Tax cuts: Utah bill to reduce income tax rates. Is it sufficient?


A panel of Utah lawmakers on Wednesday approved a bill that would cut Utah’s income tax rate to 4.85% with a price tag of about $160 million a year.

The bill is now on its way to the Senate for discussion – but the debate over how to cut taxes this year is ongoing, with lawmakers caught between those who want an even bigger tax cut, those who think that any tax reduction should be more targeted. for low- and middle-income Utahns, and those who think taxpayer dollars would be better spent on programs for the needy.

The Senate Committee on Revenue and Taxation voted 6 to 2, with two Democrats voting against, to recommend SB59 favorably to the full Senate.

The bill sponsored by Sen. Dan McCay, R-Riverton, would have initially only lowered Utah’s income tax rate from 4.95% to 4.9%, but McCay changed the bill to reflect a 4.85% rate after Senate leaders signaled they would prefer that figure. .

How much money would the Utahns get back?

For a family of four with a median income in Utah of about $72,000 a year, the cut would mean about $98 more a year, McCay said.

“It’s not a big number, but it makes a difference to those earning that income, and it’s one more expense, a few more meals. … For that reason, we hope it will be a great comeback for them.

McCay noted that his bill is just one piece of what will likely be a larger tax policy discussion as it moves through the House and Senate.

While the Senate is focused on an income tax cut, the House is “working on some additional things,” McCay said, including perhaps some changes to state Social Security taxation. and perhaps an earned income tax credit more targeted at low and moderate incomes. Utahns.

Additionally, McCay said lawmakers hadn’t ruled out Gov. Spencer Cox’s proposal for a grocery tax credit — though Senate leaders said earlier Wednesday that lawmakers weren’t very “stimulated” by the proposal.

Meanwhile, Democrats and poverty advocates pushed for a complete repeal of the state sales tax on food, but that proposal failed to gain traction in the government-controlled legislature. republicans.

Earlier this month, Senate Speaker Stuart Adams R-Layton predicted in an interview with the Deseret News that lawmakers would likely land on a lower income tax rate of 4.85%, but said added that it’s possible lawmakers could allocate more money to fund a bigger tax. cut package.

Utah lawmakers have already earmarked $160 million for a tax cut this year, with a budget expected to have an additional $219 million in permanent funds and more than $1 billion in one-time funds available. to spend this year. The proposed tax cut would use all of that $160 million.

Legislative leaders say they have identified an additional $40 million that could bring the $160 million already earmarked for a tax cut to $200 million, Senate leaders told reporters earlier Wednesday. Senate Majority Leader Evan Vickers, R-Cedar City, said he expects to see proposals on the matter come from the House.

“They’re looking at other options, with other possibilities (to) add to that,” Vickers said of House.

Asked about the governor’s proposed grocery tax credit and the Democrats’ favorite proposal to repeal the food tax, Vickers said neither the House nor the Senate “seem overly motivated” by the either of these ideas.

Adams, however, said the governor is still engaged in negotiations, noting that an earned income tax proposal “is something he likes too, so we’re having these discussions.”

Cut taxes or spend on the needy?

People on both sides of the debate expressed concerns during Wednesday’s hearing.

“Families are facing high inflation right now,” said Rusty Cannon, president of the Utah Taxpayers Association. He called for a deeper income tax cut, noting that updated revenue projections in February could give lawmakers even more funds to spend.

“We think the legislative leadership has been conservative in how they approach this, and that’s early game,” Cannon said. “We think there should be plenty of room to make this even more important for taxpayers with a bigger income tax cut than what’s on offer now.”

Heather Andrews, state director of Americans for Prosperity-Utah, said lawmakers should lower the income tax rate even further, perhaps to 4.6%. She argued that Utahans were struggling to cope with rising housing, grocery and gas costs amid record inflation.

“They feel the pinch in their wallet,” she said.

But Lisa Stamps, who said she is the mother of a disabled child, said she was “disappointed” that lawmakers were focusing on a tax cut when “we have thousands of people waiting for social services”.

“It’s disgusting to hear about tax cuts when they’re so desperately needed here for our people,” she said.

Matthew Weinstein, director of tax policy for Voices for Utah Children, urged lawmakers to be careful when cutting taxes.

“We understand that tax cuts are popular,” he said, but added “there are unmet needs. There is over $5 billion that we have been able to document in needs unmet in very important areas of state responsibility.

Weinstein also said that “not all tax cuts are created equal.” Utah’s overall tax structure is “regressive,” he said, “in that higher-income Utahns pay a lower rate of tax when you add up everything lower-income Utahns and means”.

He said the Voices for Utah Children are “big fans” of a proposed earned income tax credit, 91% of which would target low- and middle-income Utah taxpayers. He urged lawmakers to consider including a working income tax cut in the final package.

Utah Democrats would rather see a targeted tax cut for low-income Utahns in the form of repealing the state sales tax on food or using that money for other programs.

Senate Minority Whip Luz Escamilla, D-Salt Lake City, told reporters earlier Wednesday that an income tax cut would not provide “meaningful” relief for low-income Utahns.

Instead, Escamilla said she would rather see the state increase funding for programs like education and social services “to strengthen our economy.”

Is it wise to reduce tax cuts before a possible economic “bubble”?

Asked by a reporter earlier Wednesday if lawmakers were stingy with taxpayers’ money for not considering a bigger tax cut, Senate leaders said it’s possible they would support the use of more $160 million for a tax cut, but they want to be cautious.

Senate Majority Whip Ann Millner, R-Ogden, said Senate leaders want to be cautious given national conditions and the possibility of an economic “bubble.” She said projections show a “spike in revenue, and that spike in revenue is caused by federal money” in one-time COVID-19 stimulus funds.

Senate Majority Whip Ann Millner, R-Ogden, speaks in the Senate at the Capitol in Salt Lake City on the third day of the Utah legislative session, Thursday, Jan. 20, 2022.
Spenser Heaps, Deseret News

“The question is going to be whether these revenues will be maintained continuously two years, three years later. Or do we have a bubble? Millner said. “And what our economists are telling us is that we most likely have a bubble.”

That means “we have to spend some of the time in class and watch and see what happens next year,” Millner said. “And then I’m sure, depending on how the funding stabilizes, etc., that conversation could happen again next year.”

Millner said she and other lawmakers lived through the Great Recession. In 2007, she said lawmakers spent and cut taxes – but then had to cut budgets three times to respond to the spiraling economy.

“I don’t want to do that again,” Millner said. “I think we have to learn from the last bubble and be very careful here.”

Executive Vice President of Appropriations, Senator Don Ipson, R-St. George, okay.

“It was traumatic and quite brutal,” he said, noting that the state had to cut the budget by more than $1.2 billion. “We have to be careful not to cut (taxes) too much and we live within our means.”

Source link


About Author

Comments are closed.