

After the last scheduled meeting of a committee studying tax reform ahead of the 2018 legislative session, lawmakers remain unsure how they’d like to change the state’s tax code and how they’ll pay for any significant changes.

Among the largest possible changes envisioned by a draft, 233-page bill is a tax cut on manufacturing equipment that would cost the state an estimated $65.8 million and local governments $22.4 million in lost revenue over five years with no clear way to pay it.

Lawmakers listed a dozen changes to Utah’s tax code in the draft bill that they went over during a Revenue and Taxation Interim Committee meeting on Monday. For most items, there’s still no estimate on the impact to the budgets of the state and local governments.

“That’s going to be difficult to pass,” Rep. Joel Briscoe, D-Salt Lake City, said while holding up a printed copy of the bill after Monday’s hearing. “Our general fund is flat and you’re going to take $80 million from it?”

After nearly a year of talking about reforming taxes and possibly lowering the income tax from 5 percent, lawmakers remain unsure how they’ll move forward with a little more than three months before their deadline to debate and pass the first significant reform since 2008.

Like the tax bill speeding through Congress, the wide-ranging Utah omnibus draft bill spearheaded by the committee and its co-chairman, Sen. Howard Stephenson, R-Draper, will likely ignite the lobbying forces of various industries and interests affected by any final bill.

Stephenson said that’s what happens with tax policy changes that affect companies’ bottom lines. But a bill that changes property taxes, vehicle fees and sales and other taxes could have a better chance at passing because companies might not like a portion of the bill but strongly support another portion, making it hard to oppose the bill overall.

“It’s going to take a lot of work,” Stephenson, president of the business-backed Utah Taxpayers Association, said. “We can get there.”

Stephenson said while the bill isn’t finished as lawmakers wrap up hearings that bridge the 2017 and 2018 sessions, he and others will continue writing amendments that will flesh out the bill.

Looming large over that work, however, is the effort in Congress to reform taxes, and how any successful bill would affect Utah’s bottom line. The U.S. House has already passed a sweeping, $1.5 trillion tax bill. The Senate, led by Utah Sen. Orrin Hatch in his role as Finance Committee chairman, plans to move swiftly on its own version of a tax bill.

“We may want to adjust some of the elements of our taxes so it may take care of those who may be adversely affected by the federal changes,” Stephenson said.

Lawmakers will also have to watch to see how much money the state realizes from its increased collection of online sales taxes, mostly from the behemoth cyber retailer Amazon.

Representatives for Utah’s city governments said the largest known tax cut in the draft bill so far, expanding a sales tax exemption for manufacturing equipment, would deal a heavy blow to municipal budgets.

Roger Tew, senior policy adviser for the Utah League of Cities and Towns and a former state tax commissioner, said the state’s 20 largest cities would lose about 6 percent of their sales tax base under the proposed change.

For Clearfield, that’s the equivalent of three police officers, according to JJ Allen, assistant city manager of Clearfield.

“If there is no offset to the income, then we have to look at where we cut,” Allen said.

Stephenson said he believes cities are starting to collect more money from Amazon and other online retailers, and that would offset the manufacturing sales tax cut. Other legislators urged caution.

“If we were to look at a $972 million reduction in the state budget we would have fits,” said Rep. Tim Quinn, R-Heber City, referring to about 6 percent of the state’s budget.

Among the unknowns that could bring in more money are taxes on popular audio and video subscription streaming services like Netflix, Hulu and Spotify. Legislators haven’t yet put a number on how much they’d tax those services.

They’re also taking a look at creating tax incentives for people who buy electric vehicles, and also possible hikes to registration fees electric vehicle drivers pay to make up for the money those motorists avoid in gas taxes.

Lawmakers also indicated they’d like to take up school funding equalization, a potentially politically divisive issue that spurred debate Monday among school officials and the Republican legislators proposing changes to how money is raised and split among schools throughout the state.