Complexity of tax reform may be beyond citizen referendums

Originally published in the Deseret News.

I love to shop at Harmons grocery stores. Like so many others, I enjoy the salad bar, homemade soups and salsas, extraordinary cheese selection, high quality meats and fresh produce. They are very good at what they do, and I love that they are locally owned.

Because I count on Harmons to provide groceries for my family, it gave me pause when they got involved with tax policy. Even under the best circumstances, tax policy is complex and difficult to address in representative government; it’s almost impossible to address at a checkout stand.

Harmons now provides customers an opportunity to sign a citizen referendum. If enough valid signatures are collected, the tax reform legislation passed in December 2019 will be put on pause until this November, when voters will get the final say.

I support citizen referendums because they place an important check on power, particularly in a state like Utah with a super majority Legislature. I question, however, whether a referendum is the best way to create tax policy. In order to work, those who sign a referendum and vote on tax law need to become educated about the issues, just like we expect our elected representatives to do.

Here is a sampling of issues the governor and legislators learned about, debated and agreed upon when they passed tax reform last month:

Utah faces long-term and unyielding structural trends that are undermining Utah’s sales tax base. Utah’s aging population, rising health care costs and growth in the service sector have caused Utah’s sales tax base to fall from 67% of the economy in 1980 to 44% today. The problem gets worse every year. By acting, Utah leaders created a more stable tax system and prepared the state for the next economic downturn.

For the first time since the sales tax was established in 1933, the new legislation creates a grocery tax credit that will make it so ultimately no low-income households in Utah pay a sales tax on food. They will get back every dime they spend and more because of the Legislature’s generous tax credit. As a reminder … under current law everybody pays a sales tax on food; it’s just lower than many other commodities.

Utah’s tax reform also includes generous income tax credits for many Utah seniors on Social Security and for the working poor in intergenerational poverty. These changes provide critical tax relief to vulnerable populations.

Importantly, the new tax law not only rebalances how government collects money, it also ensures that government collects less money. Utahns will receive a $160 million tax cut —$200 million when you adjust for the portion paid by nonresidents.

Another important feature is the removal of the sales tax exemption for motor fuel. This creates a larger user fee for Utah drivers. The more you drive, the more you pay. Not only is this fairer, it will encourage Utahns to drive less and improve air quality.

Finally, the governor and Legislature created a more stable tax system moving forward. This stability will benefit Utah’s public and higher education system for decades to come.

Is tax reform perfect? I think not. Legislators will need to refine it more in future legislative sessions. Perhaps the referendum will lead to even better policy, but I’m skeptical. The Legislature debated reforms in the 2019 general session, formed a seasoned task force to study and hosted 62 hours of public hearings in 17 meetings held throughout Utah. They found a way to provide a large tax cut, add more stability to our revenue system, put in place significant tax benefits for low-income Utahns and make Utah drivers pay more of their costs and impacts on air quality.

I applaud Harmons for its engagement in the public process. Here’s a thought. How about providing store space for volunteer tax counseling that will help low-income Utahns fill out their tax forms and benefit from these important reforms? This is another critical piece in a sweeping tax overhaul that will keep Utah among the best led states in the nation.