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April 2015 Volume 40 Issue 4

THE TAXPAYER A Publication of the Utah Taxpayers Association Taxpayers to Pay More Following April 2015 2015 Legislative Session Volume 40 Utah taxpayers took one hit after another during the 2015 legislative session. From increases in property and fuel taxes to the legislature giving the green light to two local option sales My Corner: Education Funding – Glass Half Full or taxes, taxpayers will remember this session as a painful one. Half Empty? Utahns will see the statewide property tax levy raised by $75 Page 2 million to help narrow the funding gap among Utah’s school Page 2 districts. This tax increase will result in a $48 rise in property Legislative Scorecard Released taxes for a home worth $250,000. Business owners of a property and “Friend of the Taxpayer” valued at $1 million will see an increase of $348. Recipients Named Page 4 Your Taxpayers Association met several times with the bill’s Page 4 sponsor, Sen. Aaron Osmond (R-South Jordan), to discuss Legislative Wrap-Up and alternative methods of closing the gap among Utah’s more Taxpayer Wins affluent school districts and the districts that aren’t as fortunate. Page 5 Osmond declined to include any of the Association’s suggestions Letter to the Governor: and chose to keep the large tax increase as part of the bill. Veto SB 97 As for Utah’s fuel tax, taxpayers will now pay five cents more at the pump starting in January 2016. But that’s not all; once the Page 7 wholesale price of gas rises above $2.45 per gallon, taxpayers will see additional rate increases when they fill up their vehicles. The Estimating the Fiscal state will be allowed to collect higher fuel taxes until the rate Impact of Proposed reaches 40 cents per gallon. Essentially, lawmakers put in place a Legislation

Continued on page 3… Page 8 Association 37th Annual “Utah Taxes Now” Conference Accomplishments The Utah Taxpayers Association will be hosting its annual During March “Utah Taxes Now” conference on Thursday, May 28, 2015 at Page 9 the Grand America Hotel. Leaders from the Utah House of Association Staff Representatives, state Senate, the Governor’s office, policy experts and community leaders will cover a broad range of tax Howard Stephenson President Billy Hesterman Vice President issues. A full agenda of topics and speakers will be available Kelsey White Research Analyst soon. CLE and CPE credit will be offered. Heidi Erickson Executive Assistant

“Teed Off On Taxes“ Golf Tournament Executive Committee Join the Utah Taxpayers Association for the annual “Teed Off On Taxes” golf tournament on Thursday, June 11, 2015 at the Mike Edmonds Chairman Eaglewood Golf Course in North Salt Lake. Sponsorship Kent Stanger Vice Chair Eric Isom Secretary opportunities are available. Brice Arave Treasurer Register for the “Utah Taxes Now” Conference and the “Teed Off On Morris Jackson Legislative Chair Jim Hewlett Immediate Past Chair Taxes” Golf Tournament by contacting Heidi Erickson at H. Val Hafen At Large [email protected] or calling (801) 972-8814.

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April 2015 Volume 40 Issue 4

My Corner: Education Spending - Glass Half Full or Half Empty?

Taxpayers need to know have a point? How much of an increase in that the Utah Legislature education funding would be enough? spent a lot of money this year. The 4% WPU increase is not even the whole The biggest beneficiary of story. School officials and union leaders know Utah’s growing economy and very well that the WPU is only a portion of total the accompanying huge education funding, but they are slow to let their Association President budget surpluses was Public employees and members know. And the media? Howard Stephenson Education. But you wouldn’t Don’t count on them to accurately report the know it judging from some of the comments made by education funding increases provided by the education advocates near the close of the session. legislature. It’s always good for elected officials to hear from When all funding increases are considered, Utah constituents, and when citizens show up en masse, it public schools will see a $374 million, or 9.4% can send a powerful message. Such was the case on increase in education spending over the current the final Monday before the legislature adjourned. year. This provides a total of $4.371 billion in While the House and Senate were meeting that education funding for the school year ending in evening, school buses arrived carrying hundreds of June of 2016. educators and administrators. They crowded into the Meanwhile, the “education establishment” (the Capitol rotunda, insisting the legislature approve UEA Teachers Union, School Boards Association, Governor Gary Herbert’s proposed 6.25% increase in Superintendents Association, and State PTA) the weighted pupil unit (WPU) - the basic funding generally opposed legislation that would send unit for public education. Those present heard well- tools and resources directly to students and orchestrated speeches critical of the parsimonious teachers in the classroom. The establishment Legislature. Chanting “six point two five, six point worked hard to preserve the “trickle down” two five . . .” protestor shouts echoed through the funding model that keeps spending decisions in Capitol. the hands of bureaucrats most removed from the When the legislature passed the final education classroom. budget before the conclusion of the 2015 legislative session, the budget included a 4% increase to the WPU. Newly appointed State Superintendent Brad Smith was asked his opinion of those at the rally who didn’t appreciate the 4% increase the legislature provided. He said the ralliers reminded him of a child at Christmas complaining about not getting enough presents. The superintendent later apologized for his remarks, saying he was indulging himself “in the old rhetoric of criticism and blame.” But did the Superintendent Protestors convene in the Capitol rotunda demanding higher education funding.

