Food tax may rise; general sales tax may drop

Feb 28 2011 - 11:54pm

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Sen. Stuart Adams, R-Layton
Sen. Stuart Adams, R-Layton

SALT LAKE CITY -- The general state sales tax on such items as furniture, clothes and automobiles may be slightly lower in the future, dropping from 4.7 percent to 4.35 percent.

But the state's sales tax on food could be higher -- up from 1.75 percent to 4.35 percent.

The change is in Senate Bill 270, sponsored by Sen. Stuart Adams, R-Layton.

The Senate approved the bill, 19-9, on Monday. It now goes before the House for further consideration.

"What this does is reduce the overall sales tax rate," Adams said.

Most people pay about 6.5 percent on general sales tax because counties and cities also add local options, Adams said.

The proposed changes would mean the average consumer will pay about 6.1 percent in sales taxes after the local options are added on.

"We're seeing wide swings in the sales tax, and this brings stabilization in the general fund," Adams said.

When the economy is doing well, revenue from the sales tax is very good, he said.

But when the economy is on the downside, the sales tax revenue sharply declines, which is why lawmakers have had to make budget cuts in state departments, such as highways, transportation, social services, corrections, public safety and Medicaid.

Senate President Michael Waddoups, R-Taylorsville, spoke against the bill.

"This is obviously going to be a tax cut that benefits those who are most able to pay," he said.

Many of his constituents, who are in the middle-income bracket, have sent him e-mails and letters and have called him, asking him not to vote in favor of Adams' bill.

Sen. Gene Davis, D-Salt Lake City, said lawmakers have worked many years to reduce the sales tax on food and this is taking the state in the wrong direction.

Adams said if the state does not use just one rate to tax food and other items, it leaves the state dependent on a "volatile" source of revenue.

The reason is that, when the economy is in a recession, people buy fewer big-ticket items, such as furniture and cars. But increasing the rate on food evens out the sales tax, which funds many of the state's programs.

The Utah Constitution only allows revenue from income tax to go toward education, he said.

Property tax is used to fund local entities, such as school districts, county governments, city governments and special districts -- mosquito abatement and libraries, for example.

"Politically, it is correct to remove the tax off of food, but financially it is wrong," Adams said.

According to a report by the Utah Tax Commission sent to the Revenue and Tax Interim Committee in November 2009, reducing the tax on food did not benefit low-income households.

The reduction "proved to be an inefficient method to grant tax relief to those taxpayers who are most harmed by having to pay sales tax on food purchases," according to the report.

The report also states that a family of five earning less than $10,000 pays $290 in state and local sales taxes a year, while a family of five earning more than $70,000 pays $470 in state and local sales taxes a year.

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