Tax Reform Special Legislative Session: Review & Observations
Ronald Mortensen, Ph.D.Co-Founder, CitizensForTaxFairness.org
January 25, 2020
The following is the author's detailed
review of and observations on the passage of Utah’s tax reform bill by a special
session of the legislature.
Democrats - more transparent and more responsive to their constituents
Democrat legislators were much
more open and transparent than were their Republican counterparts during the
multi-month tax reform process. They actually listened to what their
constituents were saying and acted on that. On the other hand, the Republican
governor and legislators, with the exception of those in highly competitive
districts, only listened to powerful business interests, legislative staff and possibly
to a few big donors. The result was that, as Senator Todd Weiler openly
acknowledged, Republicans now find themselves ahead of public opinion.
When it comes to transparency, the
Republicans have always lagged behind their Democrat counterparts. The
Republican Senate caucus is always closed to the public and the House caucus is
usually closed—both were closed on the night of the special session. The
Democrats’ caucuses are open.
Because of this, those attending
the Democrat House caucus on the afternoon of the special session, saw
Republican Norm Thurston come into the Democrat caucus, whisper something to
the minority leader and then watch as he and Representative Jennifer
Daily-Provost left the caucus room. Later in the evening, Thurston and
Daily-Provost could be observed talking at the back of the House chamber.
Shortly, thereafter Representative Daily-Provost proposed to replace the
Republican bill with a substitute – the 5th
substitute. That substitute would have required big businesses to help shore
up the general fund rather than giving them a complete pass and putting the
burden on middle income taxpayers as the Republican bill, which was passed,
Washington style politics are now embraced by Utah Republicans
Utah Republicans have now fully
and very openly embraced Washington style politics.
Under current Republican control, it is the
citizens of the state of Utah who serve the government and the powerful
business interests favored by that government.
Republican leaders are fixated on ensuring that
government will continue to grow and guaranteeing that it will never have to
tighten its belt during economic downturns.
The Republican governor and Republican legislators
load middle-class Utahs down with ever more taxes in order to support big
government, corporate socialism and Utah’s elites.
The Speaker rules the Utah House with an iron
fist just as Nancy Pelosi does in Washington.
Republican legislators pass a massive tax reform
bill that they haven’t read in order to find out what is in it without a single
Democrat voting for it. And the fiscal note for
the bill is not finalized until after the Senate passes it and it has been
taken up in the House.
The Republican governor and Republican legislative
leaders misuse $150,000 of taxpayer funds to create a propaganda campaign
disguised as a listening tour. This is done in apparent violation of state
procurement rules and without an appropriation of funds. They then deny doing
Senate Action on the Bill – Democrats push back; Republicans toe the
The Republican controlled Utah state
senate is totally focused on (1) ensuring that the state revenues are always
rising, (2) that government programs are always growing and (3) that state government
never has to reduce spending or programs during the bad times.
In his presentation of the Republican’s
tax reform bill to the Senate, Senator Lyle Hillyard carried out a
mini-filibuster waiting for the 4th substitute of the bill to be finished
so the body could pass it—which they did just minutes after receiving it. Citizens
were given no time to review the final legislation before it was passed.
Focus totally on ensuring
that government has the funds to continue growing
Hillyard made it crystal clear
that for Republican’s tax reform is all about ensuring that government has growing,
stable revenue sources that will hold government harmless during economic
downturns. They achieve this by imposing the state sales tax on food, gasoline
and a handful of service providers who lack the political power to fight back.
It quickly became apparent that the
personal and corporate income tax cuts were largely designed to do two things:
First, lock in the Republican votes necessary to pass the Republican’s tax
reform bill. Second, prepare the field for future negotiations with the public
education establishment in order to remove the constitutional earmark that
dedicates the entire income tax to public education. This would be done in exchange
for authorizing local school districts to automatically increase property taxes
every year without a truth-in-taxation hearing.
The one-time payments that certain
individuals who pay state income tax will receive in early 2020 are just a
small percentage of what taxpayers overpaid because the legislature refused to
restore the dependent credit in 2018 (roughly $200 on a $2,000 overpayment). The
state keeps the major portion of the overpayment and its billion dollar surplus.
While presenting the bill, Hillyard
repeated the discredited claims that sales tax growth has not kept up with
population growth and that people were no long buying goods. In addition, he
failed to acknowledge that huge chunks of sales tax revenue had been given up by
Republican legislators in order to give big businesses an estimated
half-billion dollars in sales tax exemptions. There would be no need to
increase sales taxes on food or gasoline if these exemptions were eliminated.
