Here is a link to Senator Kitchen’s bill, SB187, which includes a link to this fiscal note. The bill has a lot in common with the ballot measure we filed in 2019, and with Rep. Briscoe’s HB304 from 2019.

Overview of the bill

The bill:

  • makes public transit free and provides $50m a year to Utah Transit Authority to provide fare-free transit;
  • funds a 10% refundable match of the federal Earned Income Tax Credit for low-income working families;
  • puts $5m a year into rural economic development and $5m a year into clean air non-profits;
  • eliminates regressive state sales taxes, notably the state sales tax on grocery store food, but also sales taxes on residential and commercial consumption of electricity and other fuels;
  • and imposes a carbon emissions tax on consumption in Utah of motor fuels (gasoline,  diesel, and aviation fuel), natural gas, fossil-fuel generated electricity, and certain other fossil fuels burned in industrial facilities.

The fiscal note estimates that during the first full fiscal year (FY2025, i.e., July 1 2024 – June 30 2025) the bill will:

  • provide $50m to UTA, $5m for rural economic development, and $5m for clean air non-profits, for a total of $60m;
  • lower state sales taxes by $260m (our estimate from 2019 was $230m, with $160m per year for eliminating the state sales tax on grocery store food and $70m for eliminating sales taxes on electricity and other fuels);
  • put $25m into the Aeronautics Restricted Account (similar to our estimate from 2019);
  • not explicitly noted in the fiscal note is about $50m for the Education Fund to offset the cost of the EITC match (this $50m is our estimate from 2019 of the cost of a 10% refundable EITC match); and
  • impose carbon taxes of $610m (our estimate from 2019 was $120m from motor gasoline, $55m from on-road diesel, $25m from aviation fuel, $120m from natural gas, $10m on large emitters, and $300m on electricity, for a total of $630m).

That leaves a balance in FY2025 of about $215m, which is what the fiscal note says will go into the Carbon Emission Tax Refund Restricted Account (CETRRA) for additional tax cuts.

Details on each section of the bill

Note that amendments to an existing section of the Utah code must include the entire language of that section even if only small parts are being amended; this is relevant for pages 2-8 below and (especially) for the sales tax section. Also note that amendments to existing sections of the Utah code feature additions in underline and [deletions in bracketed strike-through].

Pages 1-2: Formal overview of the bill

See description above.

Pages 3-8: Amending 17B-2a-808.1 and 17B-2a 815 to make public transit free

This section amends Utah code 17B-2a-808.1 (Large Public Transit District) and 17B-2a-815 (Rates and Charges for Service) to make public transit free. The key language is on Page 7 line 208: “Beginning on January 1, 2024, a large public transit may not charge a fare for any public transit service provided by the large public transit district.” (I think this should say “a large public transit district“.)

Comparison to previous versions:

  • This is a new addition from Senator Kitchen.
  • This section (plus $5m in funding for clean air non-profits) replaces the clean air funding that was in the ballot measure ($25m to DAQ for the CARROT program, $75m to DEQ) and in HB304 ($3m to CARROT, $42m to DEQ).

Estimated financial impact: Passenger revenue was about $50m per year pre-pandemic according to budget documents. Section 59-30-301 (below) adds $50m to the UTA budget to offset this.

Pages 8-10: New section 19-1-208 certifies emissions from large emitters

This section creates a process for the Department of Environmental Quality to certify CO2 emissions from large emitters relating to three types of fossil fuels: coal, dyed diesel fuel, and fuel gas. Most emissions relating to fossil fuel consumption are taxed elsewhere—electricity  is taxed at the electric utility level, natural gas is taxed at the natural gas utility level, and highway fuels (motor gasoline and un-dyed diesel fuel) are taxed at the same upstream point where existing gas taxes are levied—but there are a few types of emissions that would otherwise “slip through the cracks” and so they’re covered here. The first type is coal that is used directly, for example in a steel mill; the second type is red-dyed diesel fuel used in off-road equipment, for example at the Kennecott mine; the third type is fuel gas, which is used in oil refineries. Note that “large emitter” is defined on page 29 to be a facility that emits over 25,000 metric tons of CO2 per year, so this includes industrial facilities but not (say) construction equipment. (It’s unclear if railroad freight yards count as “large emitters”; this is worth clarifying.)
Comparison to previous versions: Very similar to both 19-1-208 of the ballot measure and 19-1-207 of HB304.