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The education establishment opposed legislation to teachers into supporting their organizations and provide teachers and schools with more computers initiatives. The dedicated and hard-working and digital learning software that would give teachers who crowded into the Capitol during the students immediate feedback while doing legislative session have no idea how they were homework. used as The establishment opposed new programs to pawns to Utah public schools will provide students with opportunities for computer support coding, applied physics, and an online tool to assist funding an see a $374 million, or 9.4% students to be fully-informed as they make plans for education increase in the education college and careers. model that The establishment opposed a measure that would runs fund. This provides a total have given students access to higher quality teachers contrary to of $4.371 billion in through distance learning. the local The establishment even opposed a measure control education spending. sponsored by Democrat Representative Carol Moss, they a former high school English teacher, to provide cherish. Nevertheless, the education establishment English teachers with the ability to give students continues to oppose proposals that would give immediate feedback with writing assignments, local control of funding to schools. reading comprehension, and spelling and Worst of all, the education establishment vocabulary improvement. perpetuates the incorrect narrative that education Finally, the establishment also opposed SB 235, the doesn’t receive enough money from the school turnaround legislation, which provides for legislature. Focusing wholly on the WPU gives an the replacement of faculty and staff in the state’s insufficient measure of school funding. Beyond the lowest performing schools. SB 235, which ultimately 4% increase in the WPU passed by the legislature passed, provides proven intervention strategies to and the total 9.4% increase in the education fund, ensure that students in the 3% of worst performing public education is the beneficiary of over 30% of public schools finally get the quality education they Utah’s total 2016 budget. w deserve. I could go on, but space is limited. The education establishment pretends to support Check out Utah’s 2016 Budget here. “local control” in an effort to deceive parents and

Taxpayers to Pay More Following 2015 Legislative Session

…Continued from Page 1

15.5 cent gas tax increase. additional $145.7 million in sales taxes if every The fuel tax legislation, H.B. 362, sponsored by county approves the local option tax increase. Rep. Johnny Anderson (R-Taylorsville), also includes In addition to the local option sales tax for a quarter cent local option sales tax. Utah’s counties transportation, another local option sales tax are now authorized to impose the tax if voter increase was also approved by the legislature in approval is received. Money raised from this sales the final hours of the session. With less than four tax will be split between counties, cities, and UTA to hours to go, lawmakers substituted HB 454, go towards local transportation needs and other Prison Development Amendments, to second projects such as trails and sidewalks. substitute HB 454, which includes a .5% local Estimates from the Legislative Fiscal Analyst find option sales tax increase for whichever city is that an individual who drives a car 12,000 milers per awarded the prison. year and gets 25 miles-per-gallon will see a $24 During the Senate floor debate on HB 454, it increase in the amount they pay at the pump due to was noted that this increase could push the sales the fuel tax increase. Utahns may also pay an tax rate above 7% in , if that is

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Adding this .5% to the .25% local option sales tax that Digging further into the budget, the legislature counties may soon impose, Utahns sales tax rates are also approved putting $5 million into a newly certainly set to climb. created account for water infrastructure projects. If tax increases weren’t enough, the drubbing on The account, created by SB 281 sponsored by Sen. Utah’s taxpayers continued as lawmakers also threw Stuart Adams (R-Layton), calls for money within “pet projects” into the final budget, instead of using the account be used to fund water projects such that money to keep taxes lower. as the Lake Powell Pipeline. No justification for Included in the final $14.2 billion state budget is a the pipeline has yet been made, and to use number of line items that should raise every taxpayers as the “bank” to start putting money taxpayer’s eyebrows. Under the Business, Economic aside for this water project is premature and Development and Labor section of the budget, $1.5 inappropriate. million is appropriated to fund recruiting activities Your Taxpayers Association holds the state’s for Utah State University’s athletic program. A elected officials accountable for these tax taxpayer would not be able to know that though, as increases and poor use of taxpayer funds. Utah the line item is listed as the “Utah Wellness has thrived because of its low tax environment. Program.” Another item includes $150,000 for an Any tax increase threatens Utah’s status as the outdoors sporting expo held in Utah County. best state for business. w Another $250,000 is allocated for the Utah Symphony to make a documentary.

