Massive bill that included a tax on services implodes at the Utah State Legislature

SALT LAKE CITY -- A massive tax reform bill in the Utah State Legislature is not moving forward.

At a news conference Thursday, Governor Gary Herbert and legislative leaders announced the bill would be yanked, and have more study and public input before it is implemented.

"For a number of reasons, this session we’re not going to be moving forward with pursuing the passage of House Bill 441," House Speaker Brad Wilson, R-Kaysville, said.

The bill faced intense public pushback over the past couple of days. On Thursday, small business owners showed up on Capitol Hill to corner lawmakers and express their fears or displeasure.

"The biggest tax change in Utah history is trying to be ramrodded through in seven days. This is atrocious!" said Ryan Smith, a financial advisor who showed up to lobby against the bill.

Rep. Joel Briscoe, D-Salt Lake City, said the number of phone calls, emails and personal visits he's gotten about HB441 has been "overwhelming."

Speaking to a packed room on Thursday afternoon, the governor defended the need for tax reform in Utah. The state is moving quickly from a goods-based economy to a service-based one.

"How do we fairly extract the revenue necessary to run the government and make sure it’s done in a fair, stable way?" he said.

HB441 was a major rewrite of the tax code. It would have lowered sales and income tax rates but imposed a sales tax on services. Those services ranged from haircuts and piano lessons to lawn care and some construction.

Business groups began pressuring lawmakers to get themselves carved out. The Utah Broadcasters Association ran attack ads on local TV and radio stations, upset about being forced to impose a sales tax on advertising. The Utah State Bar told its members to call lawmakers to complain about a tax on their services.

"This bill was not perfect. It was never final. And we commend the legislature and the governor for listening to the business community," said Abby Osborne with the Salt Lake Chamber, the state's largest business group (which also testified in support of the bill at its last hearing).

Asked if they caved to public pressure, Gov. Herbert replied: "I don’t think we caved to anything. I think we responded to what the public understands and wants to do."

The governor called for forums and hearings to take public comment and input from business groups. He said the legislature might be called into a special session to pass a tax reform bill in the summer.

"We’re committed to finding the best policy and when we find it, we’ll be back," said Senate President Stuart Adams, R-Layton.

Rep. Tim Quinn, R-Heber City, who sponsored HB441, said he hoped lawmakers could avoid pressure from special interest groups to carve themselves out of any tax modernization bill. He told FOX 13 he wanted any tax policy to be fair.

"I can only speak for myself. I’ve had that pressure for the last several months. Sometimes it’s been relentless. I will stand firm. I do believe we do need to spread this as wide as possible. I don’t believe we should be picking winners and losers," he said.

Smith, who watched the governor's announcement after spending the day pushing lawmakers against HB441, was surprised by the about-face.

"I’m gonna be a bit honest I’m surprised by it all," he said. "It shows grassroots works."

Watch the news conference here:

Notice: you are using an outdated browser. Microsoft does not recommend using IE as your default browser. Some features on this website, like video and images, might not work properly. For the best experience, please upgrade your browser.