Pages 10-11: New sections 59-10-1102.1 and 59-10-1114 create a refundable Earned Income Tax Credit

These sections create a refundable 10% match of federal Earned Income Tax Credit that benefits low-income working families, especially families with children.
The federal EITC is one of the largest anti-poverty programs in the United States; some 30 states have state-level matches of the federal EITC, so that a family that gets (say) $4,000 from the feds would get an additional $400 from the state under a 10% state-level match. A refundable EITC match means that—like the federal EITC—a family can end up getting a check from the government if it has little or no income tax liabilities. (Under a non-refundable EITC match, a family that qualifies for a $400 EITC match would see its state income taxes reduced by up to $400, but if only owes $100 in state income taxes then the EITC match would only be worth $100. Under a refundable EITC match, that family would see its $100 state income tax liability reduced to zero and would get a $300 check, bringing the total benefit to $400.)

Subsection (3) at the end transfers money from the Carbon Account (CERTRA) into the Education Fund to keep it whole. This is because income tax revenue goes into the Education Fund, so an EITC match takes money out of the Education Fund.

Comparison to previous versions:
  • Mostly similar to 59-10-1113 of the ballot measure and to 59-10-1113 of Rep. Briscoe’s HB304.
  • The ballot measure proposed a 20% EITC; the new bill and HB304 have a 10% match.
Estimated financial impact: A bit less than $50m per year for a 10% match, or a bit less than $100m per year for a 20% match. Note that the legislature just passed and the governor signed SB59, which creates a non-refundable 15% EITC match in Utah, i.e., one that reduces a family’s state income tax liabilities. The fiscal note to SB59 indicates that the EITC portion is estimated to cost $16m per year.

Pages 11-29: Amends 59-12-103, which covers sales taxes

This section amends Utah code 59-12-103 (Sales and Use Tax Base) as described below.
  1. Preface about lines 343-356 on page 12: Note that subsection 1(c) references commercial sales of natural gas, electricity, and other fuels, and that subsection 1(d) references residential sales of natural gas, electricity, and other fuels.
  2. Lines 416-421 on page 14: These amendments eliminate the state sales tax on residential and commercial sales of gas, electricity, and other fuels, beginning Jan 1, 2024. (The current state rate is 2% for residential sales and 4.7% for commercial sales. Note that local sales taxes are unchanged.) Estimated financial impact based on previous bills: About $70m per year, $40m for residential and $30m for commercial.
  3. Lines 426-429 on page 14: These amendments eliminate the state sales tax on grocery store food. (The current state rate is 1.75%. Note that local sales taxes are unchanged.) Estimated financial impact based on previous bills: About $160m per year.
  4. Lines 549-551 on page 18: These lines contain housekeeping changes.
  5. Lines 555-556 on page 19: This puts into the state General Fund an amount of carbon tax revenue equal to what the state sales tax on grocery store food and residential and commercial fuels would have been per 59-30-301(5)(b)(i). (See discussion below regarding 59-30-301.)
  6. Lines 557-564 on page 19: These lines contain housekeeping changes.
  7. Lines 565-566 on page 19: This specifies that the amount put into the General Fund per 59-30-301 (discussed in #5 above) shall be considered sales tax revenue.
  8. Lines 688-786 on pages 23-26: These lines contain complicated amendments to sections to put certain sales tax revenues into the Transportation Investment Fund. I don’t yet understand them fully.
  9. Lines 849-859 on page 28: These lines put a certain amount of sales tax money into the CERRA (carbon tax) account and reduce by that same amount the amount of sales tax money going into the Transportation Investment Fund (i.e., the Highway Fund). The “certain amount” of money is 97% of the lesser of (i) the total amount of sales tax money going into the Transportation Investment Fund and (ii) the carbon tax revenue from highway fuels (motor gasoline and diesel). The backstory here is that the state constitution requires taxes on highway fuels to go into the Highway Fund; accordingly, the carbon tax revenue on motor gasoline and diesel  goes into the Highway Fund. But there is a bunch of sales tax revenue that is currently directed into the Highway Fund, and there’s no constitutional requirement for that, so these lines basically do a switcheroo that ends up looking like the carbon tax revenue from highway fuels goes into the CERRA (carbon tax) account instead of the Highway Fund. Two numerical examples may help: First, let’s say there’s currently $200 in sales tax revenue going into the Highway Fund, and that carbon tax revenue from highway fuels is $100. That $100 goes into the Highway Fund, but these lines reduce the amount of sales tax revenue going into the Highway Fund by $97 and redirect that money into the CERRA (carbon tax) account. Second, let’s change it so that there’s currently only $50 in sales tax revenue going into the Highway Fund. Then the $100 in carbon tax revenue from highway fuels goes into the Highway Fund, but these lines reduce the amount of sales tax revenue going into the Highway Fund by $48.50. In other words, these lines ensure that 97% of the maximum possible amount ends up in the CERRA (carbon tax) account instead of in the Highway Fund. PS. Where did 97% come from? Well, the carbon tax itself is going to reduce highway fuel consumption by a  bit, so these lines allocate an extra 3% to the Highway Fund to keep it whole.
Comparison to previous versions: Similar I think, but it’s pretty hard to follow all the changes.
  • One difference is that the ballot measure uses 95% instead of the 97% in HB304 and the current bill.