Legislative Scorecard 2015 “Friend of the Taxpayer” Recipients

Released and House of Representatives: - 100% (R-Provo) “Friend of the Dan McCay - 100% (R- Riverton) Marc Roberts - 100% (R-Santaquin) Taxpayer” Award Jon Stanard - 100% (R-St. George) Recipients Named Jim Dunnigan - 100% (R-Taylorsville) Michael Kenneday – 100% (R-Alpine) The Utah Taxpayers Association released – 100% (R-West Valley City) its 2015 Legislative Scorecard recently. The Dean Sanpei – 100% (R-Provo) Association’s scorecard rated Utah’s 104 – 100% (R-Kerns) legislators on 12 key taxpayer related bills, – 100% (R-North Ogden) including the two major tax increases passed Jeremy Peterson - 90.9% (R-Ogden) during this year’s session. Sen. Margaret - 90.9% (R-Orem) Dayton, R-Orem, Sen. Deidre Henderson, R- - 90.9% (R-Fruit Heights) Spanish Fork, and Sen. Scott Jenkins, R-Plain Curt Oda - 90.9% (R-Clearfield) City, led the Senate with perfect scores of Sophia DiCaro – 90.9% (R-West Valley City) 100 percent. Rep. Norm Thurston, R-Provo, – 90.9% (R-Sandy) Rep. Dan McCay, R-Riverton, Rep. Marc Steven Eliason – 90.9% (R-Sandy) Robert, R-Santaquin, Rep. Jon Stanard, R-St. Mel Brown – 90% (R-Coalville) George, Rep. Jim. Dunnigan, R-Taylorsville, Rep. Michael Kennedy, R-Alpine, Rep. Fred Senate: Cox, R-West Valley, Rep. Dean Sanpei, R- Margaret Dayton - 100% (R-Orem) Provo, Rep. Eric Hutchings, R-Kerns, and Scott Jenkins - 100% (R-Plain City) Rep. Just Fawson, R-North Ogden, led the Deidre Henderson - 100% (R-Spanish Fork) House of Representatives all with perfect David Hinkins - 90.0% (R-Orangeville) Howard Stephenson - 90.0% (R-Draper) scores.

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Legislators scoring 90 percent or higher receive the results in a 5 cent-per-gallon tax increase distinction of “Friend of the Taxpayer” from the immediately and allows for that rate to rise Association. In the Senate five legislators earned the another 10.5 cents-per-gallon as the price of gas honor. In the House 18 members will be awarded the increases). SB 97 passed the Senate on a vote of 20- title for the upcoming year. 9 and the House on a vote of 43-31. HB 362 passed “Utah taxpayers will see an increase in their the House 44-29 and the Senate 20-8. property and fuel taxes due to the actions of the In the Senate, the highest scoring Democrat was legislature this past session,” said Billy Hesterman, Sen. Karen Mayne, D-West Valley, who earned 80 vice president of the Utah Taxpayers Association. percent. Sen. Mayne scored higher than 11 “We hope the public takes note of the legislators that Republican Senators. In the House, the highest stood strong for taxpayers and voted against scoring Democrat was Rep. , D- legislation that increased the tax burden on all Magna, receiving 81.8 percent. Duckworth scored Utahns.” higher than 38 Republicans in the House. w The 2015 Legislature’s most prominent tax increases were Sen. Aaron Osmond’s, R-South To see all legislator rankings in the Jordan, SB 97 ($75 million statewide property tax increase) and Rep. Johnny Anderson’s, R- Utah Taxpayers Association’s Taylorsville, HB 362 ($145.7 million, local-option 2015 Legislative Scorecard, sales tax hike for transit and highway projects, and click here. conversion of the fuel tax to a 12 percent rate which

