cut number proposed at the start of the session by House Speaker Brad Wilson, R-Kaysville.

Herbert said combining that tax cut with new taxes on services could drop the sales tax rate 64 percent, "to a mere 1.75 percent" and mean nine out of 10 taxpayers would pay less in taxes than they do today.

Just how much additional money would have to be collected in new taxes on services to make that happen remains to be seen, although it's been estimated it could be as much as $800 million just to get below 3.9 percent.

Quinn, the vice chairman of the House Revenue and Taxation Committee, told the Deseret News later that he was "shocked" when the governor referred to a 1.75 percent tax cut in his speech. "I don't know where the number came from."

Both House and Senate Republican leaders have said the bulk of the tax cut should be in income taxes, not sales taxes. But Quinn said there could be some reduction in the sales tax rate as the base is broadened.

"There could be a signficant cut. It just won't be 1.75," he said. You would almost have to tax every economic activity in the state" to bring in enough money to drop the rate that far. "Let's manage expectations."

And while there is interest in dropping the income tax rate from the current 4.95 percent, Quinn said there could be another $50 million to $60 million in tax credits for specific groups, including teachers and those suffering from intergenerational poverty.

Quinn is expected to carry the GOP tax package and has been working with Republican and Democratic lawmakers in both the House and Senate, including Sen. Lincoln Fillmore, R-South Jordan, to identify what services should be taxed.

"There's more in than out," he said of the list being put together, including Uber and other ride-sharing services. Health care and real estate transactions are off the table for him, Quinn said, although architectural services could be taxed.

Republican senators also talked about what's being called tax modernization in their closed-door caucus Thursday.

Senate Majority Leader Evan Vickers, R-Cedar City, said the focus was on the process of coming up with a plan, rather than numbers including the governor's latest proposal.

"It's a big undertaking. It's huge. Tax discussions in the past have taken a lengthy amount of time," Vickers said. He said there was some talk of the difficulty of broadening the sales tax base and whether it can get done this session.

"That's up in the air," the majority leader said.

Fillmore, the chairman of the Senate Revenue and Taxation Committee, said he was "happy to see the governor leading out on this issue. I haven't seen definitive enough calculations to know where the sales tax rate will land."

While Fillmore said he feels confident "it will be a significant cut in the sales tax rate. I'm hopeful that we could get to 1.75, but that probably includes taxing some services that will be pretty difficult to pass."

He said he appreciated having a goal, but without what he termed "unlikely, to say nothing of whether or not it is advisable, that there would be a tax on health care services, I doubt 1.75 is a realistic number we could hit."

Contributing: Katie McKellar

from Deseret News http://bit.ly/2SkfVMK