Rep. Christine Johnson stands firm against food tax increase

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A plan to reinstate the full state sales tax on food received the endorsement of a tax advisory board Thursday and is on its way to the Legislature and governor's office.

The idea to repeal tax cuts levied in the 2006 and 2007 legislative sessions that led to the current food tax rate of 1.75 percent has met with mixed reviews from both legislators, who are facing an $850 million budget shortfall in the coming session, and advocates for low-income Utahns who say an unprecedented number of residents are struggling to make ends meet in the dire economy. Raising the tax is estimated to bring some $145 million in new revenue.

Rep. Kay McIff, R-Richfield, is proposing legislation to take the food tax back to the full state rate of 4.7 percent while seeking to balance its impact on low-income families with a targeted tax break. That credit, he said, offsets the regressive nature of a food tax that places a proportionally bigger financial burden on those who earn lower incomes.

"From the outset, the bill that I proposed has always had a provision to address the regressivity problem," McIff said. "We could provide a sales tax credit that would take them back to ground zero, or better off than they are now."

Bringing back the full food tax— an idea McIff tried unsuccessfully to pass last session — has received some positive responses as the 2010 legislative session approaches, including from the Utah Tax Review Commission. The advisory board that includes lawmakers, business leaders and academicians, voted 7-5 Thursday to recommend the state raise the food tax to the previous rate.

Rep. Christine Johnson, D-Salt Lake, a commission member, is not among the supporters. She voted against the recommendation, saying the increased tax puts an unfair and unnecessary strain on the state's disadvantaged.

"I find the whole proposal very disconcerting," Johnson said. "I feel like it's imperative that we look at other options, instead of targeting a population that will be unfairly bearing the burden."

The commission extensively debated how that burden might be eased. While McIff's bill calls for using the federal earned-income tax credit as a matrix for granting a state tax break to offset raising the food tax, commission member Larry Walters said it would leave out many disadvantaged people, including those who earn less than $10,000 a year.

Linda Hilton, from the Utah Coalition of Religious Communities, a group that advocates for disadvantaged residents, said the bigger issue is not who would miss out on the credit, but whether issuing a new credit was an effective way to help the poor.

"There's no good way to mitigate this, except to give it to them at the register," she said. "Saying you're going to give them some money in the spring isn't the same as what they're paying at the checkout."

Other ideas posed to offset the disparity in the tax included looking at ways to enhance the food stamp system and creating an entirely new mechanism to issue tax credits. The commission intends to provide an addendum to its food tax recommendation that will outline ways to lessen the burden on poor people.

In the meantime, McIff says he thinks his bill will get a closer look this session, in light of the deficit and the lack of federal stimulus funds that patched holes in the current budget. "We need ongoing revenue to fund ongoing needs, and this is one way to help create, and stabilize, our ongoing funding." he said.