Thursday, March 12, 2009

Last day of the session: Howard Stephenson pushes a 75% reduction of corporate income tax late fees at the cost of 3 million education dollars a year

Take a look at the legislative calendar for the last day of the session. If you click on the box labeled Senate Bills under the House menu, you will see the queue of Senate bills waiting to be considered by the Utah House of Representatives today. There are two consecutive bills by Senator and registered lobbyist for the Utah Taxpayers Association (A euphemism for Utah Big Business Tax Reduction At All Costs Advocacy Association), Howard Stephenson, SB 186 and SB 64.

Senate Bill 64

SB 64 had already been on my "to blog" list, but Rolly beat me to it the other day. When I had first checked out the bill after seeing it pop up, I read the first few lines of the text through the "Highlighted Provisions" and just started laughing. To anyone following Gehrke's and Rolly's coverage last December of Stephenson unethically advocating for state contracts for ProCert , the intent is obvious. (Those 2 links lead to just the comments from the articles because of the Trib's lame archival policy. I'll post the text to the articles and an editorial in the next few weeks when I review the controversy and explain why "professional textbook review" is a total crap corporate giveaway.) The legislature would form an Administrative Rules Review Committee composed of 10 permanent legislators, plus 4 leaders of specific committees for each bill review, to check if state employees are acting legally (line 55), to ensure that they "comply with legislative intent" and that the legislature is allowed to slowly usurp the executive branch's functions(line 56), to certify that business taxes go down (lines 57-58), and to badger the State Office of Education to hire ProCert. The bill curiously has no fiscal note even though it requires this new committee of up to 14 legislators to meet once a month (lines 35-37), and I highly doubt they'll be meeting without receiving their per diem. Finally, the bill gives this mini-inquisition of intent power to spend their time examining basically anything they want:
60 (c) (i) To carry out these duties, the committee may examine any other issues that it
61 considers necessary.

Senate Bill 186

And as bad as that is, SB 186 could be worse. I'm trying to be fair and not claim dishonest intent without sound evidence, but the bill was certainly not presented accurately by its sponsor nor vetted completely by the Senate committee or body. Help me here. Listen to the audio (Click on "Senate Revenue and Taxation Committee 2/18" under the Audio Recordings of Debates heading. When 17:49 of audio pops up, just know that only the first 8 minutes concern SB 186). Does Senator Stephenson mislead the Senate Revenue and Taxation Standing Committee about the larger impact of a nice little bill to encourage individuals to pay their late taxes promptly?

0:00 Sen. Stephenson starts out, speaking from the committee dais of a committee he sits on rather than taking the floor, and says that "the bill in large part was brought by the tax commission," but then mentions that "tax practitioners" (What or who does that mean? Those members of the UTA who pay taxes?) asked for a reduction from 2% to .5% in late fees "for failing to pay certain income taxes." Senator Business Lobbyist doesn't mention that these are largely corporate franchise and income taxes and avoids the topic for the rest of the bill's hearing.

From about :30 to 2:30 in the recording: He invites a tax official, Bruce Johnson, to explain the innoucous, common sense part of the bill . They are giving individuals submitting their taxes late a break for the first 15 late days, allowing them to pay less than the normal 10% late fee in order to encourage rapid submission. Plus, they are coordinating with a new computerized tax system, GenTax. Lines 67-313 of the bill deal with this graduated partial grace period. That sounds fine, but I was looking at the enormous fiscal note and wondering how cutting the late fees on people for a few days was going to cost the education fund over 3 million dollars a year.

2:34 Sen. Neiderhauser asks Stephenson if the bill has a fiscal note.

2:37-3:13 Sen. Stephenson says he doesn't know, gets handed an incorrect fiscal note for a couple hundred thousand dollars total cost in 2010 and 2011 (which from things said later in the recording, I believe shows the cost of just the 15 days reduction in penalties for individuals proposed and discussed by the Utah Tax Commission), and is unable to decide if the lost revenue is from the General Fund as he first claims or the Education Fund (income tax), which I also believe also shows his change from the original intent since Bruce Johnson firmly thought it was a General Fund reduction.

He then takes awhile to explain that passing this before the GenTax system comes on line is important.

4:47-6:23 THE INFURIATING PART Senator Valentine both illustrates the potential for a committee to thoroughly examine proposed legislation and weigh its ramifications...AND the "You scratch my back..." mentality of "I don't want to hold up the bill" even though I have no idea how much it costs and it is obvious the sponsor has no idea either.

. - 4:47 Sen. Valentine asks about lines 322 and 326-330 and explains that those heretofore undiscussed corporate franchise and income tax late fee cuts, as well as penalty reductions for late individual income taxes, come out of the Education Fund. I start to see where the $3 million cost was coming from.

. - 5:25-5:56 Sen. Stephenson is confused by the dates in that updated portion of the bill. Sen. Valentine reads the bill quickly and accurately and explains that the penalty rate reduction from 2% a month to .5% a month in income tax is the source of the reduction in revenue for the bill from the Education Fund.

. - 5:57-6:09 More evidence that Stephenson subverted the bill. Bruce Johnson of the tax commission pipes up and says "That was the reduction in rate that you added Senator and I didn't look at that...but it would appear to me that it should be education funds." He had no idea about the intent or effects of Stephenson's business-friendly "additions" which clearly DID NOT apply to his explanation of the original intent of the bill. I am very, very suspicious as to why Sen. Stephenson would not understand that cutting the penalty on large, corporate income taxes by 75% per month would have a huge net effect on state income. In fact, from his testimony, it appears that Stephenson is largely unfamiliar with that part of the bill and I suspect the corporate franchise and income tax penalty reduction was a late business lobby addition after the original bill went to the Legislative Fiscal Analyst and came back with the smaller general fund reductions mentioned around the 2:45 mark.

