Utah lawmakers propose reducing the flat income tax rate by .20%

SALT LAKE CITY — Utah legislative leaders announced a tax relief plan on Thursday afternoon. It includes reducing the state’s flat income tax rate from 4.85%  to 4.65 %.

Pregnant women would get a double dependent exemption for children in the year of their birth.

The earned income tax credit that mainly benefits low-income families would be raised from 15% to 20% of the federal credit.

Those changes are contained in a single bill, H.B. 54, sponsored by Rep. Steve Eliason, R-Sandy, and Sen. Dan McCay, R-Salt Lake City.

#BREAKING: Utah House Majority proposing Income tax rate reduced to 4.65% (down from 4.85%)#UTLEG is also considering proposing the earmark for education on income tax go away.

They argue it needs to happen so $ can be used to cut sales tax on food. @kslnewsradio pic.twitter.com/dsytORw8sq

— Lindsay Aerts (@LindsayOnAir) February 16, 2023

 

The big tax bill is a joint effort by both the Senate and House Republicans.  They say that by lowering Utah’s income tax rate, an average family of four making $80,000 a year will save about $208. They also point out what other groups might save.

• Low-income households will see about a 22% tax cut.
• Middle-income households will see about a 6% tax cut.
• High-income households will see about a 4% tax cut.

What about the sales tax on food?

What’s not in this bill is cutting the state’s portion of the sales tax on food. Senate leaders said Thursday, that may still be coming.

Senate leaders have said that will be tough to do without removing the earmark for education. Utah’s constitution requires that income tax revenue be used for funding public education and some social services. 

Majority Whip Sen. Ann Millner, R-Ogden has been in conversations with education stakeholders. She was asked if a proposal to amend Utah’s Constitution may be coming by the end of the legislative session.

“Yes I think you’ll see something,” she said.

If two thirds of the state legislature approve proposing amending Utah’s constitution to voters, then a question would appear on the November 2024 ballot.

“To take out $200 million, because that would be the state portion of taking the sales tax on food,  means that we would have to cuts services and support out there, unless we have access to other revenue sources,” said Millner. 

Utah’s sales tax also funds things like social services, public safety, courts, prisons, corrections and parks. 

Income tax going away?

Senate President Stuart Adams said Wednesday “it is a goal” to eventually get rid of Utah’s income tax, both the personal and corporate rates.

“It’s a goal, I’m not sure it will happen in Utah but many states are doing it, and I think we are looking at it and chipping away at it a little bit,” he said.

He stressed it is a long way off, but argues eight other states are getting rid of, or lowering their rates.

“Most economists believe a tax on consumption –meaning sales tax — is much better [for the economy] than a tax on productivity, meaning income tax.”

Lawmakers don’t need voter approval to consistently lower income taxes. And presumably, if there is no income tax then Utah would have to fund education through some other means.

“We’re gonna fund education no matter whether it comes out of sales tax, or income tax, or property tax or some other tax,” vowed Adams.

Governor Spencer Cox also tells KSL NewsRadio he supports the eventual removal of the income tax but that it would be impossible to just get rid of it all together without replacing it with another revenue source.

“Generally, that means a consumption tax. So think sales tax, only double, maybe?” He said.

He wondered whether Utahns would be supportive of that.

“Right now we can reduce [income tax] because our economy is doing so well,” he said.