Lawmakers support repealing sales tax on food
State lawmakers often debate repealing Utah’s 4.75 percent sales tax on unprepared food. But with several tax cuts proposed this year on Capitol Hill the political hot potato could finally take effect.
However, when local governments’ share of the food tax is added, Summit County and its municipalities risk losing around seven percent in sales tax revenue if the tax is repealed, Summit County Auditor Blake Frazier said. "I don’t think it’s going to generate the benefit that people think it will," he said. Those who support doing away with the food tax are having a difficult time convincing elected officials in rural parts of the state that the tax cut wouldn’t deal their towns a major financial hit.
"There are people out there who wouldn’t pay any tax at all if they didn’t pay sales tax on food," Summit County Commissioner Ken Woolstenhulme said.
Summit County deputy attorney Dave Thomas, a Republican who also represents Weber and Davis counties in the state Senate, added, "undocumented aliens — that is the only tax they pay." Assistant Senate Majority Whip Beverly Evans, who represents portions of Summit County, says she hopes the bill never makes it out of committee. Her rural constituency has only a handful of businesses, and they sell food, Evans said. The cut could be worth millions of dollars to taxpayers but mayors in Coalville, Kamas and Park City fear other areas of their budgets would be harmed as councils scramble to make up the shortfalls. "If we lose the tax on food the deficit needs to be made up somewhere," Coalville Mayor Duane Schmidt said. If the Legislature passes South Jordan Republican Rep. Merlynn Newbold’s House Bill 109, which repeals the food tax, Schmidt estimates Coalville would lose roughly 30 percent of its sales tax revenue — nearly $4,000 per month. "We don’t have 25 or 30 percent of sales tax money just sitting around. It’s being used and it’s being used for services for the citizens," Schmidt said. "We are really going to have to get creative to make up that deficit whether it’s decreased services, whether it’s higher taxes on something else." Coalville’s two grocery stores are one of that city’s most reliable revenue sources, the mayor added. "Other stores, they’re up, they’re down you can pretty much count on the food sales tax," Schmidt said. "We can’t afford a 25 to 30 percent cut on that."
Despite concerns in eastern Summit County, Democratic Rep. Ross Romero, who represents portions of the Snyderville Basin, supports the bill.
"It provides for some recognition that this will affect cities’ and counties’ sales taxes," Romero said.
Along with exempting food purchases from sales tax, HB 109 changes state law to allow local governments to boost other local option sales and use tax rates.
"Summit County and Park City will absolutely not be affected by the proposal," Romero said. "There will be some losers and there will be some winners but in Park City it will have no percentage change."
But Park City Mayor Dana Williams disagrees. "In a tourist economy, the loss of sales tax on food would be absolutely huge," he said. "I’m not sure what Representative Romero was talking about sales tax generation is one of the major funding sources, along with property tax and license fees, that the city gets revenue from."
Advocates for the poor have been some of HB 109’s most vocal proponents. Williams, however, supports food "vouchers" for low-income families similar to tax credits for food being debated by the state Senate. Some of the bill’s supporters, however, claim income-tax credits wouldn’t work because many poor people don’t pay state income tax and wouldn’t apply for a refund. Kamas Mayor Lewis Marchant isn’t optimistic lawmakers could hold cites and towns harmless if the food tax is repealed.
"I don’t think it really had any merit in the past so I haven’t really been that concerned about it until this time," Marchant said. Some lawmakers say the Legislature has a $1 billion budget surplus and the possibility of relieving citizens of a tax burden at the cash register is appealing. Getting rid of food tax, however, could reportedly cost state and local governments roughly $225 million. Representatives and Gov. Jon Huntsman Jr. have contemplated repealing sales tax on food as part of their tax-reform packages. The House revenue and taxation standing committee gave HB 109 a favorable recommendation on Tuesday.
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