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Legislative leaders expressed concern Monday that the Our Schools Now initiative that seeks to raise income taxes by $750 million annually would scare away new business, hurt Utah's economy and harm the schools that it seeks to help.

So they floated numerous alternatives to muster more cash for education, among them: Restore the full sales tax on food, cut current income tax deductions for kids, close loopholes to collect more taxes from online sales, generate more money from public lands, hike local property taxes or raise the state gasoline tax to eliminate general-fund subsidies of highways that may hurt schools.

Education is "the No. 1 issue for most Utahns, and rightly so," House Speaker Greg Hughes, R-Draper, told the Legislative Outlook Conference of the Utah Taxpayers Association. Still, "I would caution against raising the income tax."

Hughes said the proposed hike of seven-eighths of 1 percent — which the initiative drive hopes to put on the 2018 ballot — could backfire if it leads to slower economic growth. He said a healthy economy is really what generates tax money for schools.

Senate President Wayne Niederhauser, R-Sandy, agreed.

"People need jobs. That's an essential part of the economy. In order to do that, we need to incentivize commerce," he said. "Raising the income tax rate is the absolute worst thing we could do because that's a tax on productivity. When a company is relocating, one of the first things they look at is the income tax rate."

"The income tax is the wrong one to raise," said Sen. Howard Stephenson, R-Draper, who is both chairman of the Senate Revenue and Taxation Committee and president of the Utah Taxpayers Association, a group funded by businesses.

Richard Kendell, co-chairman of Our Schools Now, argued that the most robust companies relocating nationally have moved to states where income taxes are higher than Utah. He said what the state really needs is better schools.

"We don't have the talent" that many companies need, he said, "at least not enough of it."

Our Schools Now is an initiative that is championed by business leaders, such as Larry H. Miller Group of Cos. owner Gail Miller and Zions Bank President Scott Anderson. They complain Utah schools receive among the lowest funding per pupil nationally and need money to improve performance.

Legislative leaders didn't shy away from offering other suggestions, many of them tax increases, to meet the goal of better funding classrooms.

Gas tax • Niederhauser, for example, said the state's gasoline tax of 29.4 cents a gallon does not fully fund the state's highways — and they still require a $500 million per year subsidy from the general fund.

He suggested the Legislature may want to boost that gas tax to reduce the road subsidy and shift money to education. Last year, the gas tax was raised by 4.9 cents a gallon, the first jump in 17 years.

Food tax • Niederhauser and Stephenson also floated the idea of fully restoring the sales tax on food, which is now taxed at 3 percent instead of the 4.7 percent statewide tax on other items. Niederhauser said that could raise $200 million a year for education.

"It was probably a mistake to take it off in the first place," Niederhauser said. It was pushed by former Gov. Jon Huntsman to help the poor.

Niederhauser noted that restoring it likely would be attacked as an attack "on the poor, [while] the rich are escaping any type of increase in taxes. And the reality is that's true" largely.

So he said if the food tax is increased, the state should consider offsetting it for the poor by passing a state earned-income tax credit for them.

Deductions for kids • Stephenson and Niederhauser also said it may be time to reconsider current state income tax credits and deductions that lower taxes, including deductions for children.

"It's ironic that the more children you send to public schools, the less you pay in income taxes for their education," Stephenson said.

Niederhauser said a review of other credits and deductions could lead to reducing some that may now have little worth.

Internet sales tax • Niederhauser, Hughes and Sen. Curt Bramble, R-Provo, called again for eliminating loopholes that have prevented automatic collection of sales tax on internet purchases.

Last year, Bramble estimated that costs Utah between $80 million and $350 million a year. He said it is likely more now because Utah's economy has been improving — but its sales tax revenues have remained flat.

"People indeed are buying more," he said. "But they are buying more online."

The trouble is, the online sales tax generally is collected at the time of sale only if the internet company has a physical presence in Utah. Many do not. Utah buyers are supposed to track what they buy online in those cases and pay the taxes later through their income tax return, but few do.

Evelyn Everton, Utah director of Americans for Prosperity, opposes online sales-tax changes.

While the sales tax technically is owed now, she said it would still feel like a tax hike. She said Utah should wait for lawsuits over efforts in other states to proceed to see what is considered legal.

She also said a recent voluntary agreement between online giant Amazon and Utah to collect tax on its sales may solve much of the problem, and the state should wait to see how that affects collections before proceeding.

Public lands • Hughes said Utah's push for control of federal lands — including opposition to the new Bears Ears National Monument — could also help its state trust lands scattered in those areas to generate more revenue for schools.

But he said President Barack Obama and former President Bill Clinton treat Utah "like an ATM for paybacks" to their environmental supporters by creating monuments as their terms ended.

Property tax • Sen. Lyle Hillyard, R-Logan, chairman of the Public Education Appropriations Subcommittee, also suggested better funding education through local school districts raising property taxes, giving them more control over the money.

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