Blames drop in child births
and an aging population for the need to tax services
Hillyard argued that Utahns are
having fewer children which further reduces spending for goods. In addition,
the state’s population is aging and old folks spend their money on such things
as medical services which aren’t taxed.
Acknowledges that online
sales tax money has already spent or used for tax cuts for big business
Hillyard acknowledged that the
online sales tax money has already been spent on items in the current budget
and on a sales tax cut for big businesses. Therefore, the task force had to
find new sources of general fund revenue that go up at the same rate as
He further argued that in order
to reduce the income tax, sales tax revenue had to increase. The tax reform
bill achieves this by taxing food, gasoline and a few services. Under the bill,
general fund revenues will be more stable and will constantly ratchet up as
food and gas prices increase. He expressed his disappointment that they weren’t
able to tax even more services.
Puts a positive spin on
income tax and food tax rebates with a little fuzzy math
Hillyard noted that a one-time
payment was now included in the bill to offset some of the extra individual income
taxes that will be paid on 2019 income. This was only necessary because the
legislature refused to reinstate the dependent credit in either 2018 or 2019.
Under this bill, taxpayers will only get a small portion of what they overpaid
back. A partial food tax credit will be paid in July and $500,000 will be
allocated to Workforce Services so it can help people eligible for that credit to
Using fuzzy math, Hillyard
argued that even though the sales tax rate on food almost tripled (from 1.75%
to 4.85%) that it won’t triple the price of food so it is not really a tripling.
Besides, the sales tax on food is a stable source of revenue since everyone has
to eat even in the bad times. Based on this bill, it would seem that Governor
Herbert and Legislators are totally lacking in compassion for individuals who may
be struggling to make ends meet during economic downturns otherwise why would
the tax their food?
Justifies sales tax
exemptions granted to business and a sales tax on gasoline
Hillyard justified huge sales
tax exemptions given to big businesses. He then said that the imposition of a 10
or 11 cent per gallon sales tax on gasoline is necessary because the existing
gas tax isn’t providing enough money for roads. He failed to acknowledge that in
2018, the people of Utah had voted 65% to 35% against a 10 cent a gallon
increase. Efforts will be made to replace the sales tax on gasoline with a fee
based on miles driven in four or five years in order to tax alternate fuel
vehicles. However, as Ronald Reagan said “Government programs, once launched,
never disappear. Actually, a government bureau (or tax in this case) is the
nearest thing to eternal life we'll ever see on this earth!”
Hillyard said that additional
revenue will be collected for roads by requiring that there be three people in
a vehicle in order for the driver to use the express lane at no cost. Months
earlier another state senator hold told constituents that this would be in the
bill and that in future years additional freeway lanes will be designated as
Argues that not everyone
benefits from roads
Senator Hillyard argued that
using sales taxes paid on goods not related to roads to pay for roads is unfair
because people paying those taxes don’t benefit that much from the roads. He
said that an agreement was made to limit the increase in taxes on diesel fuel to
six cents a gallon for two years and then increase it to ten cents because diesel
is cheaper in other states. It didn’t hurt that the trucking industry had good
lobbyists whereas the citizens didn’t have anyone at the table to push back on
the gas tax.
More services will be taxed
A number of additional services
will be taxed including shipping and handling on taxable goods, parking, dating
referral services, identity theft protection, Uber, etc. These taxes are on
final consumption according to Hillyard. Actually, these services are the
weaklings in the herd and easiest for the legislative coyotes to take down. They
will be back for the stronger members of the herd in order to impose service
taxes on them at a later date.
Five Million dollars to buy
votes of rural legislators and county government officials
Rural counties will receive $5
million in funds to help them with roads. This is another example of Washington
style politics. Can anyone say “Cornhusker
Argues that a reduction in
income tax revenues for public education helps public ed
Even though this bill reduces
income tax revenues which are dedicated for public education, according to
Hillyard, it actually helps public education. It does this by strengthening the
general fund so it can be tapped to help support public education when income
taxes drop during an economic recession. This is why the sales tax on food is
necessary. It won’t drop all that much when people lose their jobs because
people still have to eat.
Property taxes are the governor’s
and legislature’s ace in the hole. The idea of a state property tax for
education was floated
by a lobbyist for the powerful Utah Realtors. Senator Ann Millner is working on
a bill that makes it easier for local school districts to raise property taxes
in return for giving up the income tax earmark for education. That way the
governor and legislators can tap income tax money to grow government while
homeowners are being priced out of their homes due to constantly increasing property
taxes. Can anyone say, Proposition 13?