Legislative Wrap-Up and Taxpayer Wins

The 2015 Legislative Session has ended and despite 330 (Rep. Anderson), a bill that would have given some major tax increases, Utah taxpayers can interlocal entities direct property taxing authority appreciate several big wins. Your Taxpayers to issue general obligation bonds. The Taxpayers Association was successful in ensuring that a few key Association opposes adding another layer of pieces of legislation passed that promote fiscal taxation on Utahns unless tax exposure elsewhere responsibility and increase transparency. Your is diminished. Your Utah Taxpayers Association is Taxpayers Association also prevented the passage of committed to working with other stakeholders many bills that would have increased the tax burden throughout the interim to come up with a bonding on Utahns. solution for interlocal entities that will protect The accompanying table on the following page taxpayers and use tax dollars wisely. highlights some of the Utah Taxpayers Association’s Finally, your Taxpayers Association defeated HB priority legislation. Of the twelve bills included in the 456 (Rep. McCay), which would have converted table, your Taxpayers Association had ten wins and the state’s fuel tax into a .7% general sales tax two losses. increase for transportation funding. Your There were three unwise tax bills your Taxpayers Taxpayers Association opposes the use of general Association defeated. sales taxes for transportation funding because First, your Taxpayers Association defeated HB 54 those who use the roads don’t directly pay for (Rep. Draxler), legislation that would have increased their use of the roads. Transportation should be the income tax on Utahns by $429 million. Defeating funded through user fees, meaning that the tax is HB 54 is a big win in helping keep Utah a top directly tied to system use. destination state for jobs and businesses. While we Your Taxpayers Association supported the applaud Rep. Draxler’s efforts to increase passage of several important bills that remove performance pay for teachers and bring more double taxation on business inputs. SB 267 (Sen. technology to the classroom, raising the income tax is Adams) would completely remove the three-year the wrong route to take in accomplishing this goal. economic life provision of the manufacturers sales Second, your Taxpayers Association defeated HB and use tax exemption to expand the tax

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exemption to all business inputs. Unfortunately, SB 267 was not heard in the House, but your Taxpayers Association looks forward to revisiting this important issue next year. Your Taxpayers Association made important progress on the 2015 Taxpayer Wins and Losses calculation of the certified Bill # and Bill Description Win/Loss property tax rate through HB 328 Sponsor (Rep. McCay). Although HB 328 Increases the individual income tax rate from 5% to 6% HB 54 was not heard in the Senate, ($726.4M tax hike) for education funding. Your Taxpayers Draxler ✔ important progress on this issue Association opposes increasing the income tax. was made and your Taxpayers Modifies the process of creating and implementing assessment Association looks forward to 2 Sub HB areas to enhance taxpayer protections. Your Taxpayers ✔ correcting volatility in property 190 Webb Association supports government accountability and transparency. tax rates next year. Despite passing unanimously, Removes commodity-based centrally assessed properties from 1 Sub HB the calculation of new growth in the certified tax rate. Your Governor Herbert vetoed SB 94. 328 McCay Taxpayers Association supports equitable and stable property ✔ Without this bill, the state will tax rates. ensure that deficiencies are Authorizes certain interlocal entities to issue GO bonds and HB 330 collected to the advantage of the levy property taxes. Your Taxpayers Association opposes an Anderson ✔ tax collector, but refunds will not additional layer of taxation on Utahns. be given on the same basis to $145.7M local-option sales tax hike for transit and highway projects, conversion of the fuel tax to a 12% rate resulting in a benefit the taxpayer. The governor 6 Sub HB 5 cent-per-gallon tax increase immediately and allows for takes issue with the bill’s delayed 362 another 10.5 cents-per-gallon tax hike as the price of gas fiscal note and not the policy itself. Anderson ✗ increases. Your Taxpayers Association opposes local option He has committed to have the bill sales taxes and using sales taxes for transportation funding. considered in an upcoming special Converts the motor fuel tax into a .7% general sales tax for HB 456 session. Your Taxpayers transportation funding. Your Taxpayers Association opposes McCay ✔ Association will work with all sales taxes for transportation funding. stakeholders to ensure this Clarifies current Utah code to allow for a refund of an SB 94 legislation is corrected, passed, overpayment of corporate franchise or income tax. Your Stephenson ✔ and signed by the governor when Taxpayers Association supports fair and equitable taxation. Increases the statewide basic levy (property tax) by $75M for a special session occurs. It is vital 3 Sub SB 97 equalization. Your Taxpayers Association opposes higher that Utah maintain its business Osmond ✗ friendly environment and passage property taxes. of this bill will maintain that 1 Sub SB Limits the ability of counties to appeal the valuation of 165 centrally assessed properties. Your Taxpayers Association ✔ status. Bramble supports the removal of costly nuisance appeals. In all, important taxpayer 1 Sub SB Expands the manufacturers sales and use tax exemption to protections for Utahns 182 drilling equipment manufacturers. Your Taxpayers Association ✔ successfully made their way Bramble supports removal of double taxation. through the 2015 legislature, and Clarifies a sales and use tax exemption on R&D business inputs. SB 201 Your Taxpayers Association supports removal of double your Taxpayers Association will Stephenson ✔ work throughout the interim to taxation. ensure even more progress is Removes the three-year economic life provision to expand the made next year. w SB 267 manufactures sales tax exemption on business inputs to all Adams consumable goods. Your Taxpayers Association supports ✔ removal of double taxation. To view the Utah Taxpayers Association’s Table Key: complete 2015 Legislative Green = Association support, Red = Association oppose, Watchlist, click here. Win ✔ = Legislature acted in line with Association position, Loss ✗ = Legislature acted against Association position.

