June 2017 Interim Session – Tax Reform Update

Revenue and Taxation Interim Committee – 6/21

As we have said before, tax reform is probably the biggest issue that legislators are contemplating as they head into the 2018 General Session. Utah’s population is growing rapidly and more revenue will be needed in order to provide for better education, transportation, and other government services.

The main takeaway on tax reform from this committee meeting was the introduction of seven “guiding principles for tax reform.” These were developed by the chairs of the committee, Sen. Howard Stephenson and Rep. Steve Eliason, and the Governor’s Office of Management and Budget. They said that Utah’s tax system should be:

  1. Simple
  2. Economically neutral
  3. Reliable
  4. Equitable
  5. Responsive to interstate and international competition
  6. Designed to minimize burdens of compliance and administration
  7. Accountable and transparent

For more in-depth explanations on what each of these principles mean, click here. Legislators agreed that Utah is doing pretty well at each of these principles so far, but that there are ways in which the tax code could be improved to come closer to each of these.

The committee also started reviewing those categories of products that qualified for sales tax exemptions. Did you know that food and alcoholic beverages sold to a commercial airline for in-flight consumption does not get taxed? This has been an exemption since 1983 and in the past three years has qualified for $889,000 in tax exemptions. Over the past three years, the following tax revenue has also been lost to sales tax exemptions:

  • $129,000,000 for certain products primarily used in farming operations
  • $1,577,000 for machinery or equipment purchased by the film industry and used to produce certain media
  • $22,667,000 for certain machinery, equipment, or software purchased by or for a telecommunications service provider
  • $17,000 specifically for any sales to or by the Heber Creeper Railroad
  • $6,228,000 for vending machine food sold for $1 or less
  • $3,769,000 for use of coin operated amusement device

All in all, hundreds of millions of dollars are exempted from sales taxes. Some of these are for legitimately good societal purposes. But are all of them? We are glad to see that legislators are looking into these sales tax exemptions and seeing whether they are still needed. To see all of the sales tax exemptions and the amount of money that has qualified under them over the past three years, click here.

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