Page 28-47: Carbon tax

As detailed below, the rest of the bill concerns the carbon tax, with annual revenue of roughly $120m from motor gasoline, $55m from on-highway diesel, $120m from natural gas, and $80m from large emitters, and $300m from electricity, for a total of about $575m per year. Note that this does not account for a possible phase-in of the tax for industrial customers. I will try to find details elsewhere (e.g., from the ballot measure fiscal note) but accounting for the phase-in will probably reduce revenue to about $500m. 
By comparison, public transit fares are about $50m, a 10% EITC match is $50m, sales tax cuts are about $230m, and rural economic development in the new bill is $5m, for a total of about $335m per year.
PS. There’s also annual revenue of about $25m from aviation fuel, but I’m not including that in the paragraphs above because that money goes into the Aeronautics Restricted Account and is not available for other uses.

Pages 28-29: New section 59-30-101 is Definitions

This section defines various terms.

Comparison to previous versions: Identical to 59-30-102 of Rep. Briscoe’s HB304. Also identical to 59-30-102 of the ballot measure except:
  • The ballot measure included definitions of “facility” and “industrial use”.
  • The ballot measure defined “large emitter” to be a facility that emits over 10,000 MTCO2 (rather than 25,000 MTCO2).

Pages 29-30: New section 59-30-102 is Records

This section concerns record-keeping.

Comparison to previous versions: Identical to both 59-30-103 of the ballot measure and 59-30-103 of Rep. Briscoe’s HB304.

Page 30: New section 59-30-103 is Amended Returns

This section concerned amended returns.

Comparison to previous versions: Identical to both 59-30-104 of the ballot measure and 59-30-104 of HB304 except:
  • The ballot measure and HB304 had a section about amended returns for electricity providers.

Pages 30-32: New section 59-30-201 is carbon tax on motor fuel (on-highway gasoline)

This section imposes a carbon tax on motor gasoline of 8.89 cents per gallon, increasing by 3.5% plus inflation, with a maximum of 88.9 cents that’s adjusted for inflation.

Comparison to previous versions: Identical to both 59-30-201 of the ballot measure and 59-30-201 of HB304 except:
  • The dates of implementation have been updated.
  • The ballot measure started with a tax of 10.67 cents per gallon, equal to $12 per ton CO2 rather than $10.

Estimated financial impact based on previous versions: About $120m per year.

Pages 32-35: New section 59-30-202 is carbon tax on special fuel (on-highway diesel)

This section imposes a carbon tax on on-highway diesel of 10.16 cents per gallon, increasing by 3.5% plus inflation, with a maximum of $1.02 that’s adjusted for inflation.

