Taxing utilities would hit poor families hardest


February 17, 2010 - 12:00 AM

Victims of the recession would be hammered if lawmakers lift the sales tax exemption on utilities, lobbyists told the House Taxation Committee Monday. They urged the committee to look elsewhere for money.
Taxing residential utilities would bring in about $182 million a year and represents by far the largest opportunity to solve the state’s budget shortfall by lifting sales tax exemptions.
Trouble is, as the lobbyists complained, utility customers are already “hurting and angry” and hitting them with a 5.3 percent tax on their utility bills — an expense most agree is as essential to family well-being as food or shelter — would be brutal.
It also would be highly regressive, meaning that it would hurt the poor much more than the well-to-do.
It is precisely because water, gas and electricity are essential to all families, including the very poorest, that the Legislature in its compassionate wisdom exempted them from the sales tax in the first place.
And that brings us back to the importance of keeping the tax base as broad as possible.
A 1 percent increase in the statewide sales tax would bring in enough money to keep funding for the public schools level.
Raising the same amount of money by doing away with all of the exemptions granted over the years would mean subjecting those items to the 5.3 percent sales tax — collecting more than five times more than the 1 percent increase would do.
As mentioned in Tuesday’s editorial, it would be a good idea to restructure the state’s taxes from scratch. Over the years many exemptions to the sales tax and the property tax have been adopted. Many special tax breaks have been given to businesses and to individuals. Each of those exemptions and special treatments has narrowed the tax base, reducing state income and requiring higher tax rates to raise the same amount of money.
This patchwork tax quilt should be examined, patch by patch, and redone so that it does a fairer and more adequate job of producing the income the state needs to operate. That restructuring can’t be done right during a regular legislative session. It should be done by an interim committee fully staffed with tax experts and then given to lawmakers on the opening day of a legislative session.
In the meantime the public schools, the universities, the state’s highways, its courts, prisons and parks must be operated and maintained this year and next and care must be provided for those who cannot fend for themselves. The state needs $400 million more than it has in view to do those essential tasks, even at a poor-boy level.
It will be all the Legislature can do between now and May to get that must-do job done.

  — Emerson Lynn, jr.

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