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Revenue and Taxation Interim Committee

MINUTES OF THE

REVENUE AND TAXATION INTERIM COMMITTEE

Wednesday, June 17, 1998 -- 9:00 a.m. -- Room 223 State Capitol


Members Present:    
    Sen. Howard C. Nielson, Senate Chair
    Rep. Raymond W. Short, House Chair     Sen. Leonard M. Blackham
    Sen. Mike Dmitrich         Sen. E. George Mantes
    Sen. L. Steven Poulton
    Sen. Howard A. Stephenson
    Rep. Judy A. Buffmire
    Rep. Greg J. Curtis
    Rep. Kevin S. Garn
    Rep. James R. Gowans
    Rep. Wayne A. Harper
    Rep. David M. Jones
    Rep. Patricia B. Larson
    Rep. Loraine T. Pace
    Rep. Jack A. Seitz     Rep. Richard L. Walsh
    

     Members Absent:
        Rep. John L. Valentine

    Staff Present:         Mr. Bryant R. Howe,
         Research Analyst
        Ms. Rebecca L. Rockwell,
         Associate General Counsel
        Ms. L. Kaye Clark,
         Secretary



     Note:    A list of others present and a copy of materials distributed in the meeting are on file in the Office of Legislative Research and General Counsel.

1.     Committee Business_     -- Chair Short called the meeting to order at 9:00 a.m.
        
    a.    Approval of minutes of the May 20, 1998 meeting

    MOTION: Chair Nielson moved to approve the minutes of the May 20 , 1998 meeting . The motion passed unanimously. Sen. Poulton and Reps. Jones, Larson, Valentine, and Walsh were absent for the vote.
    
    b.    Review of Committee Meeting Schedule for 1998 - The committee agreed to hold the remaining additional meetings at 2:00 p.m. on September 16, October 14, and November 4.

    c.    Update on Sales Tax Exemption Studies _ Bryant R. Howe, Research Analyst, noted that at the May interim meeting the committee voted to hire a consultant to study the manufacturing and pollution control sales tax exemptions. Mr. Howe reported that letters of inquiry have been sent to several consultants and he expects the selection to be completed soon. Chair Nielson recommended that the pollution control exemption be the first agenda item for the July interim meeting. Sen. Stephenson stated that because pollution control is a social issue, it may not require the expertise of an outside consultant.

    MOTION: Sen. Stephenson moved that at the July Revenue and Taxation Interim Committee meeting: (1) staff report on the pollution control exemption; (2) the committee hear comments from the Utah State Tax Commission ("Tax Commission") and the public regarding the pollution control exemption; and (3) the committee decide if further analysis by a hired expert is needed. The motion passed unanimously. Sens. Blackham, Dmitrich, Poulton, and Reps. Curtis, Jones, Larson, Walsh were absent for the vote.

    d.    Letter to Constitutional Revision Commission ("CRC") _ Rebecca L. Rockwell, Associate General Counsel, informed the committee that a letter was sent to the chairs of the CRC asking them to review a constitutional resolution allowing for: (1) the classification of property; and (2) the imposition of different tax rates or fees for the classes of property. She reported that the CRC passed a motion to review the resolution and will report their findings to the Revenue and Taxation Interim Committee on or before the October interim meeting.

2.    Commercial Waste Facility Issues--
    a.    Industry Testimony--Laidlaw Environmental Services, Inc.-- Lowell Peterson distributed the handout "Laidlaw Environmental Services, Before the Utah Legislature Revenue & Taxation Interim Committee, June 17, 1998." Mr. Peterson explained that several factors have combined to reduce the size of the available market for commercial waste facilities and increase industry competitiveness including: (1) waste reduction/minimization; (2) completion of "event" jobs; (3) use of cement kilns for hazardous waste incineration; (4) growth of "on-site remediation;" (5) surplus of capacity; and (6) elimination of PCB wastes. He claimed that lower fees would have a positive effect on Laidlaw's competitiveness. Mr. Peterson urged the committee to examine the use of fee revenues for programs that are unrelated to commercial waste facilities. He also recommended that fees be based on weight.