Comparison to previous versions: Identical to both 59-30-202 of the ballot measure and 59-30-202 of HB304 except:
  • There are some minor housekeeping changes.
  • The dates of implementation have been updated.
  • The ballot measure started with a tax of 12.19 cents per gallon, equal to $12 per ton CO2 rather than $10.

Estimated financial impact based on previous versions: About $55m per year.

Pages 35-37: New section 59-30-203 is carbon tax on aviation fuel

This section imposes a carbon tax on aviation fuel of 9.57 cents per gallon, increasing by 3.5% plus inflation, with a maximum of 95.7 cents that’s adjusted for inflation.

Comparison to previous versions: Identical to both 59-30-203 of the ballot measure and 59-30-203 of HB304 except:
  • There are some minor housekeeping changes.
  • The dates of implementation have been updated.
  • The ballot measure started with a tax of 11.48 cents per gallon, equal to $12 per ton CO2 rather than $10.

Estimated financial impact based on previous versions: About $25m per year.

Pages 37-39: New section 59-30-204 is carbon tax on natural gas

This section imposes a carbon tax on aviation fuel of 53.12 cents per thousand cubic feet, increasing by 3.5% plus inflation, with a maximum of $5.31 that’s adjusted for inflation.

Comparison to previous versions: Identical to both 59-30-204 of the ballot measure and 59-30-204 of HB304 except:
  • There are some minor housekeeping changes.
  • The dates of implementation have been updated.
  • The ballot measure started with a tax of 63.74 cents per thousand cubic feet, equal to $12 per ton CO2 rather than $10.
  • The ballot measure had a phased-in rate for industrial customers, starting at 10% of the general rate, going up by 5 percentage points per year to a maximum of 50%. (See subsection 3(c) starting on line 1277.)

Estimated financial impact based on previous versions: About $120m per year, assuming no phase-in for industrial customers.

Pages 39-40: New section 59-30-205 is carbon tax on large emitters

This section imposes a carbon tax on large emitters of $10 per metric ton CO2, increasing by 3.5% plus inflation, with a maximum of $100 that’s adjusted for inflation.

Comparison to previous versions: Identical to both 59-30-205 of the ballot measure and 59-30-205 of HB304 except:
  • There are some minor housekeeping changes.
  • Lines 1190-1192 specify certain types of emissions. (So does HB304, but the ballot measure doesn’t… why?)
  • The dates of implementation have been updated.
  • The ballot measure starts with a tax of $12 per metric ton CO2 rather than $10.
  • The new bill and the ballot measure (but not HB304) have a phased-in rate for industrial customers, starting at 10% of the general rate, going up by 5 percentage points per year to a maximum of 50%. (See subsection 2(c) starting on line 1339.)

Estimated financial impact based on previous versions: About $10m per year at the 10% rate, about $80m per year at 100% rate.

Pages 41-42: New section 59-30-206 is carbon tax on electricity providers

This section imposes a carbon tax on electricity of $10 per metric ton CO2, increasing by 3.5% plus inflation, with a maximum of $100 that’s adjusted for inflation. The tax is based on The Climate Registry’s Electric Power Sector Protocol’s Delivery Metric.

Comparison to previous versions: Similar to both 59-30-206 of the ballot measure and 59-30-206 of HB304 except:
  • There are some minor housekeeping changes.
  • The dates of implementation have been updated.
  • The ballot measure starts with a tax of $12 per metric ton CO2 rather than $10.
  • The new bill uses the Electric Power Sector Protocol instead of a homegrown calculation. (PS. On line 1259, is “calculate the number of metric tons of carbon dioxide emissions that the electricity provider delivered” the right language? Maybe “calculate the number of metric tons of carbon dioxide emissions associated with the electricity that the electricity provider delivered”? And maybe the new bill needs to be more specific on the next line, line 1260, regarding The Climate Registry’s Electric Power Sector Protocol’s Delivery Metric?)
  • The ballot measure had a phased-in rate for industrial customers, starting at 10% of the general rate, going up by 5 percentage points per year to a maximum of 50%. (See subsection 2(c) starting on line 1383.)