Increasing property taxes
deferred to another day in order to pass this bill
Hillyard noted that there is
nothing in this bill about property taxes. Of course, that wasn’t included since
it would have killed the bill. Now that sales taxes have been increased, property
taxes will be dealt with in the regular session. In fact, Senator Millner is already
working on a bill to end the constitutional earmark for the income tax. Her
bill will reportedly authorize local school districts to raise property taxes automatically
each year by the rate of inflation—without holding truth-in-taxation hearings
in return for freeing up the income tax.
Tax reform task force will
continue in its quest to find more things to tax
Senate President Stuart Adams touted
the public vetting that this tax reform bill had received. In response to a
question from Senator Anderegg, Adams said that there was no intention to
repeal the tax reform task force. Therefore, it will continue in its quest to
tax services and to drive people from their homes by increasing property taxes
each and every year. Anderegg said that since the food tax credit would be partially
paid up front and because the task force would continue to find services to tax
that he would vote for the bill.
Senator Weiler notes that the
legislature is ahead of public opinion on tax policy
Weiler referenced the elite’s
favorite, Natalie Gochnour, and then said that he was convinced that the poor
would be better off once the sales tax was reinstated on food due to the credit
they would receive. He also noted that the governor and legislators are ahead
of the public on this in spite of spending $150,000 in taxpayer funds to shape
public opinion. He said that legislators will be criticized but food and
gasoline have to be taxed in order to avoid cutting social programs.
Senator Davis’ amendment to
require businesses to pay more fails
Senator Gene Davis tried to
amend the bill in order to increase the corporate franchise and corporate income
tax rates. He failed. He also pointed out that much of the new sales tax revenue
from the online sales tax had been used to give additional sales tax exemptions
to big businesses. The Republicans justified this by saying that it was done to
prevent the windfall from online sales taxes from being spent on government
programs. Hillyard opposed the amendment and it was voted down. Big business
interests had remained untouched.
Hillyard reaffirms bill’s
purpose is to guarantee growth in state funding
Hillyard summed up by saying
that President Adams was a great leader, that Olene Walker gets credit for the
rainy day fund that helps ensure that the state will not have to cut back its
spending during times of economic downturn and that the income tax needs to be
supplemented by general fund revenue in the bad times so schools are held
harmless. Nothing was said about the people paying for all of this—mainly
Senator Fillmore is proud to
vote for the biggest tax cut in the state’s history
Speaking to explain his vote, Senator
Fillmore said “I am proud to vote aye”—because this is the largest tax cut in
the history of the state.
Senator Harper votes for the
bill because people are better off under it
Senator Harper said that he was
voting yes because people are better off under this bill.
Senator Iwamoto votes “No”
because of the harm done to the most vulnerable
Senator Iwamoto said that it was
important to look at sales tax exemptions granted to big businesses, the impact
of the sales tax increases on indigenous people who live in remote areas and have
to drive long distances and on the elderly who are among the single filers who
may pay more taxes under this bill.
All senate Democrats and two senate
Republicans vote “No” on the bill
The tax bill passed the Senate by
a 2/3 majority by getting 20 votes. All
Democrats and two Republican Senators (Thatcher and Henderson) voted against it.
Neither Henderson nor Thatcher spoke against the bill. When the bill was voted on a second
time later in the evening due to an amendment made in the House it only got
19 yes votes because Senator Okerlund had left. Therefore, on final passage it
failed to get a 2/3 majority. However, this didn’t matter because the bill
failed to pass the House by a 2/3 majority.
House action – Democrats push back, Speaker controls Republicans
House Sponsor not sure what
is in the bill
When the bill got to the House,
the bill’s sponsor, Francis Gibson, gave a short explanation of it. He tried to
explain why the new gasoline sales tax was not really an increase. He then said
that the total tax cut was $255 million. Therefore, the cut went from $80
million to $160 million ongoing then to $255 million ($160 million ongoing and
$95 million one-time funding) in order to get the votes needed to pass.
The day after the bill passed,
legislative leaders were saying the total cut was $240 million. That includes
$80 million one-time money for a limited rebate for those families that have
dependents. What they didn’t mention was that many of these families will be
paying up to $1,000 in extra income taxes for the second year in a row and all
they get back is $200 with the state pocketing the other $1,800.