    b.    Additional Industry Comments--Envirocare of Utah--Ken Alkema distributed the handout "Concluding Points." Mr. Alkema concluded his presentation from the May interim meeting and informed the committee that: (1) clean up wastes represented 98 percent of Envirocare's business in 1997; (2) Envirocare has plenty of competitors for clean up wastes; and (3) Envirocare cannot be compared to the Barnwell and Richland waste facilities.

    c.    Additional Industry Comments--ECDC Environmental/Allied Waste Systems, Inc.-- Dave Fisher distributed the handout "The Impact of State Disposal Fees on the Amount of Revenue Generated for the State of Utah and Related Issues" and continued his presentation from the May interim meeting . He reminded the committee that private landfills are taxed $.50 per ton for municipal solid waste while public landfills pay no state fees. Mr. Fisher explained that because profit margins are already so small, any increase in the current tax rate could severely impair ECDC's ability to attract business in a highly competitive market.

    Dennis Downs, Division of Solid and Hazardous Waste, and Diane Nielson, Department of Environmental Quality, explained the fee structure for commercial waste facilities and answered questions from the committee. Ms. Nielson pointed out that current fees are at the appropriate levels to fund all required programs. She also commented that states are federally preempted from imposing fees on certain types of wastes. Chair Short asked staff to report on the fees in statute at the July interim meeting.     
    d.    Comparison of Fees for Radioactive Waste_Mr. Howe reviewed the information in the handout "Tons of Waste Disposed at Commercial Waste Facilities." He projected a significant reduction in revenues for fiscal year 1998 from fees paid by commercial waste facilities. In response to Rep. Garn's request that staff research the various aspects of waste fees, Mr. Howe prepared the report "Comparison of Commercial Low Level Radioactive Waste Facilities." He compared Envirocare of Utah, Clive, Utah; Chem-Nuclear Systems, Barnwell, South Carolina; and US Ecology Nuclear, Richland, Washington. The comparison addressed: (1) selected operational aspects of commercial low level radioactive waste facilities; (2) waste volumes, curries received, and types of waste; and (3) all costs, per cubic foot and per currie.

    e.    Committee Discussion_Sen. Nielson asked Mr. Howe to prepare a comparison of the disposal charges for each of the companies. Sen. Mantes cautioned the committee to study the issues carefully before making any decisions and recommended that Tooele County be involved in the process. Rep. Gowans agreed that the committee needs to hear from Tooele County regarding commercial waste facilities in Tooele County. Chair Short added that he would like to have access to industry financial reports.

    Rep. Harper presented Sen. Blackham's request to discuss proposals at the July interim meeting. Chair Short responded that the committee is not prepared to vote on any proposal before hearing from all concerned parties. Sen. Mantes requested that staff conduct research on the amount of the waste stream attributable to: (1) clean up costs; and (2) on-going wastes. Chair Short asked the committee members to inform the chairs of any additional proposals. Rep. Buffmire requested that future agendas allow more time for committee discussion.

3.    Taxation of Boats and Off Highway Vehicles_
                
    a.    Comparison of Boat Registration Fees and Property Taxes in Utah, Idaho, Arizona, Nevada, and Wyoming_Mr. Howe distributed "Total Fees and Property Taxes Paid to Register a 20-Foot Boat" which shows that Utah's fees and taxes are substantially higher than fees and taxes in Idaho, Nevada, and Wyoming. He noted that a Utah resident can easily register a boat in another state, thereby avoiding property taxes and registration fees.

    b.    Committee Discussion and Direction for Future Action
    Rainer Huck, Utah Trail Mission Association, stated that Utah registration fees and taxes for off-highway vehicles are significantly higher than those of surrounding states. He requested that the committee replace the current off-highway vehicle registration fees and taxes with a $12 in-lieu fee. Mr. Huck speculated that this change would result in increased compliance. Sen. Mantes commented that in enacting S.B. 50 during the 1998 General Session, it was the intent of the committee to extend flat uniform fees to other types of vehicles in the future.