Estimated financial impact based on previous versions: About $300m per year (not accounting for industrial phase-in).

Page 42: New section 59-30-207 is Exemptions

This section creates three modest exemptions from the carbon tax. First, it exempts fossil fuels brought into the state in the fuel supply tank of a motor vehicle, vessel, locomotive, or aircraft, i.e., if you drive from AZ to UT then you don’t have to stop and pay carbon tax on the fuel in your tank. Second, it exempts imposing the carbon tax in situations that would violate federal law or the federal or state constitutions, e.g., if federal law says (hypothetically; I’m not sure if it does) that it’s illegal to impose state taxes on fuel used by the military then that would be exempt from the carbon tax. Third, it exempts fossil fuel intended for export out of the state, e.g., coal that is mined in Utah but sold out of state. (This would probably not be covered by the carbon tax anyway because the carbon tax focuses on consumption of fossil fuels in Utah.)

Comparison to previous versions: Identical to both 59-30-207 of the ballot measure and 59-30-207 of HB304.

Pages 42-44: New section 59-30-301 creates the CERRA account

This section creates the Carbon Emissions Revenue Restricted Account (CERRA). Subsection 2 says that this account gets:

  • the revenue from the carbon tax applied to natural gas, large emitters, and electricity providers (59-30-204, 59-30-205, and 59-30-206, respectively), and
  • the equivalent of 97% of the revenue from the tax on motor gasoline and on-highway diesel, as described in 59-12-103 (the sales tax chapter). As noted above, this revenue cannot go directly into the CERRA because the state constitution says that taxes on motor fuels must go into the Highway Fund.

The two bullets above cover all but one of the sections of the carbon tax. The missing section is the carbon tax on aviation fuels, which goes into the Aeronautics Restricted Account as required by federal law.

Sections 3-6 concern allocation of the revenue in this fund. Funds are allocated per section 3 in the priority order described below, with the stipulation that the balance in the fund may not decrease below $20m. (Why not?)

Comparison to previous versions: Similar to 59-30-301 of the ballot measure and to 59-30-301 of HB304 except:
  • The ballot measure and HB304 called this account the Carbon Emissions Tax Expendable Revenue Fund.
  • The priority order for revenue is different. The priority order for the new bill is:
    1. $20m balance in the CERRA account, per subsection (6)(a), line 1341. (Why is this necessary? Just curious.)
    2. Offset impact on General Fund of lost sales tax revenue from grocery store food and fuels, per subsection (3)(a), line 1299.
    3. Offset impact on Education Fund of lost income tax revenue from the refundable EITC match (59-10-1114) per subsection (3)(b), line 1300.
    4. $50m for Utah Transit Authority for free fares per subsection (3)(c), line 1301.
    5. Pay for any necessary carbon tax refunds per subsection (3)(d), line 1302. (Should this be closer to the top of the priority list since it’s about double-payment of taxes?)
    6. $5m for rural economic development per subsection (3)(e), line 1303.
    7. $5m for the Clean Air Support Restricted Account (19-1-109) per subsection (3) (f), line 1304.
    8. Transfer any remaining amount in excess of the $20m cushion into the CETRRA tax-refund account described below.
  • The priority order for the ballot measure (see Subsection (3) starting on line 1442) was:
    1. Offset impact on Education Fund of EITC and Retirement Tax Credit.
    2. Offset impact on General Fund of lost sales tax revenue.
    3. $25m to CARROT clean-air program.
    4. $50m for rural economic development.
    5. $75m to DEQ for clean-air programs.
    6. Remaining funds to into a tax-refund account.
  • The priority order for HB304 (see Subsection (3) starting on line 1510) was:
    1. Offset impact on General Fund of lost sales tax revenue.
    2. Offset impact on Education Fund of lost income tax revenue from EITC etc.
    3. $42m to DEQ for air quality programs.
    4. $3m to CARROT air quality program.
    5. $5m for rural economic development.
    6. Remaining funds into a tax-refund account.

