Amid rising prices, should Utah dump state income tax?
May 6, 2022, 5:23 PM
The federal tax filing season has begun. And it's going to be tough sledding for the IRS -- and for some tax filers -- given the millions of returns from last year that still have to be processed, staffing issues due to Covid-19 and a lack of needed funding for the agency. Photo credit: Adobe Stock
SALT LAKE CITY — As the price of gas and groceries climb, so do the sales taxes consumers pay. As the price of real estate in Utah rises, so do the property taxes homeowners pay. Two of the Beehive state’s neighbors pay no state income tax. Is it time Utah joined them? A state senator and a taxpayers’ advocate debate cutting the tax burden in the state.
Meet Bob and Brooke Beehive and their three children. The fictitious Utah family earns about $84,000 a year and pays almost 25% ($20, 790) of their income in taxes.
The Utah Taxpayers Association releases a report each year showing the annual tax burden that a typical Utah family pays based on current tax policy and tax rates for the (2021) tax year.
Utah income tax: save it or shrink it?
Rusty Cannon, president of the Taxpayers Association, joined KSL NewsRadio’s Debbie Dujanovic and guest host state Sen. Todd Weiler to talk about the state and federal tax burden, what it funds and where it goes.
“How do you justify that? As a senator — you’ve been a senator for a long time. A good chunk of that is state income tax that they’re paying,” Debbie asked Weiler, referring to the fictional Beehive family.
“Well, yeah, and that state income tax goes to support the schools,” he said. “The constant refrain that we’re hearing is, ‘Oh, we don’t want to be 49th or 50th in per pupil spending. You need to increase the spending.'”
Up until two years ago, Weiler said all income taxes went to fund state education. But now state income taxes are shared with social services.
“[Social services] used to be 10% of our budget. Now it’s 20% of our budget, just in one decade,” he said.
Utah has a flat income tax rate of 4.95% while neighbors Nevada and Wyoming both have no state income tax, according to the Tax Foundation.
Cannon pointed out during the previous session the Legislature cut the state income tax by 0.10%.
“Idaho just cut their rate half a percent,” he said.
“We’ve cut our rate twice in the past three years,” Weiler said, “and it wouldn’t surprise me if we cut it again next year.”
Social Security and Medicare’s big bite
The Social Security Act was signed into law by President Roosevelt on Aug. 14, 1935. Social Security taxes were first collected in January 1937, with workers and employers each paying one percent of the first $3,000 in wages and salary.
For the Beehive family, 56% of their total tax burden goes to Social Security and Medicare, Cannon said.
“That’s a massive amount of taxes. It’s 15.3% of your gross income every year. If you’re self-employed, you pay it all. If you’re employed, you pay half (7.65%) and your employer pays half,” he said.
“Those systems are not healthy, and it’s taking a lot of money from folks,” Cannon said in closing.
Dave & Dujanovic can be heard weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play.
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