. - 6:09-6:25 Sen. Stephenson will request a new fiscal note, Valentine doesn't "want to hold up the bill because I understand exactly its need..." but he wants to be accurate about which budget they're dealing with in the "tight budget year." If Valentine really cares about fiscal responsibility and understands the need to encourage prompt payment of late taxes (the first 313 lines of the bill), why doesn't he demand real information about a hastily added section of the bill that encourages late payment by reducing the penalties associated with large corporations paying their franchise and income taxes on extensions by 75%? (Lines 314-330)

6:25-6:51 Sen. Valentine begins follow-up question possibly addressing my concern about the intent of the bill to encourage prompt filing, and...Sen. Stephenson interrupts because he has finally figured out that he has the wrong fiscal note.

6:55-7:08 Jokes about perjury and whether it was intentional or merely negligent oversight...Possibly both in my opinion...

7:09-7:37 Sen. Niederhauser declares they won't ask questions because they don't have a fiscal note and opens it up to the public who surely had no idea what was going on.

7:37-8:08 Senator Valentine moves they pass the bill anyway and the committee unanimously votes in favor of the bill with "encouragement" to get the fiscal note. My opinion of committees as largely being political softballers which only scrutinize certain bills for political or ideological reasons is confirmed.

Now the floor debate:

Click on the Day 35 debate. It's 6:03, including liberal amounts of downtime and a role call vote. (The bill name links to audio, or you can click on the day and scroll down the list to SB 186 for video.) A couple weeks have passed since the committee hearing, and Sen. Stephenson now rises and says absolutely nothing about the story that got him through committee, encouraging the prompt payment of late taxes. He says nothing about those 15 grace days of reduced penalty. Instead he jokes they are going to make Utah as friendly as the IRS, gets a laugh, and now sorrowfully announces that the tax decrease will cause a fiscal note, explaining nothing specific or even what was requested at the end of the committee hearing. The lame highlight comes from 1:30 to 3:00 on the recording. Sen. Okerlund asks Sen. Stephenson to explain the fiscal note--remember, this $3-million-a-year ongoing hit to the Education Fund from 2010 onward was presented as as a two-year $125,000 cut in the General Fund during committee. Sen. Stephenson asks Okerlund questions back, hems and haws, followed by an awkward pause, and explains nothing. Sen. Okerlund, however, appears a bit reluctant to admit he has no idea what the bill is doing and especially why. No one understands what the one-time money that is shown as income means, including Sen. Stephenson. It makes me so mad when legislators have no idea what they are sponsoring because they are just acting for some lobbyist!! The next day, Sen. Stephenson gives an explanation from the Fiscal many do you think really understood it? I didn't.

Click on the Day 36 debate. It's a whopping 2:52 long. Stephenson gives the canned explanation and the bill passes with a unanimous vote. Whenever the legislators brag about how much careful, unbiased, non-lobbyist-influenced deliberation they give policy, I just think of crap like this. You could have taken a roll call for justification of SB 186 right after the vote, and I bet not one senator, with the possible exception of the sponsor, could have done more than repeated Stephenson's sorry excuse for an explanation that "It makes us not as mean as the IRS." I wonder how many even looked at the fiscal note which Stephenson purposely avoided announcing out loud.


1. Sen. Stephenson presented the bill as one thing during committee, and emphasized the opposite on the floor. His lobbyist interests seemed to conflict with the goals of his Tax Commission partners who helped draft the bill. (This seems familiar...)

2. NO ONE ELSE EVEN CARED!! Sen. Stephenson could not satisfactorily answer one question in committee or on the floor. If a PTA lady speaks in support of a bill in committee, Bramble, Stephenson, and Dayton grill her. If the powerful Senator Stephenson is completely unprepared, cannot answer basic questions about the reasoning behind his bill, omits that his bill costs 3 million dollars a year, and disingenuously changes his story from place to place, while other legislators vote for a bill they obviously know nothing about....that's fine. And once again, they will tell us it's the media's fault the public distrusts the legislature.

3. Sen. Stephenson is mucking around with HB 2, trying to shift charter school costs to districts, which regardless of substitute version cuts all training days and Career/Technical budgets and portions of everything else, while sneakily cutting over 3 million education dollars a year through a fee decrease that almost exclusively helps corporations. (I'm not sure what happened to the laptops for preschoolers Upstart program. Does anyone really know if that money was spent this year or has been cut?)

4. Weber County Forum and Ogden County Forum have been featuring well-reasoned pleas for the state or county to collect late property Senator Stephenson goes and makes it easier for corporations to delay payment of corporate franchise and income taxes. The regular Joe Taxpayer's burden gets a little heavier.

Any legislative interns reading this, please ask your legislator to ask one question of Rep. Harper, the House sponsor, when SB 186 comes up for debate this morning. Why does the majority of the bill encourage prompt payment of late taxes, but the small expensive part encourages LATE payment of owed taxes? Seriously. And for a difficult bonus question, ask: Why are you stealthily cutting $1 1/2 million from education next year and $3 million every year after that?

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