Pages 44: New section 59-30-302 creates the CETRRA account

This section creates the Carbon Emissions Tax Refund Restricted Account (CETRRA). As noted in the previous section, this account gets any “excess” carbon tax revenues, i.e., anything left after transfers into the General Fund and the Education Fund, spending on rural economic development spending, etc.

Revenue in this account must be used “to lower state taxes”.

Comparison to previous versions: Similar to both 59-30-302 of the ballot measure and 59-30-302 of HB304 except:
  • The ballot measure and HB304 both included in this account “money lapsed from the Clean Air Grant Program” (which is not part of the new bill).
  • The ballot measure (but not HB304) specified that lower taxes were to be targeted “especially for low- and middle-income households and for energy-intensive trade-exposed businesses”.

Pages 44-46: Amends 72-2-126 concerning aviation fuels

This section amends 72-2-126 (Aeronautics Restricted Account) to specify that revenue from carbon tax on aviation fuels goes into this account, as required by federal law.
Comparison to previous versions: Similar to both 72-2-126 of the ballot measure and 72-2-126 of HB304 except:
  • Housekeeping change on line 1636 of the ballot measure, and similarly on 1724 of HB304. (Make the same change in the new bill, adding “this” to line 1379 so that it reads “described in this Subsection (4)(a);”?)

Page 46: Effective date

Section 19 establishes an effective date of Dec 31, 2023.

Comparison to previous versions: Similar the ballot measure and 59-30-302 of HB304 except:
  • Dates are updated.
  • The ballot measure and HB304 both have some specifics about implementation dates. I thought these were related to  ballot-measure implementation rules, but perhaps not. (If I remember correctly, it’s that ballot measures relating to tax increases cannot take effect until the January 1st that comes 13 months after the election, e.g., a measure passed in Nov 2024 cannot take effect until Jan 1, 2026.)

Not in the new bill

As detailed below, some sections that were in the ballot measure and/or HB304 are not in the new bill.

Certification of electricity provider

Both the ballot measure and HB304 have a new section (19-1-208) that certifies emissions from electricity providers. This part of the bill is no longer needed because electricity providers use The Climate Registry’s Electric Power Sector protocol. (Maybe we can have large emitters use a different TCR protocol and eliminate the certification process for large emitters in 19-1-207?)

Clear air grants program

Both the ballot measure and HB304 have a new section (19-2-401) that provides clean air funding.

Throughput infrastructure fund

Both the ballot measure and HB304 have modest amendments to 35A-8-308 and 35A-8-309 (Throughput Infrastructure Fund). These change were made by other legislation that passed in recent years, so we don’t need to worry about this. 

Refundable tax credit for mining and manufacturing

HB304 (but not the ballot measure or the new bill) had two sections (59-7-624 and 59-10-1112) that provided a refundable tax credit for mining and manufacturing. The ballot measure (and the new bill) accomplish the same thing by having a reduced rate for these businesses, i.e., instead of paying the full tax rate and then getting a refund, they pay a lower rate to start out with. So I think we don’t need to worry about this. 

Retirement tax credits

Both the ballot measure and HB304 amended 59-10-1119 (Nonrefundable retirement tax credits) and enacted 59-10-1102.1 (Apportionment of tax credit) to provide a retirement tax credit. The new bill eliminates this tax credit, which I think is a good thing because I don’t think it’s well-targeted. So I think we don’t need to worry about this.

Carbon tax title

Both the ballot measure and HB304 have a new section (59-30-101) that creates a Title for the carbon tax chapter. (The new bill doesn’t have that. Why not?)

Repeal dates, Title 19

HB304 (but not the ballot measure) amended 63I-1-219 to change the repeal date of Title 19, Chapter 2, Air Conservation Act from 2019 to 2029. These change were made by other legislation that passed in recent years, so we don’t need to worry about this. 

Amending definition of state taxes in 63N-2-502

Both the ballot measure and HB304 amended 63N-2-502 regarding the definition of “state taxes” in subsection 28. (I’m not sure I understood why this was in the ballot measure or HB304, and now I’m not sure why it’s not in here. ???)