Utah: GOP battle brewing on the Hill - Depate over which taxes to raise, which tax exemptions to remove

By Bob Bernick Jr. and Jerry D. Spangler
Deseret News staff writers

3/4/03

Lawmakers are taxing hazardous waste and booze. But newspapers and cable TV?

A battle over taxes is brewing between House and Senate Republicans. With one day left in the 2003 Legislature, the fight is over how much "one-time" money to put in the fiscal 2003-04 budget compared to how much should be raised in new taxes or fees.
Tuesday morning, House and Senate GOP leaders met and decided to split the proverbial baby — put a little more surplus cash in the budget and then let the Republican caucuses pick between two possible "revenue enhancements": Raise vehicle title fees by $10 or remove the sales tax exemption on cable and satellite TV subscriptions.
"We'll leave it up to the (GOP House and Senate) caucuses to decide which it is," said House Speaker Marty Stephens, R-Farr West, who Monday advocated using one-time monies to balance out the budget rather than raise taxes on citizens via repealing some current sales tax exemptions.
The leadership compromise would keep sales tax exemptions for newspaper subscriptions ($2.8 million) and vending machine sales ($950,000).
The House GOP caucus voted Monday afternoon not to take away three sales tax exemptions, which together raise $13.7 million. Instead, that much in one-time surplus monies would be plugged into holes in the $7.3 billion 2003-04 budget.
Senate Republicans feel differently, arguing it's more fiscally responsible to remove selected tax exemptions, creating a source of money that will be there year after year rather than put one-time funds into ongoing programs.
Using one-time monies that may not be there in the future "makes us have a train wreck next year," said Senate Majority Leader Michael Waddoups, R-Taylorsville. "It's just that much more money we have to make up next year."
While Republicans argue over a few tax hikes, one tax increase does seem to be liked by money-starved legislators: hazardous and radioactive waste.
A bill that would increase those taxes by about $2.8 million passed the House Monday and is likely to pass the Senate, too. And taxing waste is good public relations, since a poll conducted last month for the Deseret News and KSL-TV shows 82 percent of Utahns favor increasing those fees.
Lawmakers also approved tax increases on beer, wine and spirits on Monday.
Senate Republicans, who feel like they have already walked out on a political limb when they voted earlier to raise the income tax slightly (the House nixed that idea later), are increasingly frustrated with their House colleagues. Senators say House Republicans agree to fund state programs with small tax and fee increases here and there, only to change their minds moments later.
Taking away cable and satellite TV would raise about $10 million, legislative budgeters say. Adding $10 to the vehicle title fee brings in about the same. To make up the difference, leaders decided to take a little over $6 million from the state's tobacco settlement monies, and "we found a few million dollars in some other reserve accounts — swept the corners a little," said House Majority Leader Greg Curtis, R-Sandy.
The state's Rainy Day Fund would not be touched, said Curtis, a sticking point with Senate Republicans.
Senators are frustrated over the process, saying House Republicans are trying to leave them holding the tax-hike bag.
"It looks like Speaker Stephens is leading out on this one," Waddoups said Monday afternoon, adding Stephens' gubernatorial aspirations appear to "have some influence on his thinking." Stephens plans to make an announcement in March whether or not he'll run for governor next year.
But it is clear the previous coalition for SB213 — a bill originally aimed at repealing a number of sales tax exemptions — has fallen apart.
Sen. Ed Mayne, D-West Valley, sponsor of the bill, says it's OK by him if House Republicans kill it.
"It's been changed (by majority Republicans) so that it is all a tax on the little guy," Mayne said of his legislation that originally would have eliminated $54 million in sales tax breaks on industry and various products. "I won't even vote for the bill myself."
In arguing against SB213 in his GOP caucus Monday, Rep. Greg Hughes, R-Draper, said: "We are the ninth most-taxed state in the country," adding that "not even Democrats" want to raise taxes at this time.
But Rep. Sheryl Allen, R-Bountiful, reminded House Republicans that State Treasurer Ed Alter and the state's official bond counselor warns that using one-time funds to balance ongoing budgets puts the state's AAA bond rating, the highest available, in jeopardy.
But Stephens countered that lawmakers put $72 million in one-time funds into the current 2003 budget a year ago, with no ill effects to the bond rating. His proposal would only add $13.7 million in one-time cash to the $33.6 million in one-time funds already packed into the huge spending package.
"That would actually be a decrease of around 40 percent in use of one-time funds," the speaker noted.
Stephens said it's his intention to bring an omnibus sales tax repeal bill to the 2004 Legislature. And whatever exemptions legislators ultimately repeal, the general state sales tax rate of just over 4 percent would be lowered accordingly.
"We would raise (sales) taxes on a few groups, but lower it for all" next year, he said.
Stephens said leaders need to close a $7 million gap in the budget. If they raise $10 million through the title fee increase or repealing the cable TV sales tax exemption, that could help them over the next 48 hours with another problem: Other bills that raise money keep being whittled away.
Originally, the radioactive and hazardous waste bill would have raised $5.3 million — money state budget experts have already plugged into next year's budget.
But the bill was amended and the revenue dropped to $2.87 million.
Lawmakers also reduced the size of the beer tax from $14 to $12.80 per barrel, although they insist it won't reduce the total revenue going to fund DUI enforcement. The "extra" money found in the leaders' compromise can be used to clean up relatively small shortfalls in other bills, they note.