4.    Marriage Penalty
            
    a.    Introduction-- Rep. Wayne Harper informed the committee that under the federal income tax code, couples may be penalized for filing jointly rather than as single individuals or as heads of households. He noted that there are currently at least 14 proposals in Congress dealing with this inequity and recommended that before pursuing this issue on a state level, the committee wait to see whether Congress takes action on this issue. However, Rep. Harper expressed an interest in eliminating marriage tax penalties for the individual income tax retirement income deductions.

    b.    Background--Ms. Rockwell made a presentation to the committee titled "The Marriage Tax Penalty, Defining the Problem and Finding a Solution." She reported that according to the Congressional Budget Office, more than 20 million couples pay higher taxes than they would if they were single, with penalties totaling about $29 billion in 1996. In contrast, 25 million couples get a marriage bonus, totaling about $33 billion. She stated that the most important factor in determining a tax provision's effect on married couples is how income is divided between the spouses. She explained that couples having disparate incomes generally receive marriage bonuses while couples with roughly equivalent incomes generally incur marriage penalties. She noted that Congress' focus is on eliminating marriage tax penalties. Ms. Rockwell identified and reviewed the major sources of marriage penalties under the Internal Revenue Code and under the state individual income tax. She reviewed the proposals currently before Congress to eliminate penalties under the Internal Revenue Code, and then presented some options for reducing or eliminating penalties arising under the state individual income tax. .     
    c.    Review of Proposed Federal Legislation and Possible Revenue Effect on Utah--Tom Williams, Economist, Utah State Tax Commission, handed out "Marriage Penalty Reduction Scenarios, 1999 Values." Mr. Williams discussed discrepancies in standard deductions, tax brackets, IRA provisions, child credits, tuition credits, and the alternative minimum tax for each filing status. Commissioner Pacheco asked the committee to consider fixed costs in reviewing this issue. He explained the concept of fixed costs, and commented that fixed costs are taken into account in the standard deduction.

5.    Standards for Acceptable Assessment Levels and Valuation Deviations_

    a.    Background Information--Mr. Howe distributed copies of Utah Code Ann. sections governing assessment studies, sharing of data, factoring assessment rates, and corrective action.

    b.    Implementation of Sections 59-2-704 and 59-2-704.5--Ross Bartholomew, Property Tax Division, Tax Commission, distributed handouts "59-2-704,""59-2-704.5," and "Standards for Assessment Levels and Valuation Deviations." Mr. Bartholomew explained how the Tax Commission measures county assessment performance. He said that the assessment/sales study is based on data provided by the county assessor and by answers to questionnaires. Chair Short asked how Utah's methods for this study compare to other states. Mr. Bartholomew replied that the key difference is that some states gather information through disclosure laws instead of through questionnaires.

    c.    Comment from County Assessors--Dennis Ayers, Iron County Assessor, reported that the county assessors recommended making no changes to the Tax Commission's administrative rule governing county assessment performance or to the Tax Commission's standards. He stated that assessors are constrained to find the most likely selling price, not market value. Lee Gardner, Salt Lake County Assessor, stated that Utah standards very closely mirror the standards of the International Association of Assessing Officers.

    d.    Committee Discussion and Direction for Future Action
    Sen. Poulton commented that when property values and property taxes increased in his area, he made requests to the Tax Commission, County Assessor, and County Auditor for information as to where property taxes decreased. He said he has not received the information and would like to receive it.

    Rep. Short asked that the Property Tax Division report to the committee regarding the implementation of the recommendations from the 1997 legislative audit.

7.    Other Business _ Senator Stephenson requested that staff ask Diane Nielson, Department of Environmental Quality, to present information regarding the environmental impact of the pollution control exemption at the July interim meeting .

8.    Adjournment --

     MOTION: Rep. Seitz moved to adjourn the meeting at 12:10 p.m. The motion passed unanimously.

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