Is there an end in sight for Utah’s food tax?

If nobody likes the food tax, why is it still around?

By Frank Pignanelli & LaVarr Webb

Some political issues never seem to get resolved. They percolate in various forms on a frequent basis. The sales tax on food in Utah is a worn dispute that crosses partisan and demographic lines. Because this is a very old argument, we oldsters are well qualified to comment.

A recent Deseret News/Hinckley Institute of politics poll revealed 76% of Utahns want the sales tax removed from food. If this fee is so hated, why is it still around?

Pignanelli: “For every tax problem, there is a solution which is straightforward, uncomplicated — and wrong.” — Unknown 

For 90 years, the tax on groceries was a continuing source of political antagonism and efficient government funding. The measure was implemented in the Emergency Revenue Act of 1933, with the promise of repeal in two years. The extension in 1935 was controversial and has been the subject of derision since.

Several statewide initiatives targeted the tax (1980, 1988, 1990), but were defeated. The Legislature wrestled with modifications, passing reductions in 2006 and 2007. In a 2019 special session, lawmakers increased the tax in exchange for lower income tax. This action prompted a massive volunteer effort that garnered enough signatures to place a referendum on the ballot. The Legislature repealed the bill in 2020.

Sales tax on food is a classic conundrum. It is a stable source of funding for government that reaches across demographic and economic spectrums. But this strength reflects the fact everyone must eat — which implies unfairness of taxing a true necessity. Support or loathing toward the tax is spread among Republicans and Democrats, rich and poor, urban and rural citizens.

Thus, sales tax on food will be a major political issue in the 2024 elections.

Webb: I’ve been a broken record for many years, arguing that the best tax system is comprised of a broad tax base with low rates. Everyone gets taxed a little, but taxes are spread across a broad base. Eliminating the sales tax on food narrows the tax base and makes it more volatile and susceptible to economic downturns. That’s why this tax hasn’t been eliminated earlier.

I’m in full agreement that low-income people shouldn’t be hurt by having to pay taxes on food. But there’s no reason wealthy people should get a tax break when they buy a $90 chunk of prime rib for the family Sunday dinner. Give poor people a generous food subsidy as proposed by Gov. Spencer Cox in the last legislative session (there are various ways to do it) and keep taxing wealthy people. Keep the tax base broad and rates low.    

According to the poll, Utahns are split (47% in favor, 43% opposed) regarding the Legislative proposal to remove the sales on food only if the state constitution is amended to eliminate the dedication of income taxes for education and disability programs. A similar poll conducted in April stated that half of Utahns opposed the amendment. Does this amendment have a chance in the 2024 election?

Pignanelli: The history of initiatives and constitutional amendments in Utah provide a very basic, but often unheeded, lesson. Election measures to voters that enjoy early support can be defeated by an aggressive, bipartisan group of community activists. Conversely, difficult propositions can only overcome unpopularity through an aggressive campaign. Items placed on ballots without a frequent education effort by sponsors is vulnerable to last-minute whims (i.e. the failed 2022 constitutional amendment). This constitutional amendment has a very narrow path for success that can only be achieved with a strong, broad outreach.

Webb: I agree that the Legislature needs more flexibility in the use of various tax revenue streams, while education funding must be protected. If the constitutional amendment is explained properly, it will pass. The Legislature is making commitments to the education community that education will be funded properly. Education funding must always be the Legislature’s highest priority.

Legislative leaders are working with education leaders to see if agreements can be reached resulting in education support for the constitutional amendment. If that happens, passage is more likely.