It is important to understand
that the $95 million or $80 million or whatever amount was added to the bill was
done in order to buy wavering members’ votes and to give members cover by
allowing them to repeat over and over again that this is the biggest tax cut in
the state’s history. This $95/$80 million figure shows that legislators,
including the bill’s House sponsor, didn’t know what was in the bill until they
passed it because the fiscal note
wasn’t completed until hours after the special session had been called to order.
There was never any talk about the
one-time tax cut for 2019 income taxes until I sent every legislator a series
of questions. A number of these questions essentially asked why they were
taking the income tax windfall that resulted from their failure to restore the dependent
exemption for the second year in a row. I also pointed out that no one would
see any noticeable tax reduction until their income taxes were filed in 2021.
So, it could be argued that my questions resulted in the legislature rebating $80
million to taxpayers who were the victims of its failure to restore the
dependent exemption in 2018 like they should have.
Democrats were the only ones
to openly fight back against the bill in the House
The Democrats in the House
offered numerous amendments. All failed. Finally, Jennifer Daily-Provost
proposed a 5th
substitute that would have deleted the sales tax on food, increased the sales
tax rate on aviation fuels, increased the severance tax rates on oil and gas, increased
the tax rate for radioactive waste facilities, etc.
Her substitute bill was the only
significant attack mounted in the House against Utah’s, Republican created corporate
socialism but it failed by a vote
of 21 for and 46 against. Prior to the motion to substitute the bill, Republican
Representative Norm Thurston was seen talking with Daily-Provost which, as
noted earlier, may explain what their earlier meeting during the Democrat
caucus was about.
Several House Republicans spoke
in favor of the bill. Melissa Ballard praised all aspects of the bill including
the fact that it helps give the state a stable source of income. She concluded
by saying that if it didn’t pass there wouldn’t be money for transportation.
All House Democrats and 11
Republicans vote against the bill
The bill passed the House by a vote
of 43 to 27 which was 7 short of a 2/3 majority required for the bill to
take effect immediately. All House Democrats voted against the bill along with 11
Republicans—Coleman, Dunnigan, Eliason, Hall, Judkins, Lyman, Pierucci, Quinn,
Thurston, Ward and Winder. Many of these legislators are in competitive districts
and one is running for Congress. None of the Republicans voting against the
bill spoke against it. The bill was then sent back to the Senate because it had
been amended in the House and the Senate then voted
19 to 7 on final passage. As noted above, this was one short of a 2/3 majority
since Senator Okerlund, who had originally voted for it, had departed.
Governor and legislative
leaders “buy” and coerce enough votes to pass the bill
So, despite strong public
opposition, the governor and legislative leaders finally cobbled together a
bill that garnered enough votes to pass. They did this by “buying” the votes of
numerous legislators through the addition of larger income tax cuts ($80
million ongoing to $160 ongoing funds), $80 million one-time funds for income tax
rebates on 2019 taxes and pre-bates on food tax credits, $5 million for county
roads, etc. Reportedly legislative leaders also threatened legislators with loss
of committee chairmanships and assignments, ability to move legislation in the
2020 general session, etc. In addition, according to a reliable source,
lobbyists were told to get behind the legislation or else. Talk about
Washington style politics.
Big winners are government
and big businesses; losers are middle class taxpayers
The big winners in this exercise
are 1) state government which has a larger, more stable revenue stream and 2) the
states’ big businesses that kept all of their exemptions while pushing still
more of the tax burden onto an already overstressed middle class.
The losers are the middle class
taxpayers because their short-term gains will end up being long-term pains as
they are forced to pay more and more and more to support government and Utah’s
corporate socialism. Had public opposition not been so great, the income tax
cut would have been a paltry $80 million rather than $160 million ongoing and
$80 million one-time. That extra $160 million ($80 million ongoing, $80 million
one-time) is money that they were planning to spend while pleading poverty to
justify new and higher taxes.
In conclusion, Washington style
politics is alive and well in Utah. The top priorities for Republicans now
appear to be growing and sustaining government while promoting corporate
socialism. This is alienating them from many of those who have traditionally
supported Republicans without question.
Democrats on the other hand are
basking in the bipartisan glow resulting from their opposition to increased
sales taxes and support for maintaining high levels of public education funding.
However, this will likely quickly disappear unless a bipartisan referendum to
undo the bill gains traction. If that happens, then the bipartisanship that
this bill has generated will likely continue and Democrats will be well
position to make further gains in Utah.