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Letter to the Governor: Veto SB 97 With the unfortunate passage of SB 97 (Sen. Osmond) by the Utah legislature, your Taxpayers Association continued the fight to protect taxpayers from a $75 million property tax hike. The Utah Taxpayers Association delivered the following letter to Governor Herbert, asking him to support taxpayers and businesses by vetoing SB 97. w

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Estimating the Fiscal Impact of Proposed

Legislation: The Need for Dynamic Scoring The Office of the Legislative Fiscal Analyst holds the impact of various behavioral important responsibility of estimating the cost or responses. For example, a savings of all proposed legislation. Every bill publicly tax cut will directly reduce numbered and filed in Utah includes a fiscal note, tax revenue to the state, but which shows the analysis conducted by the Legislative if it encourages companies to invest more or Fiscal Analyst. These fiscal notes help legislators people to spend larger amounts of money, those establish a balanced budget by forecasting revenues private sector behavioral responses will defray and expenses throughout the process of passing the direct cost to the state budget. legislation. Fiscal notes play an integral role in Your Taxpayers Association has long ensuring fiscally responsible government in Utah. highlighted the economic benefits that come Uniquely, Utah is one of the few states to issue fiscal from low and equitable taxes that in turn assist notes on tax cuts, showing revenue the state may the state’s financial condition. forego by passing certain legislation. This method During the 2013 interim the legislature implies that the state is entitled to all current tax conducted a pilot project exploring the use of revenues and that giving taxpayers a break is an dynamic fiscal notes. As an example, the expensive burden to the state. In these static fiscal legislature chose to analyze the expansion of notes, only one side of the equation is seen. The other Utah’s existing manufacturer’s sales and use tax component that is not seen by the legislature is the exemption to all business inputs – not only those impressive economic growth that occurs following tax inputs with an economic life of three years or cuts and tax reforms. These benefits to taxpayers and more. Essentially, this is SB 267, sponsored by the state are missing from traditional fiscal notes. Senator Stuart Adams and passed through the A new kind of fiscal impact analysis, known as Senate during the 2015 session. The 2013 dynamic scoring, is beginning to be used at the federal prototype dynamic fiscal note showed that the level as a more accurate way of estimating the direct cost to the state of this policy change would be as well as indirect effects of policy. Dynamic scoring $22.5 million less than the estimate produced takes into account broader changes in the economy from a static fiscal note. When considering the that may result from policy shifts and shows the fiscal growth that could occur in wages, jobs, and GDP in Utah, the legislature sees a much clearer picture of the true trade-

offs involved in cutting taxes. Dynamic scoring is needed in Utah to help policy makers see the real effects of policy and decide which policies achieve Utah’s goals most effectively. Next year the legislature will revisit the manufacturer’s sales and use tax exemption, and your Utah Taxpayers Association will continue working to educate and inform legislators of both the seen and unseen fiscal impact of such policy. Tax cuts shouldn’t been

seen as expenses to the state, but rather, as catalysts in spurring economic growth and development in the state of Utah. w

Bills are heard on the floor of the House.

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Association Accomplishments During March:

v Successfully lobbied the 2015 Utah Legislature for lower taxes and better tax policy v Met regularly with House and Senate leadership v Defeated a number of bills that would have increased taxes and/or implemented poor tax policies v Advocated for legislation to improve Utah’s tax climate and allow for better economic outcomes

In the News:

v Spoke against the legislature’s passage of a $75 million property tax increase on Utahns § Salt Lake Tribune § Deseret News § KSL § ABC4 v Provided a recap of the 2015 Utah Legislature from the perspective of taxpayers § Fox 13 § Salt Lake Tribune § Rod Arquette Show § Trib Talk v Spoke against the fuel tax hike passed under HB 362 and the local option general sales tax included in the legislation § KUER § ABC4 § The Spectrum § The Atlantic v Proposed a sensible approach to reforming Utah’s fuel tax in a way that would keep the needs of taxpayers in mind § Deseret News v Commented on changes to UTA’s pay structure and executive bonuses § Fox 13 v Released the 2015 Legislative Scorecard that ranks Utah’s legislators based on their votes with or against the positions advocated by the Utah Taxpayers Association § Utah Policy v Commented on the governor’s decision to sign multiple tax hikes into law § Deseret News § Salt Lake Tribune § Fox 13 § Standard Examiner § KUER § The Daily Herald

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