Our Mission on Tax Modernization

"When everyone pays their fair share, everyone pays less tax." - Governor Gary R. Herbert


THE STORY:

     Governor Herbert believes that our current state tax system is out-of-date and out-of-balance.

 

     This is especially true of our sales tax structure. In the 1980s, for example, sales taxes covered about 70 percent of the economy. Today sales tax covers just over 40 percent. Much of that comes from transitioning from a goods-based to a service-based economy. If the sales tax structure remains unchanged — even with improved government efficiency — state and local governments will not be able to pay for core services in the future. Policymakers will then have to choose between increasing tax rates or forgoing basic services. Both of these options could harm the economy.

 

     That is why, in his 2020 Fiscal Year Budget Proposal, Governor Herbert asked our state legislature to modernize our tax system — especially with respect to sales and use taxes — during the coming 2019 General Legislative Session.

 

     Consider some peculiarities of how we collect sales and use tax.

 

     Did you know that limousine services aren’t taxed but auto repairs on the family car are taxed? Did you know that lobbyists and lawyers don’t have to tax their services, but computer repair persons do? In Utah, you don’t have to pay taxes on an elective liposuction procedure, but women pay taxes every time they buy feminine hygiene products.

 

     Notice a pattern here?

 

     Many of these tax exempt consumption services disproportionately favor those well-off enough to pay for limos, lobbyists or liposuction, while leaving the tax burden for essential services on Utahns who can’t afford those services.

 

     In fact, a Utah family of three with $25,000 in income directly pays about 3 percent of its income in sales tax; a similar family with $150,000 of income directly pays only about 1 percent of its income in sales tax.

 

     We can actually reduce the sales tax rate in Utah if more goods and services like limos, lobbyists and liposuction contributed to our sales tax base.

 

     The Governor’s 2020 Budget Proposal asks the legislature to return $200 million in budget revenues to the taxpayers but cutting the general sales tax rate.

 

     I want to see some adjustments that account for how Utah taxes were inadvertently raised for large families when federal tax reform passed, and and I want to cut the general sales tax rate.

 

     When everyone pays their fair share, everyone pays less tax.

 

     The Governor’s 2020 Budget Proposal asks the legislature to return $200 million in budget revenues to the taxpayers but cutting the general sales tax rate.

 

     In the short term, Governor Herbert’s proposed tax cut will actually result in a net tax decrease for everyone. Simultaneously, lawmakers will be asked to review industries and services that are currently going untaxed (limos, lobbyist, liposuction, and more) and be asked to remedy the inequitable application of sales tax in Utah.  

 

     A shift from goods to services will make the system more fair.

 

     It would create a long-term path for fiscal stability that will allow state and local governments to provide essential services as our economy changes.

 

     When everybody pays their fair share, then everybody pays less taxes.

 

See Governor Herbert discuss tax modernization in the video below:


 

FREQUENTLY ASKED QUESTIONS:

 

Q: Will this increase the amount I pay in taxes?

A:  In the short-term it absolutely will not. Governor Herbert’s proposal includes setting aside $200 million in the state budget each year (from surplus funds) so that the sales tax rate can be cut. Ideally, this will help to lower the state sales tax rate from 4.85% to less than 4%. Currently, a Utah family of three with $25,000 in income directly pays about 3 percent of its income in sales tax; a similar family with $150,000 of income directly pays about 1 percent of its income in sales tax. Governor Herbert’s plan to modernize the Sales and Use Tax will bring greater balance to everyone.

 

Q: When will the tax laws go into effect?

A: Governor Herbert has asked our state legislature to modernize our tax system — especially with respect to sales and use taxes — during this coming legislative session. If the legislature identifies this as a priority and proceeds with this plan, we could expect to see changes as early as July 2019.

 

Q: What new services will be taxed?

A: New taxable services will need to be identified and determined by the Utah Legislature, however Governor Herbert believes that services which are traditionally only accessible by- or predominately accessed by high-income households should be identified. Some questions the governor poses are:

The governor believes this is unfair and has created imbalance. Many tax exempt consumption services disproportionately favor those well-off enough to pay for limos, lobbyists or liposuction, leaving the tax burden for essential services on Utahns who can’t afford those services.

 

Q: Is sales tax on food going up?

A: Governor Herbert has expressed openness to discussing any and all options with the Utah Legislature. He is not pursuing an increase in sales and use tax as is applied to food at this time.


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