Analysis: Who was the major driving force behind the sales tax on services initiative?
Ronald Mortensen,
Ph.D.
May 7, 2019
Question:
Who was the major driving force behind the sales tax on services
initiative as reflected in HB441?
Answer:
The Salt Lake Chamber, which has been designated as an Enemy of the Taxpayer, was apparently
the major driving force behind the sales tax on services initiative. The
Chamber’s efforts were led by Derek Miller in collaboration with the Kem C.
Gardner Policy Institute’s Director, Natalie Gochnour—who is just
coincidentally the Chamber’s Chief Economist, a member of the Chamber’s
Executive Team, a Senior Advisor to the Chamber, a member of the Chamber’s Board
of Directors and a member of the Chamber’s Board of Governors.
Discussion:
The Enemy of the
Taxpayer, Salt Lake Chamber, in close coordination with Governor Gary
Herbert, orchestrated the Tax Modernization effort as reflected in HB441 by
using its full range of front groups, fellow-travelers, lobbyists and a
specially created tax modernization website.
Tax Modernization, as defined by the Chamber, includes a sales tax on
services accompanied by a cut in the corporate income tax which allows its big
business members to continue to socialize their costs by shifting even more of their
tax burden onto low and middle income Utahns as well as onto small businesses
while privatizing their profits.
A Chamber Press release issued on December 14, 2017
stated: “Over the past several decades, Utah’s sales tax base has been eroded
due to changing purchasing patterns, the digitization of goods, legislated
exemptions and remote sales.” Lane
Beattie, the Chamber President and CEO at the time said: “Now is
the time for tax modernization…. Relying
on the same old tax code just won’t cut it.”
The Chamber’s press release further noted that “The [Chamber’s] campaign will seek to make this issue extremely visible
with the public and help people understand the need to modernize our tax code,
and encourage the legislature to take action this coming session….For more information on Utah Tax
Modernization visit, http://utah.tax/”
According to the Chamber’s Utah.tax website,
“Expanding the sales tax base to services and removing previously-passed
exemptions would improve stability and level the playing field, while also
allowing for flexibility for business-to-business transactions.”
When the House of Representatives finally released
its sales tax on services bill, HB441 on February 27, 2019, the Chamber quickly
issued a press
release in support of it. Derek Miller, Chamber President and
CEO and Governor Herbert’s former Chief of Staff said: “As Utah’s ‘Voice of Business,’ the Salt Lake Chamber supports the Utah
Legislature taking bold action to implement an updated, balanced approach to
Utah’s tax policy.” In
addition, “Tax Modernization” is listed as the Chamber’s top priority under the
category of Business Climate.
The Chamber received substantial help from affiliated
organizations that provided the “empirical” arguments for expanding the sales
tax to include services.
In June, 2018, a Utah Foundation study
addressed the increased expenditures on services and concluded that If Utah
broadened the sales tax base to include all personal consumption transactions, “the state could drop the effective rate to
2.1% (from 6.2% currently) and generate the same amount of revenue.” The Chamber’s CFO is a member of the Foundation’s
Board of Trustees.
Utah Policy parroted the Chamber’s talking
points, published its press
releases verbatim, pushed out the studies completed by the Utah
Foundation and Kem C. Gardner Policy Institute. It also commissioned and then reported on a poll
that found strong public support for broadening the sales tax base.
Governor Gary Herbert has a long history of taking Chamber policies
and making
them his own. In this case, the Kem
C. Gardner Policy Institute gathered much of its data from the Governor’s
Office of Management and Budget. The
Chamber and the Governor
then took the Gardner Institute study and used it to build their case for Tax
Modernization based on a sales tax on services.
The Utah House of Representatives eventually put
up its own web page on Tax
Modernization. However, it does
nothing more than repeat the Chamber’s, Kem C. Gardner Policy Institute’s and Governor’s
talking points. It then links directly to
the Chamber’s Tax Modernization website.
Once HB441 was made public, the Chamber quickly
issued a press release in support of the House bill. In addition, it had its Vice President of
Public Policy and Government relations speak in
favor of HB441 during a House Committee hearing and the Chamber lobbied
legislators to pass the bill.
It was only when Chamber members, who are not part of the
Chamber’s big business inner circle, finally caught on to what the Chamber was
doing that Derek Miller, the Chamber’s President and CEO, backtracked and issued
a new press
release calling for HB441 to be pulled.
So, just as all roads used to lead to Rome, in Utah all
roads on the sales tax on services lead to the Salt Lake Chamber and to the Kem
C. Gardner Policy Institute and their leaders, Derek Miller and Natalie
Gochnour.
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