ST. GEORGE — Artists and independent creative business owners are paying close attention to Utah’s tax reform process to see how proposed changes might affect them.
The Utah Cultural Alliance has reached out to its members leading up to the Tax Restructuring and Equalization Task Force town hall listening tour beginning at the end of this month.
The UCA is the advocacy voice for artists around Utah. As a nonprofit organization, UCA conducts research on the effects of the arts on communities around Utah and finds ways for legislative entities and the arts to maintain a mutually beneficial relationship.
Executive director Crystal Young-Otterstrom said tax reform, especially in regard to sales tax, can have two levels of impact with a number of effects to the arts. Tax reform can have a significant effect on nonprofit organizations and for-profit, local businesses.
One of the most highly-discussed solutions to tax reform involves sales tax. In the 2019 legislative session, HB441, proposed enacting sales tax on services and a number of additional goods in order to expand the tax base. The bill failed, giving rise to HB495, the legislation behind the task force.
Young-Otterstrom said “a great deal of creative businesses are services based.” If the task force were to propose taxing services as HB441 attempted to do, photographers, architects and musicians who offer private lessons would be subject to sales tax.
The impacts to nonprofit businesses is slightly different, she said. Symphonies, operas, history museums and dance companies are currently untaxed, but Young-Otterstrom said that is unlikely to continue if sales tax is expanded.
“We’re theoretically not opposed to sales tax expansion, but we just want to make sure we’re still covering the needs of our nonprofit arts.”
The biggest effect would come from any changes to funding from the Recreational, Arts, and Parks tax. The RAP tax, currently available in seven counties and 33 cities, funds artistic or cultural projects within specific communities. Nonprofit arts simply wouldn’t exist in the current market without the help of donors and public support through the RAP tax, Young-Otterstrom said.
She said in the original draft of HB441, the Legislature proposed a rate reduction for local sales taxes, including the city and county sales taxes, as well as the RAP tax. The idea behind the proposal was to balance the sales tax expansion to more transactions with a decreased rate to limit the impact on residents.
The problem with such a blanket solution is that it will affect each community differently, she said. Although the statewide trend might illustrate an overall positive change, communities that are more rooted in traditional transactions might see a decrease in revenue generated from sales tax while a neighboring community with more services-based businesses might see an increase.
“We’re pretty concerned about the impact, especially to our smaller cities and counties if a rate reduction happens.”
Young-Otterstrom said the UCA would like to explore options that protect the resources funded by the RAP tax. If sales tax is expanded to services, the RAP tax should be left virtually untouched by rate reductions. Likewise, there should be some discussion regarding what services make sense to tax.
Overall, she said legislators should be careful to estimate the impact of each decision “so there aren’t winners or losers between the different cities and counties.”
“Some industries versus others could be able to stomach a services tax, but a lot of these transactions would be pretty difficult, especially for these small, individual operators.”
Legislators have also discussed amending the Utah Constitution to break out of the current revenue silo and allow funds gathered from income tax to be used in areas outside of education. Young-Otterstrom said she is hesitant to support this action, as well.
Education funding is important to the UCA because it includes arts education funding for drama, band and art teachers and their programs. She said any change to income tax spending could negatively impact arts education programs.
“We hope that the Legislature will consider exempting some of these very fragile industries as they look at the overall tax structure.”
The tax reform task force begins its town hall listening tour in Brigham City on June 25. Its fourth stop will be in St. George on June 29 with an open house beginning at 1 p.m. and the meeting at 2 p.m. The session will be held at the Dixie Technical College auditorium and lobby at 610 S. Tech Ridge Drive.
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