SALT LAKE CITY — Lawmakers have unveiled an overview of their proposal to make sweeping changes to the state’s tax system, including a reduction of the sales tax and the addition of new taxes on services ranging from haircuts to legal work.
Real estate, health care and tuition are the only services left largely untouched by the plan meant to bolster a shrinking sales-tax base, the Desert News reported. It makes up the bulk of the state’s general fund, but revenues are down because people are spending less on goods and more on services, most of which are not taxed.
“We wanted to make this as broad as possible so we didn’t pick winners or losers by this policy,” said Republican Rep. Tim Quinn, who is sponsoring the measure backed by Republican leadership. The cuts will balance out the new taxes, making the plan revenue-neutral, he said.
It would gradually lower the sales tax rate from 4.7 percent to 3.1 percent, not including a small boost voters approved to fund Medicaid expansion.
Republican Gov. Gary Herbert has been pushing for sales tax reform, and expressed support for the proposal on Tuesday.
The income tax rate would also be reduced from 4.95 percent to 4.75 percent. In Utah, income taxes can only be used for education.
Lawmakers said the average resident would save hundreds a year, even with new taxes on services.
Businesses would pay the bulk of the new tax revenue. Higher income earners will also likely pay more in taxes, said Republican Rep. Robert Spendlove.
Republican House Majority Whip Mike Schultz said he expects to see pushback against the new taxes as the Legislature enters its final weeks.
“There will be groups lobbying against this but I think we’re resolute in the fact that something needs to be done,” Schultz said. “We have a structural problem that has to be addressed.”