UPDATE 12/12/19: The Utah State Legislature passed the major tax overhaul plan during a special session Thursday night.
UPDATE: The Tax Restructuring and Equalization Task Force voted 6-3 Monday night to move the proposal forward to the legislature.
SALT LAKE CITY (ABC4 News) – The Utah State Legislature Tax Restructuring and Equalization Tax Force is expected to make a decision Monday evening on whether a proposal that will increase the sales tax on food by three percent will move forward to the legislature.
Lawmakers supporting the proposal said the plan will increase education funding and provide Utahns with an income tax reduction of $160 million.
In a statement released Monday night, Senate President J. Stuart Adams and House Speaker Brad Wilson said the task force has spent the past seven months studying how to address the state’s revenue imbalance and held 17 public meetings (eight town halls across the state and nine public meetings at the Capitol).
Utahns experiencing food insecurity and hunger advocates have been vocal about their opposition to the increase which would raise the food tax from 1.75 to 4.85 percent, saying it could cripple those who are struggling to make ends meet.
“The food budget in a family is the flexible portion of the budget. So they often draw to that as a way to cover unexpected expenses, like a fix in your car or doing a home repair,” said Alex Cragun, Food Security Advocate for Utahns Against Hunger. “People shouldn’t have to choose between housing and food, especially in this day and age.”
John Wilkes, a Murray resident, said he is one of the individuals who would be severely impacted if the proposed increase on food sales tax passes. Although he overcame homelessness 10 years ago, food insecurity is something he still experiences.
“It has just made it really difficult for me to further improve my quality of life, even though I’m permanently housed,” said Wilkes. “I like to eat good to stay healthy. But that’s difficult for people with low income because fresh food is very expensive…more than frozen, boxed garbage. The most crucial way that it affects me is I’ll be lacking energy or not feeling well, because I can’t get enough healthy food.”
Cragun said the average Utahn will pay about $28 more a month in just grocery taxes if the proposal passes. He said although the amount may not seem like a lot to most, it makes a world of difference for those living in the low-income bracket.
Wilkes shared that he only receives a little more than $1,000 a month in income and has to spend 30 to 40 percent of that on food.
“I’d love to have a dime left at the end of the month or even two weeks into the month sometimes. But that never happens,” said Wilkes. “When you’re working with very little, every bit counts.”
Grocery Tax Credit
Senator Lyle Hillyard, who co-chairs the Utah State Legislature Tax Restructuring and Equalization Tax Force said the tax restructuring proposal includes modifications that will help Utahns in the lower-income class.
“Number one, we have a grocery tax credit. That’s $125 for every person living in the household where the income is below $45,000,” he said.
Cragun said the credit would cause more Utahns experiencing food insecurity to fall through the cracks.
“There are a number of individuals who don’t file their taxes because they don’t make enough money for other reasons,” said Cragun. “Then there’s the question of making sure people know about it and will apply for it. They might not have time to go to the Tax Commission’s website, print out the form, mail it to them, and then wait the couple months to get it back. People need tax relief now, not necessarily just in April.”
He went on to say, “The fact that they recognize there’s a need for tax credits shows that they know this will do harm to people, which is why they should consider not doing it in the first place.”
Sen. Hillyard said he doesn’t believe that’s a convincing argument against the grocery tax credit.
“I’m told currently, we have only had 70 percent of Medicaid-eligible Utahns who apply for it. We don’t repeal Medicaid just because 30 percent of people choose not to take advantage of it,” he said. “Those people who don’t file income tax returns for the credit will be given a simple form online. I’m sure most CPAs will have ’em. I think most agencies will have them. They can fill out that form and get their money back to them.”
According to Utahns Against Hunger, there are currently 363,000 to 373,000 food-insecure individuals in the state – most of whom are children.
“Based on a 2016 study by Auburn University, for every one percent the state increases the sales tax on food, food insecurity in non-SNAP-eligible households (those who make more than the limit, but are still low-income) goes up by .6 percent,” said Cragun. “That means food insecurity would increase by roughly 56,000 Utahns.”
Advocates said Utah is only one of 16 states that has a sales tax on unprepared food. Wilkes believes Utah should eliminate it altogether.
“I don’t think there should be a tax on food anywhere, period or any other basic human necessities. That’s just immoral, in my opinion,” he said.
Sen. Hillyard said he believes eliminating the sales tax on food altogether would actually harm the truly needy and food stamps program.
“Food is such a basic part of our sales tax base. When you remove it, you make the sales tax more volatile/less predictable. It’s very important because funding for health and human services comes from the general fund, which comes from sales tax,” he said. “If it’s not stable, the programs most affected are those that actually help the poor. So it’s really kind of a catch-22 situation when you do that.”
He also said that by imposing a sales tax on food, it helps offset funds from those who are not currently paying income tax.
“There’s a lot of people in our state, not just people who are here without documentation, but a lot of other people who live on cash so they don’t have any income tax. They don’t pay on any withholdings. The only tax they pay is sales tax,” said Sen. Hillyard.
According to Sen. Hillyard, the task force also included a repeal of the state income tax on social security in the proposed restructuring plan to help Utahns on fixed income and get a tax break.
“Additionally, we’re throwing in a third component for intergenerational poverty. We’re really targeting to get them up and we’re going to give what’s called an ‘earned income tax credit’ of 10 percent state of what they would get on the federal,” he said. “Is the proposal perfect? Absolutely not. No system is perfect. But I think we really have addressed the concerns really generously. The ultimate goal is to have a viable, healthy general fund so we can address these issues.”
Hunger advocates said the task force is disregarding the reality that some low-income Utahns cannot wait months or once a year for their financial assistance. Wilkes said if the proposal makes it to the legislature, he hopes lawmakers will listen to individuals who are struggling first-hand.
“Most of our legislators maybe have never experienced hardship and perhaps those that have, may have forgotten what that’s like,” he said. “I think our leaders need to find a way to put more of the burden on those who might be better able to afford it instead of people who rely on low-income programs and people who struggle to meet their basic, daily needs.”
Cragun said his organizations and their partners are prepared to fight the restructuring proposal all the way.
“We’ll be voicing that concern all the way up to the special session and into the general session,” he said. “Oftentimes, policies are crafted in this sort of laboratory setting and legislators need to be reminded about the reality of these kinds of things.”
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